Dutch corporate law: legal forms, decision-making and director liability

Dutch corporate law is contained in Book 2 of the Civil Code, and for most entrepreneurs it comes down to three questions: which legal form, who decides what, and who is personally exposed when things go wrong.

The choice of form is the first fork. A sole proprietorship and a general partnership are quick and cheap to establish but leave the entrepreneur liable with their private assets, and in a partnership each partner is liable for the whole of the obligations. A private limited company (BV) is a legal entity, requires a notarial deed and has no minimum capital; a public limited company (NV) has a minimum capital and is the form used where shares are to be freely transferable. Foundations and associations serve non-commercial purposes but may carry on a business.

Decision-making follows the articles of association within the limits Book 2 sets. The management board manages and represents the company, the general meeting appoints and dismisses directors and adopts the annual accounts, and a supervisory board or a one-tier board may be added. A shareholders’ agreement can regulate a great deal alongside the articles, but cannot displace mandatory company law, and a resolution taken in breach of it is generally still valid.

Exposure is the third question and the one most often misunderstood. Directors owe a duty to the company under Article 2:9 and are personally liable where they perform their duties improperly and can be seriously reproached. In bankruptcy, Articles 2:138 and 2:248 make a board liable for the deficit where it manifestly failed in its duties — and failing to file annual accounts on time or to keep proper records counts as such a failure, with the burden of proof reversed.

Which legal forms can you choose?

The main choice is between a form without legal personality, where you are liable with your private assets, and a company with legal personality, where in principle only the company is liable. Most entrepreneurs who take on risk choose a private limited company (besloten vennootschap, BV).

Sole proprietorship and partnerships

A sole proprietorship (eenmanszaak) has no separate legal personality. You register it with the Netherlands Chamber of Commerce (Kamer van Koophandel, KvK), and you are personally liable for all business debts.

A general partnership (vennootschap onder firma, vof) is formed by two or more partners. Under Article 18 of the Dutch Commercial Code (Wetboek van Koophandel), each partner is jointly and severally liable for the whole of the partnership’s obligations. In a limited partnership (commanditaire vennootschap, CV), the limited partner is only liable up to its contribution, as long as it does not act on behalf of the partnership.

Private and public limited company

A BV is incorporated by notarial deed under Article 2:175 BW. Since the Flex BV Act of 1 October 2012 there is no minimum capital, and the articles of association (statuten) can create shares without voting rights or without profit rights.

A public limited company (naamloze vennootschap, NV) requires a minimum issued capital of €45,000 under Article 2:67 BW. Its shares can be freely transferable, which makes the NV the usual form for a stock-exchange listing. Shares in a BV are transferred by notarial deed (Article 2:196 BW), and the articles may contain transfer restrictions.

Until the BV is registered after incorporation, the persons acting on its behalf are jointly and severally liable for transactions entered into, unless the company ratifies them (Article 2:203 BW). Registration with the KvK must take place within one week of the start of the business.

Foundation, association and branch

A foundation (stichting) has no members or shareholders and may carry on a business, but may not make distributions to its founders (Article 2:285 BW). An association (vereniging) has members and is used for clubs, trade bodies and cooperatives.

A foreign company can operate in the Netherlands through a branch, without a Dutch entity. The branch must be registered with the KvK. A company from outside the EU that does almost all of its business in the Netherlands is subject to the Act on Formally Foreign Companies (Wet op de formeel buitenlandse vennootschappen), which imposes Dutch filing duties and director liability. Tax structuring falls outside our practice; for that, consult a tax adviser.

Who decides what in a BV or NV?

The management board (bestuur) runs and represents the company, and the general meeting (algemene vergadering) holds all powers not assigned to other bodies. The articles of association set out the details within the limits of Book 2 BW.

Under Article 2:239 BW (Article 2:129 BW for the NV), the board manages the company and must be guided by the interest of the company and its business. Each director can represent the company unless the articles provide otherwise (Article 2:240 BW). The general meeting appoints and dismisses directors, adopts the annual accounts and amends the articles. In a BV, the articles may oblige the board to follow instructions from the general meeting, unless an instruction conflicts with the interest of the company (Article 2:239(4) BW).

A company can have a two-tier board, with a supervisory board (raad van commissarissen), or a one-tier board of executive and non-executive directors (Article 2:239a BW). A supervisory board is only mandatory for companies under the large company regime (structuurregime). That regime applies when, for three consecutive years, the issued capital and reserves exceed the threshold set by decree, the company or a dependent company has a works council, and at least 100 employees work in the Netherlands.

Shareholders have pre-emption rights on new shares in proportion to their holding, unless the articles provide otherwise (Article 2:206a BW). A shareholders’ agreement can regulate voting, transfer and exit, but it cannot displace mandatory company law. Resolutions can be adopted outside a meeting if everyone entitled to attend meetings has agreed to that procedure (Article 2:238 BW).

What compliance duties does a company have?

