Dutch Civil Code, Book 2, Title 5: the BV in English

Why the BV is the default vehicle

Since the Flex BV Act of 2012 the Dutch BV is one of the most flexible private companies in Europe. There is no minimum capital, shares may be denominated in a foreign currency (Art. 2:178), and the articles can create shares without voting rights or without profit rights (Art. 2:228, Art. 2:216). Transfer restrictions, once compulsory, are now optional. That flexibility is the reason the BV is the standard holding and operating vehicle for foreign groups in the Netherlands.

Formation: notary, deed, register

Incorporation needs a notarial deed signed by every incorporator (Art. 2:175). The deed contains the articles of association; the name must include “B.V.” and the registered seat must be in the Netherlands (Art. 2:177). Until the company is registered in the trade register, the directors are jointly and severally liable with the company for legal acts done in its name (Art. 2:180). Online incorporation under Art. 2:175a is open to nationals of EU Member States; other founders still sign by power of attorney before a Dutch notary, which in practice works just as well.

Shares change hands only by notarial deed

Every issue and transfer of shares, and every pledge or usufruct, needs a deed executed before a notary established in the Netherlands (Art. 2:196). A share purchase agreement alone does not move the shares. Unless the articles exclude it, the default offer arrangement in Art. 2:195 applies: a shareholder who wants to sell must first offer the shares to the other shareholders at a price set by independent experts if they cannot agree.

The distribution test and personal liability

The general meeting decides on distributions, but only to the extent that equity exceeds the reserves required by law or the articles, and the resolution has no effect until the board approves it (Art. 2:216). The board may refuse only if it knows or should reasonably foresee that the company will not be able to keep paying its debts as they fall due. Directors who approve a distribution in those circumstances are jointly and severally liable for the shortfall, and a shareholder who received the distribution knowing the risk must make good the shortfall up to the amount he received. In practice, boards document a twelve-month cash-flow forecast before every dividend.

Shareholder instructions and the company’s interest

The articles may oblige the board to follow instructions from the general meeting or another body (Art. 2:239). The board must still refuse instructions that conflict with the interests of the company and its enterprise. A director with a personal conflict of interest may not take part in the decision; if no board resolution can be adopted as a result, the supervisory board or the general meeting decides (Art. 2:239).

Directors’ liability in bankruptcy

Art. 2:248 makes each director jointly and severally liable for the deficit in bankruptcy if the board manifestly mismanaged the company and this was an important cause of the bankruptcy. Failing to keep proper books (Article 2:10) or to publish the annual accounts on time (Article 2:394) counts as mismanagement and creates a presumption that it caused the bankruptcy. Late filing of the accounts is the most common way non-resident directors end up personally liable.

Large BVs and the structure regime

A BV whose issued capital and reserves reach the threshold set by Royal Decree, that has a works council and that employs at least 100 people in the Netherlands, must register as a large company (Art. 2:263). After three years the structure regime applies: a mandatory supervisory board that appoints and dismisses the directors and approves major decisions. International holding companies whose employees mostly work abroad are exempt (Art. 2:263), and there is a mitigated regime for subsidiaries of international groups.