Since 1 July more options for having a foundation’s trustee discharged by the court

Until recently, it was relatively difficult to remove a trustee in the event of mismanagement at a foundation. The parties involved could apply to the court for this purpose only in limited and very specific cases. However, as of 1 July 2021, the statutory grounds for discharge have been expanded. Attorney Onno Hennis, a corporate law specialist, explains the change in the legislation in this blog.

Foundation Board of Trustees

Unlike other legal entities, a foundation is not required to have another body in addition to the Board of Trustees. It is customary for a foundation to have a Supervisory Board, but this is not a mandatory statutory requirement.

Appointment and discharge of foundation trustees

By law, directors are appointed and discharged in accordance with the procedure set out in the articles of association A document, drawn up when a Dutch company or legal person is set up, and which regulates the operations of the company and defines its purpose.
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Articles of Association
. If there is no Supervisory Board, appointments are usually made by cooptation. This means that existing board members appoint new board members. Also with regard to discharge, the board normally decides (by majority).

Lots of (unchecked) power in the board

Because the board members are selected by the board, and the board has extensive powers pursuant to legislation (such as the representation of the foundation), a relatively high level of (uncontrolled) power is in the hands of the trustees. This is all the more true when the board consists of just one person.

Abuses at foundations

Sometimes the above leads to abuses in foundations. One can think of improper use of subsidy funds, self-enrichment, etc. In practice, given the structure of a foundation, it is difficult for third parties to do anything about this, even if they are affected by it.

Discharge by the court

However, there are legal options. Under certain circumstances, an individual foundation trustee may be discharged by the court. To achieve this, an interested party (or its legal representative must submit a petition to the court. Interested parties are defined as (legal) persons who are closely involved with the foundation.

(New) grounds for discharge

Until recently, the grounds for discharge were very limited. Since the amendment of the law, grounds have been added. For example, a trustee may be removed from office in the event of (i) neglect of duties, (ii) other serious reasons, (iii) a radical change in circumstances, or (iv) failure to comply or adequately comply with an order issued by the interim relief judge.

Future?

It is safe to expect that the new grounds for discharge – which have the nature of an open standard – will make it easier to intervene in cases of abuse. However, it is not yet clear how this open standard is to be specified in rulings. The new grounds for discharge correspond to the statutory grounds for discharge of a supervisory director body of a limited company or association that supervises the executive policy of the legal person
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supervisory board member
of a two-tier company, but no case law has (yet) been published on their application.

AMS Attorneys: experts in foundation law

If you encounter an issue with a foundation or if you are held liable as a trustee, please contact us without obligation. We have years of experience advising and litigating on behalf of and in connection with foundations.

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