Every BV and NV must keep proper records, prepare and file annual accounts on time and keep its registrations at the KvK up to date. These duties are simple, but missing them has direct consequences for the directors.

• Records: the board must keep records from which the company’s rights and obligations can be known at any time, and retain them for seven years (Article 2:10 BW).
• Annual accounts: the board of a BV prepares them within five months after the end of the financial year, a period the general meeting can extend by up to five months (Article 2:210 BW).
• Filing: the accounts must be filed with the KvK within eight days after adoption and no later than twelve months after the end of the financial year (Article 2:394 BW). Small companies may file abridged accounts.
• Registers: the board keeps a register of shareholders (Article 2:194 BW for the BV) and registers the ultimate beneficial owners (UBOs) with the KvK.
• Distributions: in a BV, the board must approve every distribution and may only do so if the company can continue to pay its due debts afterwards (Article 2:216 BW).

Sector rules come on top of company law. Examples are the GDPR for personal data, the Money Laundering and Terrorist Financing Prevention Act (Wwft) for financial and certain other businesses, and the duty to set up a works council once a company normally employs at least 50 people (Works Councils Act, Wet op de ondernemingsraden).

When is a director personally liable?

A director is liable towards the company only if a serious reproach (ernstig verwijt) can be made for improper management under Article 2:9 BW. In a bankruptcy, the threshold is manifestly improper performance of duties under Article 2:248 BW (Article 2:138 BW for the NV).

The board is collectively responsible. Under Article 2:9(2) BW, an individual director escapes liability only if the matter was not within their tasks, they cannot be blamed for it and they were not negligent in taking measures to prevent the consequences.

In a bankruptcy, the trustee (curator) can hold each director jointly and severally liable for the deficit if the board manifestly performed its duties improperly and this was an important cause of the bankruptcy. If the board did not keep proper records or filed the annual accounts late, improper performance is established and presumed to be an important cause (Article 2:248(2) BW). Only improper performance in the three years before the bankruptcy counts.

Directors can also be liable to third parties, for example a supplier, if they caused the company to enter into an obligation while they knew or should have known that it could not be performed. Directors who approve a distribution while they knew or should have foreseen that the company could not continue to pay its debts are jointly and severally liable for the shortfall (Article 2:216(3) BW).

How are company disputes resolved?

Disputes between shareholders and about the policy of the company go to the Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal or to the ordinary courts. Which route applies depends on what you want to achieve.

In an inquiry procedure (enquêteprocedure) under Articles 2:344 to 2:359 BW, the Enterprise Chamber can order an investigation into mismanagement and take immediate measures, such as suspending a director or appointing a temporary supervisory director. In a BV or closed NV, a shareholder can also be forced to transfer its shares, or can demand to be bought out, through the dispute settlement procedure (geschillenregeling) of Articles 2:335 to 2:343c BW. A resolution that conflicts with the law or the articles can be void or voidable under Articles 2:14 and 2:15 BW.

What should you check as a founder or director?

Most problems for directors start with formalities that were never arranged. Check these points when you set up the company and once a year after that.

• Does the legal form match your risk: a sole proprietorship or vof leaves your private assets exposed?
• Do the articles and the KvK registration correctly state who may represent the company?
• Are the annual accounts prepared on time and filed with the KvK within twelve months after the financial year?
• Is every distribution approved by the board with a documented test under Article 2:216 BW?
• Are resolutions and conflicts of interest recorded in writing?

What should you check as a shareholder or investor?

As a shareholder, your influence depends on the articles, the shareholders’ agreement and the class of shares you hold. Check these points before you invest.

• Do your shares carry voting and profit rights, and are you entered in the register of shareholders?
• Which decisions require approval of the general meeting or of your share class?
• Do the articles contain transfer restrictions, and does the shareholders’ agreement provide for exit, drag-along or tag-along rights?
• Are your pre-emption rights under Article 2:206a BW excluded or limited?
• What happens in a deadlock: is there a dispute mechanism, or will you depend on the Enterprise Chamber?

What can we do for you with Dutch corporate law?

We advise founders, directors and shareholders on Dutch company law; our corporate lawyer page and our article on setting up your business structure give more background.

• We advise on the choice of legal form and prepare the incorporation of your BV with the civil-law notary.
• We draft and review articles of association and shareholders’ agreements.
• We draft board and shareholder resolutions, including on distributions and conflicts of interest.
• We assess director liability claims from a trustee, a shareholder or a creditor.
• We conduct inquiry and dispute settlement proceedings before the Enterprise Chamber.

Summary

• Dutch corporate law is in Book 2 BW; the BV, without minimum capital, is the usual form for a business that takes on risk.
• Partners in a vof and sole proprietors are liable with their private assets.
• The board manages the company in its interest; the general meeting appoints directors and adopts the annual accounts.
• Late filing of the annual accounts or poor records leads to a presumption of improper management in a bankruptcy.
• Shareholder disputes go to the Enterprise Chamber of the Amsterdam Court of Appeal.

Frequently asked questions