Reform for limited companies

Author: | Published: 1 Jul 2005
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Houthoff Buruma

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Amsterdam

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+31 20 577 2000

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+31 20 577 2700

The Netherlands is amending the rules that govern Dutch limited companies (besloten vennootschappen). The aim is to have more flexible rules, in line with today's practice. The reform will take place in three different stages. In March 2005, Dutch practitioners handed in their points of view on the first consultation document, which was distributed by the Ministry of Justice.

This document proposes to allow Dutch limited companies to determine in their articles of association whether the holders of depository receipts for registered shares have the right to attend the general meeting of shareholders. However, once a right has been included in the articles, it would no be longer possible to reverse this. This right falls within a grey area of law and the proposal provides clarification on this matter.

Furthermore, the document proposes that clear and direct instructions be given to the managing board by the general meeting, or, if applicable, the supervisory board. The managing board is nevertheless given an escape route from these instructions if they are deemed contrary to the interest of the company (or the group to which it belongs) or its enterprise. It seems desirable, especially when considering larger group structures, for the future law to only provide the managing board with limited possibilities to do so.

Unfortunately, this proposal (and the current law) does not contain any provisions on the possibility of having non-voting shares. Their existence is desirable, as one would no longer need to deal with the complicated structure of depository receipts for shares to achieve this effect.

The Ministry of Justice is reviewing the various practitioners' points of view and draft legislation is being prepared.

Arnout Stroeve and Evelien Visser