International company law: which law governs your company?

In the Netherlands, a company is governed by the law of the country under which it was incorporated, even if it is run entirely from the Netherlands. This incorporation theory means a foreign company can do business here without converting into a Dutch entity; the exception is that Dutch rules on registration, employment, reporting and, for certain non-EU companies, extra disclosure and director liability still apply.

International company law is not a single body of law. It is the combination of national company law, private international law and, within the European Union, EU rules on freedom of establishment and cross-border operations.

Which law governs your company?

The law of the state under which the company was incorporated. Under Article 10:118 of the Dutch Civil Code (BW), a company that, at the time of its incorporation, had its registered office (or, failing that, its centre of external activities) in the state under whose law it was incorporated is governed by that law.

That law determines the internal affairs of the company: its legal personality and capacity, the powers of the board and the general meeting, the rights of shareholders and the liability of directors in that capacity. A German GmbH run from Eindhoven therefore remains a German company for these questions, and a Dutch private limited company (besloten vennootschap, BV) with its management in London remains a Dutch company.

Not every country follows this approach. Some countries apply the real seat theory, under which the law of the place where the company is actually managed applies. Within the EU, however, a member state must respect a company validly incorporated in another member state. The Court of Justice of the European Union confirmed this in cases such as Centros, Überseering and Inspire Art.

Can a foreign company do business in the Netherlands without a Dutch entity?

Yes. A foreign company can operate in the Netherlands directly, for example through a branch. It must, however, register that branch with the Netherlands Chamber of Commerce (KvK).

Whether you choose a branch or a Dutch subsidiary depends on liability, reputation with customers and banks, and the local obligations you want to take on. A branch is part of the foreign company, so the foreign company is directly liable for its Dutch obligations. A Dutch BV is a separate legal entity. It can be incorporated without a minimum share capital, but requires a notarial deed of incorporation (Article 2:175 BW). For the tax consequences of either choice, consult a tax adviser. Read more about the practical side of setting up in our article on doing business internationally.

What are formally foreign companies?

A company incorporated outside the EU and the European Economic Area (EEA) that carries out its activities wholly or almost wholly in the Netherlands, and has no real connection with its state of incorporation, is a formally foreign company (formeel buitenlandse vennootschap). The Formally Foreign Companies Act (Wet op de formeel buitenlandse vennootschappen) then imposes additional rules.

These include registration and disclosure obligations, and rules on the preparation and publication of annual accounts. If these obligations are not met, the directors can be jointly and severally liable, together with the company, for legal acts performed on its behalf. Since the Inspire Art judgment, this Act no longer applies to companies incorporated in another EU or EEA member state.

Which Dutch rules apply regardless of where a company was incorporated?

Company law may be foreign, but many other rules are territorial. Anyone doing business in the Netherlands must comply with Dutch registration, employment, data protection and regulatory rules.

Employees who habitually work in the Netherlands are protected by the mandatory provisions of Dutch employment law, even if their contract is governed by another law (Article 8 Rome I Regulation). Personal data processed in the Netherlands is subject to the General Data Protection Regulation (GDPR) and supervision by the Dutch Data Protection Authority. Sector-specific licences, such as those for financial services or energy supply, depend on where the activities take place, not on where the company was incorporated.

Dutch legal entities must also register their ultimate beneficial owners (UBOs) in the UBO register kept by the KvK. Since a judgment of the Court of Justice of the EU in November 2022, the register is no longer freely accessible to the public, but authorities and certain obliged institutions still have access.

How do cross-border mergers, divisions and conversions work?

Within the EU, a company can merge with a company in another member state, split across borders, or move its registered office by converting into a legal form of another member state. These operations follow a harmonised procedure with protection for creditors, minority shareholders and employees.

The rules follow from the EU Company Law Directive as amended by the Mobility Directive (EU) 2019/2121, which the Netherlands implemented in 2023. A cross-border operation requires a proposal, reports for shareholders and employees, a period in which creditors can ask for security and, at the end, a pre-operation certificate from the competent authority. In the Netherlands, the civil-law notary issues that certificate for a Dutch company, after checking that the procedure has been followed. The authority may refuse if the operation is set up for abusive or fraudulent purposes.

