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Manage the governance and supervision of your legal entity

This information is provided by:Netherlands Chamber of Commerce, KVKNetherlands Chamber of Commerce, KVKNederlandse versie

Do you have an organisation with legal entity? Such as a private company, cooperative, or association? Then be sure to adhere to the rules that apply to the board and supervision.

On 1 July 2021, the Governance and supervision Act (Wet Bestuur en Toezicht Rechtspersonen, WBTR) came into effect. Since then, the same rules for management and supervision apply to all business structures with a legal entity. This means there is now a legal basis for coöperaties, verenigingen en stichtingen to introduce a supervisory body, such as a board of supervisors.

Record management and supervision in the articles of association

Every legal entity has an administrative body. The board or management is ultimately responsible for how things are done in an organisation and can act on behalf of the organisation. For example, by buying goods and services. You determine how many people your board consists of. In a small company there may only be 1 director. In addition to management, you can also have a supervisory board. The Supervisory Board supervises management (the board) and the strategy of the organisation. A supervisory board is not mandatory.

One-tier or two-tier board

You can have a supervisory board that is separate from management (dual governance model). You can also choose to have 1 body for both management and supervision (monistic management model).

The Governance and supervision Act states that all legal entities can have a supervisory board. So that includes cooperatives, associations, and foundations. They can also opt for a one-tier board as their governance model.

Read more about the one-tier and two-tier board governance models.

Articles of Association

The form of management and supervision is recorded in the articles of association. For example, whether you have a supervisory board. And whether you opt for a monistic or dual management model.

Who appoints and dismisses the board?

It differs per legal entity who appoints the board:

  • A foundation must record how directors are appointed in its articles of association.
  • In a private (bv) and public (nv) limited company, the shareholders appoint the board.
  • In cooperatives and associations, the members do this through the general meeting of members.
  • In the articles of association you record how directors are appointed and under what conditions. The same body that appoints the directors can also dismiss or temporarily suspend them.

Notify KVK of changes in the board

Directors and supervisory directors register with the Netherlands Chamber of Commerce KVK. Are you resigning as a director? Notify KVK within 8 days of a board change. Retired directors who are still listed in the Business Register run the risk of being held liable for debts or malpractice.

Division of tasks and responsibility of the board

You can divide the tasks within the board. For example, there usually is a chairperson, a board secretary, and a treasurer. Do you have executive and non-executive directors in 1 body? Only a non-executive director may be chairperson. Even if the tasks are divided, each director remains responsible for the decisions and strategy of the entire board.

Signing contracts

The board as a whole is authorised to sign. This means that the directors may sign contracts jointly or independently on behalf of the company. They are also able to perform certain legal acts. Who can sign alone and who has to sign with one or more others, is stated in the articles of association of the organisation.

Follow the rules for good governance

The law contains rules for good governance. As a director or supervisory director, you must always act in the interest of the legal entity and the company or organisation associated with it. You must fulfil your task as effectively as possible. This is called good governance. For example, you must complete the financial statements on time and ensure that the financial accounting is correct.

Do not make a decision in the event of a conflict of interest

The personal interests of directors or supervisory directors may conflict with those of the organisation. In that situation, they are not allowed to participate in the discussion and decision-making on these subjects. Can the board not come to a decision as a result of this? Then the supervisory board, the meeting of shareholders, or the members must take the decision. In the case of a foundation without a supervisory board, the foundation board takes the decision. All considerations leading to the decision must be recorded in writing.

Personal liability

If you do not perform your task as a director properly, the legal entity can hold you personally liable for the damage. You can also be held liable if the legal entity goes bankrupt due to mismanagement or negligence by the board. Read more about managerial and personal liability.

Restriction of multiple voting rights

Directors make decisions by voting. Usually each director has 1 vote. You can record in the articles of association that a director will have multiple votes. This is called multiple voting rights. The new rule is that a director alone may never have more votes than the rest of the board put together. For example, are there only 2 directors? Then neither of the 2 directors may have an extra vote. The restriction of multiple voting rights also applies to supervisory directors.

Record what to do if a director cannot participate in the decision

Sometimes a director or supervisory director is temporarily unable to perform their function. For example due to illness or because they have temporarily been suspended. A director or supervisory director may even no longer be in office at all. Because they resigned, were fired, or died. This is called absence. In your articles of association you record who takes decisions for the organisation when one of the directors or supervisory directors is suspended or absent.

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