In the Netherlands it is possible to conduct business through entities with and without corporate (legal) personality. Business structures without legal personality are the:
Conducting business through a structure without legal personality, results in joint and several liability for the business owners for the debt of the company. However, this is different for the limited partnership. The ‘sleeping’ partner (i.e. the partner who only provides capital) is not liable, as long as this partner does not perform any act of management.
Business structures with legal personality are the:
Most of the regulations with regard to the N.V. and the B.V. are similar. The B.V. differs from the Dutch N.V. in ways, for instance:
Chapter 2 of the Dutch Civil Code (DCC, Burgerlijk Wetboek), contains rules governing all of the above mentioned legal entities with legal personality. The regulations for partnerships (both general, commercial and limited) can be found in Chapter 7A DCC as well as the Dutch Commercial Code (Wetboek van Koophandel). There are no specific regulations for a sole proprietorship.
In addition, regulations may be found in the other Chapters of DCC, the Bankruptcy Act, The Trade Register Act and The Dutch Corporate Governance Code 2016. Also, as a result of the implementation of the Fourth Anti-Money Laundering Directive (EU/2015/849) in 2020, companies are obliged to register their ultimate beneficial owner (UBO) in a register at the Chamber of Commerce.
Furthermore, companies that issue securities, listed companies and other companies active in the financial markets, are bound by specific regulations issued by amongst others the Dutch financial markets authority (AFM) and the Dutch National Bank (DNB).
A partnership only requires registration with the trade register. There is no minimum starting capital when setting up a partnership.
The incorporation of a B.V. is done by ways of a deed that is countersigned by a civil law public notary (and the founding shareholders). This deed contains the (first) articles of association. The articles of association state the name, the registered office (place) and the objective of the B.V., as well as all kinds of other provisions that are important for the company. The registered office of the B.V. (and N.V.) cannot be located abroad. Founding shareholder often opt to conclude a shareholder agreement in which they can regulate their mutual relationships (i.e. exit scenario’s, drag/tag along clause, bad leaver clause, etc.)
In most ways, the establishment of a N.V. is similar to that of a B.V.
Most companies are obliged to file their annual accounts with the Chamber of Commerce, although there are some exceptions (for instance for a sole proprietor, some subsidiaries in the case of consolidated financial statements with the parent company, and micro or small private limited companies for pension or annuity purposes).
The rules on financial reporting in the Netherlands is contained in Chapter 2 Title 9 DCC. The provisions regarding the annual accounts, the management report and the publication of these documents do not apply to businesses that do not have legal personality, unless if it concerns a cv or a vof that falls under Art. 2:360 paragraph 2 of DCC.
The management of the company is obliged to keep records. The obligation to keep records also applies to partnerships. This obligation exists regardless of the legal provisions about annual reporting. A company is obliged to annually, within six months after the end of the financial year, draw up the balance sheet and the statement of income and expenditure, and put this in writing.
A foreign company can conduct its business in the Netherlands through either a Dutch holding company, a subsidiary or a branch. Apart from some identification requirements at the establishment at the notary, there are no special restrictions on foreign-owned companies planning to start a business in the Netherlands.
There are few significant trade barriers, except for some EU-wide impediments. Exporters may need to adapt their products and documentation for the Dutch market to be in compliance with certain regulations. Furthermore, foreign companies must comply with Dutch and European competition regulations.
Subject to any restrictions imposed by the articles of association, the board of directors is charged with the management of the company.
In the Netherlands a company with legal personality such as a BV (but also a N.V., cooperative, an association or a foundation) is liable for the debts of a company, not the managing director or the board of management. However, if the director or the board of directors incurs debts of which they know cannot be paid, or withdraw so much money from the company that debtors can no longer be paid, the director himself can be (personally) held liable for those debts by creditors.
If the board of directors does not comply with the rules (and, for example, acts contrary to the articles of association), or in general does not carry out its duties properly, it also risks liability versus the company itself. For example, if the board of directors enters into a major contract, while the articles of association require prior consent of the shareholders, the contract is (usually) valid, but the board of directors is nevertheless might be liable for the consequences thereof. The general meeting of shareholders often waives the liability of the board of directors upon approval of the financial statements of the company (décharge).
If a company goes bankrupt, the bankruptcy trustee will investigate if there is cause for directors’ liability. If so, the board can be to pay all of the company’s debts, if he concludes that there has been ‘manifestly improper management’ (mismanagement) and if it is plausible that this mismanagement caused the bankruptcy.
There are no specific requirements for an individual to qualify as a director of company. Both legal persons as well as individuals are eligible to become a director, as long as they are appointed by the authorized body of the company (mostly the general meeting of shareholders).
