Important Changes to Dutch Corporate Law in 2010 (I)
In December 2009 three bills were adopted by the Dutch Lower
House of Parliament, which are expected to enter into force on 1
January or 1 July 2011.
These are the bills regarding:
- the simplification and flexibilization of BV law;
- the one-tier board; and
- the unincorporated association of persons.
In this and the next two newsletters we will go into the main
changes announced by these bills.
This article will deal with the bill on the simplification and
flexibilization of BV law (Parliamentary Paper nr. 31058).
Simplification and Flexibilization of BV Law
The rules for the Dutch private company with limited liability
("BV") with regard to the protection of capital will be simplified
and there will be more flexibility in the governance structure of
the articles of association of the BV.
Protection of Capital and Creditors
The regulations based on the protection of capital and creditors
will be fully revised.
The mandatory minimum share capital of EUR 18,000 will be
abolished. The bank statement and the auditor's report will be
abolished. The share capital may be denominated in currency other
than the euro.
The "Nachgründung scheme" from Section 2:204c of the Dutch Civil
Code ("BW") - which imposes additional requirements on transactions
entered into between a BV and incorporators or shareholders within
two years of the BV's initial registration in the Trade Register -
and the ban on financial support by the company for the purchase of
shares in its own capital (Section 2:207c of the BW) will be
repealed. Various restrictions on a BV's ability to buy its own
shares will be abolished. The procedural requirements to reduce a
BV's capital (Section 2:209 of the BW), which take more than two
months to complete will be abolished.
Distributions by a BV
While the current statutory restrictions on the purchase by a BV of
its own shares, the reduction of capital and the payment of
dividends or distribution of reserves will be repealed, new rules
will be introduced under which the board and the shareholders will
be liable if, through their culpable conduct, the rights of the
BV's creditors are harmed. The basic principle is that decisions to
make a distribution must be approved by the management board, which
must refuse to grant its approval if it knows or should reasonably
foresee that, after making the distribution, the BV will be unable
to continue paying its due and payable debts. If, after making a
distribution, the BV is unable to continue paying its debts due,
the managing directors who at the time of the distribution knew or
should reasonably have anticipated this will be jointly and
severally liable towards the BV for compensation of the deficit
resulting from the distribution, plus interest at the statutory
rate calculated as from the date of the distribution. A party that
receives a distribution when he/it knows or ought to anticipate
that the BV will be unable to continue paying its debts due after
making the distribution will be liable towards the BV for
compensation of the deficit resulting from the distribution. The
maximum compensation payable by the recipient will be the amount or
value of the distribution received by him/it, plus interest at the
statutory rate calculated as from the date of the distribution. If
the managing directors have already compensated the BV for a
deficit, the compensation paid by the recipients of the
distribution will be given to the managing directors in proportion
to the amount of compensation paid by each.
Voting Rights and Rights to Share in Profits
The rules on decision making within a BV will become
significantly more flexible. It will be easier to pass resolutions
without a meeting being held. It will be possible to hold
shareholder meetings outside the Netherlands. It will be
considerably easier to tailor the allocation of voting rights to
individual shareholders. The company will be able to issue shares
bearing multiple votes, which could be particularly useful in the
case of joint ventures and family-owned companies. The bill
originally provided that BVs would be allowed to issue shares with
different numbers of voting rights depending on the decision in
question, but this was dropped under the first memorandum of
amendment to the bill. It will be possible to issue shares without
voting rights, as an alternative to the issue of depositary
receipts for shares. Shares without right to profits will become
possible.
Share Transfer Restriction
It will no longer be mandatory to include share transfer
restrictions in the articles of association. If a BV opts to
include such restrictions in its articles of association, it will
also be able to include detailed rules on how the price of the
shares will be determined. The articles of association may include
a lock-up clause prohibiting the transfer of shares for a specific
period. The options are extended to impose obligations on the
shareholders in the articles of association, such as the obligation
to grant a loan to the BV or the obligation to supply products to
the BV.
Disputes Procedure
The statutory disputes procedure will also become more
flexible. Under the current rules, it is possible for a shareholder
who prejudices the BV's interests to be expelled and for an
aggrieved shareholder to demand that he/it be bought out of the
company. A BV and its shareholders will be given more room to adopt
dispute resolution mechanisms, either in the articles of
association or by agreement, which deviate from the statutory
rules. It will be possible to deviate from all or some of the
statutory rules, unless the mechanism chosen would make the
transfer of shares impossible or extremely onerous. It will be
possible to opt to have disputes settled by the Enterprise Chamber
of the Amsterdam Court of Appeal or by arbitration. Furthermore,
the court will not have to appoint experts to determine the price
for the shares if it feels it can do so itself, either because the
parties agree on the price of the shares or because clear criteria
for determining the shares' value are laid down in the articles of
association or in an agreement.
Pending the proceedings, any of the parties will be entitled to
request interim relief until such time as the shares have been
transferred.
A shareholder will have greater scope to initiate exit proceedings
(i.e. to demand that he/it be bought out of the BV). It will be
possible to initiate such proceedings not only against other
shareholders of the BV but also against the company itself.
An exiting shareholder will be entitled to request the court to
take into account a depreciation in the value of the shares if it
is the result of the actions of the other shareholders or of the BV
itself. In such a case, the exiting shareholder will be able to
secure a higher price for his/its shares.
If you require more information about the coming changes in
corporate law, you may contact the lawyers of the Corporate Law
group of Kennedy Van der Laan.