Leiden Law Blog

Third major overhaul of corporate law in the Netherlands

Posted on by Jelle Nijland and Cees de Groot in Private Law , 1
Third major overhaul of corporate law in the Netherlands

Corporate law in the Netherlands is moving forward fast. The first major change was the coming into force of the Act containing provisions to simplify and make the law on private limited companies more flexible on October 1 2012. This Act gave private limited companies a completely new character vis-à-vis public limited companies. Private limited companies are no longer regulated as a smaller version of public limited companies. The second overhaul took place on January 1 2013 with the coming into force of the Act on the management and supervision of both public limited companies and private limited companies. This Act created the possibility for both public limited companies and private limited companies to include an ‘internal supervisory function’ into their articles of association, if they so wished. Previously the ‘internal supervisory function’ was only allowed in the form of a supervisory board in a two-tier board system, but now a company can opt for a supervisory function incorporated in either a one-tier board system or a two-tier board system. Following on from these Acts, the government put a third Bill to vote in Parliament on June 8 2016, that will once again change Dutch company law radically. This legislative proposal is intended to clarify the provisions in Book 2 of the Dutch Civil Code concerning the management and supervision of legal entities and thus put these rules on a par with all corporate forms regulated in Book 2 of the Civil Code, i.e. not only for public limited companies and private limited companies, but also for associations, co-operative associations, mutual insurance associations and foundations. The Bill seeks to both improve the legal framework of all legal persons and to codify existing legal practice. The main points of the proposed legislation include the following:

- Currently, supervisory boards of associations and foundations do not have a specific legal basis, and supervisory boards of co-operative associations and mutual insurance associations only have a limited legal basis. The Bill proposes the adoption of a provision that will form a legal basis for the creation of a supervisory board for all legal persons regulated in the Civil Code. Furthermore, the proposal aims to allow all legal persons, not just public limited companies and private limited companies, to be able to opt for a one-tier board system.

- Added to that, the Bill aims to provide clarity for both public limited companies and private limited companies as well as for associations, co-operative associations, mutual insurance associations and foundations, on the provisions regarding, (i) the principles to be observed by the executive and non-executive directors in a one-tier board system and the supervisory directors in a two-tier board system while performing their duties, (ii) the way all directors should behave in the event a conflict of interest occurs and, (iii) the rules on the liability of directors in the event of bankruptcy. General applicability to all legal persons would be achieved by transferring the relevant legal provisions that are currently only applicable to public limited companies and private limited companies to the general title of Book 2 of the Civil Code As the general title of Book 2 contains provisions that are applicable to all legal persons regulated in Book 2 of the Civil Code, the rules that are to be transferred would also be applicable to associations, co-operative associations, mutual insurance associations and foundations.

- Also, the rules concerning the dismissal of all directors of a foundation by court order will be brought up to date and clarified.

1 Comment

Gertjan van Koeverden Brouwer
Posted by Gertjan van Koeverden Brouwer on October 5, 2016 at 14:55

Interesting!

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