There are no specific requirements for an individual or a legal entity to qualify and be a shareholder of a company in the Netherlands.
For public limited companies, article 2:96 of DCC grants the authority to issue shares to the general meeting of shareholders, which can delegate this authority to another corporate body for a maximum period of five years.
The resolution must state how many shares can be issued. It must also indicate which type of shares, whether they must be fully paid up, what the issue price will be (share premium), whether payment must be made in cash or in kind, the date of issue and to whom the shares will be issued.
In case of different classes of shares, there is a requirement of approval of each group of shareholders whose rights are affected by the issue. The full text of the resolution must be filed with the trade register within eight days. Failure to comply with this obligation to publish is an economic offence.
The rules on the resolution to issue shares included in DCC for the B.V. are considerably less strict than those for the N.V. imposed by the requirements under the Second EEC Directive.
After its incorporation, the B.V. may only issue shares pursuant to a resolution of the general meeting, insofar as no other body has been designated in the articles of association. The general meeting can transfer its authority to do so to another body and it can also revoke this transfer.
As long as the articles of association do not provide otherwise, each shareholder, both in a N.V. as in a B.V., shall have a pre-emptive right to issued shares in proportion to the total amount of its shares.
Dutch corporate governance rules are found in EU Regulations, the DDC, the Dutch Commercial Code (Wetboek van koophandel), the Act on Financial Supervision (Wet financieel toezicht), the articles of association, the Dutch Corporate Governance Code (DCGC, Code Tabaksblad), and case law of mainly the Enterprise Chamber of the Amsterdam Court of Appeal.
The corporate governance code is a form of self-regulation. The parties responsible for the drafting (and thus the “regulators”) are the Dutch Stockholders’ Association (VEB), Eumedion, Euronext, FNV and CNV, the Association of Securities-Issuing Companies (VEUO) and the Confederation of Netherlands Industry and Employers (VNO-NCW).
Legal personalities that run a business are subject to Corporate income tax (vennootschapsbelasting). The Corporate income tax rate is 15% for a taxable income of up to € 245,000 and 25% on more than € 245,000. Benefits, such as dividends and capital gains, in connection with a qualifying shareholding of typically 5% and income attributable to a foreign business enterprise are exempted. In specific cases a company might pay dividend tax of 15%.
Generally spoken, companies without legal personality are personal businesses, subject to income tax (box 2, ‘income from business’).
VAT is a form of turnover tax that a business in the Netherlands adds to most goods and services that the business provides. VAT can be 0%, 9%, or 21%. VAT can typically be reclaimed.
Customs duties and VAT might be charged if a Dutch company imports goods into the Netherlands from outside the EU.
Dutch competition law is based on the Dutch Competition Act, as well as European policies and directives. The main topics include the avoidance of cartels, illegal undertakings of a dominant position or abuse of power, and the unlawful use of state aid.
On May 25, 2018 the General Data Protection Regulation (EU 2016/679) (GDPR) became directly applicable law in all Member States of the European Union, without requiring any implementation. However, the Netherlands implemented the GDPR by means of the Implementation Act GDPR, which contains the requirements of the previous Dutch Data Protection act insofar as possible under the GDPR.
The primary legislation governing insolvency in the Netherlands can be found in The Dutch Bankruptcy Act (Faillissementswet) and the European Regulation on Insolvency Proceedings.
As of January 1, 2021, the available options to successfully restructure financially distressed but viable businesses in the Netherlands has increased with the implementation of a restructuring scheme (WHOA).
The last major reform in Dutch company law can be found in the Act on the Flexibilization of Dutch B.V. law (Wet vereenvoudiging en flexibilisering BV-recht), as per October 1, 2012, which amongst others implemented changes in capital protection, decision making, transfer of shares, power of the board and general meeting of shareholders, and the distribution and repurchase of shares.
Furthermore, a reform on Dutch partnerships is anticipated with the Act on the Modernisation of Partnerships. This act will provide for a single legal entity for the general and commercial partnership under the name “vennootschap”. This new legal form will also be granted legal personality, as opposed to the current situation.
Dutch company law provides for a flexible and modern legal environment, which allows companies from different jurisdictions to conduct business. The major difference between other European countries lies in this flexibility.
The Dutch government has implemented a series of economic measures in order to assist people and companies to cope with financial constraints. The aim of these measures is to ensure that companies are able to pay wages and manage their cash position throughout relaxed tax provisions, allowances and supplemental lines of credit. The government support also focuses on the future, helping companies adapt to a newly shaped environment by making the necessary investments.