What is a B.V.?
A “B.V.’ is a private company with limited liability; in Dutch: “Besloten Vennootschap met beperkte aansprakelijkheid”. In comparison to other jurisdictions, the B.V. has similar features as the German “GmbH”, the American “LLC”, or the English “Ltd”. The B.V. has legal personality and it has an equity divided into shares.
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 (i) 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); (ii) the appointment of the first (registered) managing directors; and (iii) 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 city where the company is registered. 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. Generally speaking the shares must be paid up in cash.
Transfer restrictions
Transfer restrictions with respect to the transfer of shares to others are applicable. The transfer restriction results in the obligation of the transferring shareholder to first offer the shares to the fellow shareholders.
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
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. 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.
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.
B.V. in formation
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.
Chamber of Commerce/Liability Shareholders and Directors
Immediately following the incorporation, the B.V. must be registered with the Trade 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.
Until registration with the Trade Register of the Chamber of Commerce takes place, the Managing Directors are liable, jointly and severally with the B.V. for transactions binding the B.V. and performed during their management. The shareholders of a B.V. are – in general – not personally liable for acts performed in the name or on behalf of the B.V., nor can they be obliged to make more funds available than that part of the capital for which they have subscribed.
Statutory directors can be held liable for acts of bad management. Statutory directors may also be held liable if the B.V. makes a distribution of reserves (dividend) or paid in capital and the B.V. cannot comply to its financial obligations in the year following the distribution.
Other examples which cause liability for directors of a Dutch B.V.:
- Fraudulent or illegal practices within the company;
- Taking unsustainable financial risks;
- Asset stripping;
- Diverting the company’s funds for personal use;
- Not properly insuring the company’s tangible assets.
Registration with tax authorities
The B.V. needs to be registered with the Dutch tax authorities and also with the social insurance office if any employees are to be hired. The tax registration will in essence be done automatically with the first registration of the B.V. with the Chamber of Commerce.
Registration, administration and filing requirements of a Dutch B.V.
In essence every Dutch B.V. has the ongoing obligation to keep and maintain an administration, to register for tax purposes and to file periodical tax returns. The administration forms the basis for the preparation of the annual financial statements. After the end of the year the General Meeting of Shareholders should approve of the Financial Statements as presented by the board of directors and discharge the board for any liability in this respect. An abbreviated version of the Financial Statements must be filed with the Dutch Chamber of Commerce for publication in the Trade Register of the Chamber of Commerce.The Trade Register is accessible by the public.
Opening bank account
For a B.V., no minimum capital requirement applies anymore, and hence, the B.V. does from a legal perspective no longer require a (Dutch) bank account.
If you prefer the B.V. to have a bank account upon incorporation, the following procedure can be followed. After completion of the incorporation of the B.V. the incorporator/directors can open a bank account for the B.V. During the last couple of years banks have become more stringent with regard to the procedure for opening a bank account. It is required that the directors/incorporators attend to the bank in person, identify themselves and fill out the necessary forms.
Payment in cash on shares issued at the incorporation of the B.V.
If payment is made in cash, it can be done after the establishing of the B.V. on the bank account of the B.V. after its incorporation. It is very important to pay up the shares. We also wish to stress that you should keep proof of the payment made to pay up the shares. This could mean filing a copy of the bank statement showing the paying up of shares in the administration of the B.V.