A cross-border operation takes months, not weeks, because the proposal must be published and creditors and employees get fixed periods to react. Start with the timetable, and settle the employee participation arrangements early.

Which court decides disputes within an international company?

For disputes about the validity of company decisions or the dissolution of a company, the courts of the member state where the company has its seat have exclusive jurisdiction within the EU (Article 24(2) Brussels I bis Regulation). For other disputes, the general rules on jurisdiction and any choice-of-court or arbitration clause apply.

In practice this means that a claim to annul a resolution of the general meeting of a Dutch BV belongs before a Dutch court, even if all shareholders live abroad. Disputes between shareholders about a shareholders’ agreement, on the other hand, can be brought before the court or arbitral tribunal chosen in that agreement. The Netherlands also has the Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal, which can investigate mismanagement in Dutch companies and order immediate measures. For more on handling disputes with a foreign element, see our article on cross-border legal issues.

When are directors personally liable in an international group?

For the internal liability of a director towards the company, the law of the state of incorporation applies. For a Dutch BV or NV, a director is liable to the company for serious mismanagement (Article 2:9 BW) and, in bankruptcy, to the estate for manifestly improper management (Article 2:248 BW).

Liability towards third parties, such as creditors, can also be based on tort (Article 6:162 BW), and which law applies to that claim is determined by the rules on torts, not by company law. In an international insolvency, the EU Insolvency Regulation determines which member state’s insolvency law applies, generally the state where the company has its centre of main interests. Directors of a group company therefore need to know both the company law of their own entity and the rules of the country where it operates.

What should you check as a foreign company entering the Netherlands?

Your company law stays foreign, but Dutch territorial rules apply from the first day of activity here. Check these points:

• The branch or the Dutch subsidiary is registered with the KvK before activities start.
• If you are incorporated outside the EU and EEA and operate almost entirely here, you meet the Formally Foreign Companies Act.
• Staff who habitually work in the Netherlands receive the mandatory protection of Dutch employment law (Article 8 Rome I).
• A Dutch BV has registered its UBOs with the KvK.
• Any sector licence, for example for financial services or energy supply, is in place.

What should you check as a Dutch company expanding abroad?

Your Dutch BV or NV remains governed by Dutch law under Article 10:118 BW, wherever it is managed. Check these points:

• The target country follows the incorporation theory or the real seat theory, which decides whether it recognises your BV.
• Directors know that Articles 2:9 and 2:248 BW still apply to them abroad.
• Resolutions of the general meeting can only be annulled before a Dutch court (Article 24(2) Brussels I bis).
• Shareholders’ agreements contain a choice of court or arbitration clause.
• A planned move of the registered office follows the cross-border conversion procedure, with a pre-operation certificate from the notary.

What can we do for you with international company law?

Our corporate lawyers advise Dutch and international businesses on structuring and cross-border operations; for tax structuring we work alongside your tax adviser. Specifically:

• We advise on the choice between a branch and a Dutch BV.
• We prepare the KvK registration and the UBO filing.
• We draft shareholders’ agreements with choice-of-court or arbitration clauses.
• We guide a cross-border merger, division or conversion through the notarial procedure.
• We act in shareholder disputes, including Enterprise Chamber proceedings.

Summary

• The Netherlands applies the incorporation theory: a company is governed by the law of the state under which it was incorporated (Article 10:118 BW).
• A foreign company can operate here through a registered branch; non-EU companies operating almost entirely in the Netherlands face extra rules as formally foreign companies.
• Dutch employment, data protection, registration and regulatory rules apply to activities in the Netherlands, whatever the company’s nationality.
• Cross-border mergers, divisions and conversions within the EU follow a harmonised procedure with protection for creditors, shareholders and employees.
• Disputes on the validity of company decisions belong before the courts of the company’s seat.

Frequently asked questions