New Dutch limited company law effective as per October 1, 2012

New Dutch limited company law effective as per October 1, 2012

It took quite some time, but today (1 October 2012), the Bill for “Simplifying and extending the flexibility of the private limited company-law” has entered into force, effecting drastic changes in Dutch company law. Incorporation of a Dutch limited company (“besloten vennootschap, or “B.V.”) is made much easier. There no longer is requirement for the minimum paid up share capital. A new B.V can now be set up in a matter of hours, if necessary. Dutch lawyer Hidde Reitsma, owner at law firm AMS attorneys, explains.

 

Complete make-over of Dutch corporate law

The BV (limited liability company, in Dutch:  besloten vennootschap met beperkte aansprakelijkheid) was introduced in the ’70’s.  It can be considered as the equivalent of the Ltd (limited), but other than in surrounding legal systems, it was required that the BV has – upon its incorporation – a minimum paid-up share capital of € 18,000.-. Furthermore, it is required that the articles of association contain a clause that avoids the free transfer of shares.

It has been the general opinion for years that the BV is in need of modernization. Now, it is expected that a bill that will fundamentally change the BV shall come into force even this year. This new BV has also been called: “the flex-BV”.

The most important changes in Dutch BV-law

  • incorporation requirements: the minimum paid-up capital of € 18,000, the bank statement (in case shares are being paid-up in cash) , and the mandatory auditor’s report (in case shares are not being paid-up in cash) will all no longer be required, along with many other financial rules (such as the current rule that the BV is not allowed to provide financial assistance in relation to the acquisition of shares in its own capital);
  • more flexible rules on shares, management, e.a.: it will, among other things, become possible to issue shares without profit rights, or shares without voting right (a combination of both will not be possible), and it will be possible to allow the holders of certain shares to appoint one or more directors;
  • free transfer of shares allowed: the current share transfer restrictions (that now in fact form the essence of the BV)  will no longer be mandatory, but at the same time, transferability can be completely excluded for a specific set period of time;
  • protection of creditors: the rules for making a dividend payment or a distribution from a reserve will be fundamentally changed. The BV will only be allowed to make distribute dividend if the management board approves such decision; the board may only adopt a proposal to distribute dividend if it is op the opinion that this shall not affect the mandatory reserves, or the capacity to pay of the company’s debtors. If the acts in breach with this rule, it may be held liable.
  • shareholder’s disputes and buy-out of shareholders: the current dispute settlement proceedings will be simplified, offering shareholders a more accessible option to start buy-out proceedings. The current rules on the buy-out of shareholders are complex and time-consuming.

Upcoming changes in Dutch limited-company law: be prepared

It is now widely expected that the bill will come into force soon; this will have a fundamental impact on the Dutch private company law. Although it may seem that most rules will only become less strict, a good preparation will be essential. Existing shareholder’s agreements may have to be amended or arranged in a different way. Furthermore, it is essential that existing director’s of Dutch limited companies will be informed on their duties under the new rules on distribution of dividend. A lack of preparation may result in personal liability,  that can easily be avoided.

Corporate lawyers in The Netherlands

The Dutch lawyers with AMS (based in Amsterdam, near Schiphol Airport) are considered specialists in corporate law in The Netherlands. Our attorneys offer a sharp and transparent fee structure, and aim to provide high-end professional services. Should you have further questions, please contact one of the corporate lawyers of our law firm.

More information on the new financial rules (distribution and liquidity test)

Please also read our blog on with more in-depth information on the new financial rules (the distribution and liquidity test).

Hidde Reitsma - Advocatenkantoor AMS Advocaten
Hidde Reitsma Hidde has a varied consultancy and litigation practice, focusing on corporate law and insolvency law. He frequently acts in proceedings before the Enterprise Chamber of the Court of Appeal in Amsterdam and in cases on directors’ liability. Hidde also advises on drawing up and negotiating contracts, mergers and acquisitions and joint ventures. Follow Hidde also on Google or LinkedIn. Hidde is available via e-mail and +31 (0)20-3080315.
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