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Russell Advocaten B.V.
Amsterdam, Netherlands

On 28 January 2020, the Dutch Parliament adopted the bill on the management and supervision of legal entities. What are the changes?

The Bill will make it possible for all legal entities to:

  • Set up a supervisory board
  • Opt for a one-tier board system: this means that, within the board, tasks are divided between executive and non-executive directors. There is no separate supervisory board in addition to the management board.

Associations, foundations, cooperatives and mutual benefit associations will thus be subject to the same rules as companies. The bill has still to be dealt with by the Senate.

Uniform arrangements for all legal entities

In addition, the Act introduces uniform arrangements for:

  • The liability of directors and supervisory directors in the event of improper performance of their duties
  • The principles directors and supervisory directors must observe in the performance of their duties
  • The court’s discretion to dismiss a director or supervisory director of a foundation if requested to by the Public Prosecutor’s Office or another interested party
  • When directors and supervisory directors have a conflict of interest and must refrain for taking part in the decision-making process

During the vote, the original bill was amended in two parts:

  1. Associations, foundations, cooperatives, and mutual benefit associations that have not included arrangements for prevention from acting or absence have to change the articles of association as soon as possible. With regard to “prevention from acting” you can think of long-term illness and with “absence” you can think of deferral or dismissal, for instance. This is because the legislator believes that management and supervision must also be possible if all board members or supervisory board members are prevented or absent.
  2. Statutory provisions stipulating that one managing director or supervisory director has the majority of the voting rights in the decision-making are no longer permitted. Such provisions will remain valid until the next amendment of the articles of association or for a maximum period of five years after the entry into force of the Act. The legislator does not consider it desirable for a single director or supervisory director to have a dominant voting right, because the management board and the supervisory boards are internally collegial bodies.

More information?

Are you a director or supervisory director of an association, foundation, cooperative or mutual benefit association? Make sure to keep an eye on the progress with regard to the bill on management and supervision on legal entities in our blog! We are happy to keep you informed through our newsletter. Do you have any questions about the bill, the structure of your business or corporate governance? Please contact Guus van Lieshout (guus.vanlieshout@russell.nl or +31 20 301 55 55).