How to do business in the Netherlands – Incorporation of the most popular limited liability company
The most popular limited liability company in the Netherlands is the "Besloten vennootschap met beperkte aansprakelijkheid", usually abbreviated as "B.V.".
Below a brief summary on how to establish and incorporate a B.V.
Deed of incorporation
Incorporation of a B.V. takes place through the execution before a Dutch Civil Law Notary of a notarial Deed of Incorporation. The Deed of Incorporation has to be executed in the Dutch language and has to contain the following:
– details regarding the shares issued upon incorporation, the payment on the shares (in cash or in kind) and details regarding the incorporator(s)/shareholder(s);
– the appointment of the first (registered) managing directors and (optional) the first supervisory directors; and
– the company’s Articles of Association.
Articles of association
The company’s Articles of Association are included in the same document as the Deed of Incorporation and have to contain at least the following items:
– Name of the Company
The name of the company must include the indication "Besloten vennootschap" or (most common) "B.V.".
– Registered office ("zetel") of the company
The seat must be in the Netherlands. The company’s registered office does not necessarily have to be at the same place as where the actual offices are located or business is carried out.
– Objects clause
This is a short description of the company’s anticipated activities. It is customary for Dutch companies to have relatively short and very generally worded objects clauses to avoid any claim based on ultra vires action.
– The subscribed share capital and the nominal amount of each share
The share capital must be divided into shares with a nominal (or par) value. This value must be expressed in the Articles of Association.
Due to new legislation the denomination of shares does not have to be in Euros, other currencies, such as US dollars, are accepted. Different classes of shares (with different par values) may be created and included in the Articles of Association. In addition to ordinary shares, it is also possible to create other types of shares, such as preference shares (carrying financial benefits), priority shares (conferring rights of corporate control), non-voting shares and shares without a profit entitlement.
Note that the minimum issued share capital for B.V.’s of EUR 18,000 has been canceled. The share capital can be EUR 1 or even less. Generally speaking the shares must be paid up in cash or in kind.
– (Optional) transfer restrictions
By law transfer restrictions with respect to the transfer of shares to others than fellow shareholders, spouses, close relatives and the company itself (third parties), are applicable. The transfer restriction by law results in the obligation of the transferring shareholder to first offer the shares to the fellow shareholders. If a transfer restriction is not required or if another substantiation of transfer restrictions is considered appropriate, these other arrangements must be included in the Articles of Association.
– Financial year
The deed of incorporation may stipulate that the company’s first financial year is either shorter or longer than twelve months. The maximum is 24 months minus one day. This has various tax consequences and should therefore be discussed with a Dutch tax consultant.
– Management and Supervision
The B.V. must have at least one Managing Director. There are no legal requirements regarding the number, nationality or residence of managing directors. Individuals as well as legal entities can be managing directors.
In addition to a Board of Managing Directors, the Articles of Association may provide for:
(i) a Board of Supervisory Directors, or
(ii) for a one-tier Board, with Executive and Non-executive Directors to supervise the Management/Executive Directors.
Legal entities may not be supervisory directors. The company’s Articles of Association have to contain specific regulations regarding the absence or the inability to act of all directors.
The Board of Managing Directors of the company, as such, is always authorized to represent the company towards third parties. In addition, unless otherwise provided for in the Articles of Association, the individual managing directors are also authorized to represent the company.
It is not uncommon for Articles of Association of Dutch Companies to provide that: (i) the signatures of a particular number or class of managing directors, acting together, are required to represent the company, and/or
(ii) certain management decisions/actions are made subject to the prior approval of the General Meeting of Shareholders or the Board of Supervisory Directors.
– Shareholders’ meetings
There is one yearly shareholders’ meeting on the approval of the annual account. Other meetings are convened as often as the Board of Directors or shareholders deem necessary. The company’s Articles of Association contain specific requirements for a general meeting.
No Ministerial approval required
Until the end of 2012 the incorporation could only take place after the Ministry of Economic Affairs had granted its Certificate of No-Objection. This procedure is no longer applicable, which results in a quite simple and quick procedure of the incorporation of a BV.
In the meantime it is possible to assume contractual rights and obligations on behalf of a B.V. in formation. Unless otherwise stipulated, the person acting on behalf of the B.V. in formation, will be liable towards the contracting third party for the obligations entered into, until the same are ratified by the B.V. upon incorporation.
Immediately following the incorporation, the B.V. must be registered with the Commercial Register (of the Chamber of Commerce) in the Netherlands. If the B.V. has only one shareholder, this fact and the identity of the shareholder will be mentioned on the extract of the company’s registration details, which is publicly available.
Should you have any questions about the incorporation of a B.V. or doing business in the Netherlands in general, please do not hesitate to contact one of the Company law attorneys or the members of the International Desk.
Member of the International Desk of Boels Zanders Advocaten