Netherlands - League of Lawyers

Capital: Amsterdam
Largest city: Amsterdam
Official Language: Dutch
Government: Unitary parliamentary constitutional monarchy
Area: 41,856 km2
Population: 17,613,400
Currency: Euro (EUR)
GDP total: EUR 858.833 billion (USD1.012 trillion)
GDP per capita: EUR 492.243 billion (USD58,003)
Time zone: UTC +1/UTC-4
Calling code: +31, +599
Internet TLD: .nl

[Source: Wikipedia]

No. of domestic companies: 1.160.015 as at July 2020
No. of foreign companies: 13.475 as at July 2020
[Source: CBS]

Principal Legislation governing Companies

Chapter 2 of the Dutch Commercial Code
Dutch Bankruptcy Act
Corporate Governance Code 2016

Q&A on Company Law

What are the different kinds of legal forms for a company in the Netherlands?
In the Netherlands, it is possible to conduct business through entities with and without a corporate (legal) personality. Business structures without a legal personality are:
- sole proprietorship / sole trader / “DBA”, i.e. doing business as (eenmanszaak)
- commercial partnership (vennootschap onder firma)
- general partnership (maatschap)
- limited partnership (commanditaire vennootschap)
Conducting business through a structure without legal personality results in joint and several liability for the business owners for the debts of the company. However, this is different for a limited partnership, where a ‘sleeping’ partner (i.e. a 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:
- private limited liability company (besloten vennootschap or B.V.)
- public limited liability company (naamloze vennootschap or N.V.)
- cooperative association (coöperatie)
- association (vereniging), not for profit
- foundation (stichting), not for profit
- mutual insurance company (onderlinge waarborgmaatschappij)
- Societas Cooperativa Europaea (SCE)
Most of the regulations with regard to the N.V. and the B.V. are similar. The B.V. differs from the N.V. in several ways, for instance:
- Shares in an N.V. are often listed at a stock exchange;
- There is no required minimum issued and paid-up capital for the B.V. However, it is required that there is at least one issued share. For the N.V. issued and paid-up capital of at least €45.000 is required;
- A B.V. is allowed to issue shares without voting rights or dividend rights, but this is not the case for an N.V.;
- N.V.s must comply with more capital and creditor protection rules.
What are the laws and regulations governing legal companies in the Netherlands?
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 Dutch Civil Code 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).
What are the procedures and requirements for incorporating or registering a company in the Netherlands?
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 shareholders often opt to conclude a shareholder agreement in which they can regulate their mutual relationships (i.e. exit scenarios, 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.
What are the reporting requirements for companies in the Netherlands?
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 are 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 a legal personality, such as partnerships, unless it concerns a limited partnership (CV) or a commercial partnership (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.
What are the procedures and requirements for foreigners and/or foreign companies to establish a company or business in the Netherlands?
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 of the notary, there are no special restrictions on foreign-owned companies planning to start a business in the Netherlands.
What are some of the challenges that foreign companies should take into consideration prior to entering the industry or market 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.
What are the duties, responsibilities and liabilities of directors in the Netherlands?
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 B.V. (but also a N.V., cooperative, an association or a foundation) is liable for the debts of a company, and not the managing director or the board of management. However, if a director or the board of directors incur debts of which they know cannot be paid, or withdraw so much money from the company that debtors can no longer be paid, the directors can be held personally 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 personal liability. 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 may 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. The board can be made to pay all of the company’s debts if the trustee concludes that there has been ‘manifestly improper management’ (mismanagement) and if it is plausible that this mismanagement caused the bankruptcy.
What are the requirements or criteria to be satisfied for an individual to qualify as a director of a company?
There are no specific requirements for an individual to qualify as a director of a company. Both legal persons as well as individuals are eligible to become a director, as long as they are appointed by the authorised body of the company (mostly the general meeting of shareholders).
What are the requirements or criteria to be satisfied for an individual or a legal entity to qualify and be a shareholder of a company in the Netherlands?
There are no specific requirements for an individual or a legal entity to qualify and be a shareholder of a company in the Netherlands.
How are shares in a company allotted and/or offered 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 the case of different classes of shares, there is a requirement of approval by 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. and in a B.V., shall have a pre-emptive right to the issued shares in proportion to the total amount of its shares.
What are the corporate governance practices in the Netherlands?
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 the Enterprise Chamber of the Amsterdam Court of Appeal.
Who are the regulators for corporate governance in the Netherlands?
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).
What are the taxes which apply to companies in the Netherlands?
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, companies without legal personality are personal businesses, subject to income tax ( ‘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.
Are companies in the Netherlands subject to competition laws and regulations?
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.
What are the data privacy laws in the Netherlands that companies should be aware of?
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.
What are the company insolvency laws and regulations in the Netherlands?
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).
Have there been any recent reforms or regulatory changes pertaining to the company law in the Netherlands?
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.
What are the main changes with company law in the Netherlands that differ to company laws in other European countries?
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.
In light of the Covid-19 pandemic and various governmental movement control orders in the Netherlands, has the Dutch government implemented changes or temporary orders to assist companies to cope with financial constraints?
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 alongside 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 allowing them to make necessary investments.

ABOUT THE AUTHORS

Sjoerd Yntema
Lawyer

Sjoerd graduated in 2018 from the Faculty of Law of Leiden University with a masters in Civil and Business Law. He also studied French law at the Université de Poitiers in France. After his studies, he worked for some time as a lecturer at the corporate law department of Leiden University. Sjoerd joined AMS lawyers in September 2019, where he focuses primarily on corporate law and commercial litigation. Sjoerd is pragmatic, critical and has a problem-solving mindset.

Juriaan de Vries
Lawyer

Juriaan de Vries has been a lawyer since 2017 and joined the AMS Advocaten team in 2021. Juriaan studied law at Maastricht University. After his studies, Juriaan worked at Houthoff where he successively dealt with mergers and acquisitions and general procedural law. At AMS Advocaten, Juriaan focuses on advising and litigating in commercial and corporate disputes. He handles both matters that occur within the company (such as deadlocks within the general meeting of shareholders and directors’ liability) and disputes between the company and external parties (such as former trade and investment partners, suppliers and customers)

ABOUT THE FIRM

Name: AMS Advocaten
Address: Poeldijkstraat 4, 1059 VM Amsterdam Postbus 69111 1060 CD Amsterdam The Netherlands
Telephone: +31 (0)20-3080315
Email: info@amsadvocaten.nl
Website address: https://www.amsadvocaten.com/
Key contact: Marco Guit, Partner, marco.guit@amsadvocaten.nl
Established: July 2011
Number of lawyers: 17
Languages: Dutch, English, German

Brief description :
AMS specialises in Dutch civil law and is based in Amsterdam and in Naarden, the Netherlands, located near Schiphol Airport (just 10 minutes by car or train). AMS’s highly experienced lawyers both advise and litigate for Dutch and international companies and private individuals. We are committed to providing our clients with not only excellent service, but also cost-effective fee structures.

Key practice areas :
Corporate law, Commercial litigation, M&A, Contract Law, Litigation, Insolvency law, Debt Collection, Intellectual Property law, Media law, Real Estate law, Construction law, Commercial Tenancy law and Employment law.