The same rules apply to all legal entities
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.
Is your company listed? As of 1 January 2022, at least 1 in 3 members of the supervisory board must be female. You will need to start this transition as soon as a position on the board becomes available. You can appoint a male board member again when at least 1 in 3 members of the board is a woman.
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). 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.
No one-tier board for cooperatives, associations, and foundations yet
The Governance and supervision Act states that all legal entities can have a supervisory board. So that includes cooperatives, associations, and foundations. Which means they can also opt for a one-tier board as a governance model. But this part of the new law will not yet come into effect on 1 July 2021. It is not yet known when cooperatives, associations, and foundations will be able to register a one-tier board.
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 the KVK Chamber of Commerce of changes in the board
Directors and supervisory directors register with the Chamber of Commerce (KVK). Are you resigning as a director? Notify the 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.
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 annual 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.
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.
The restriction of multiple voting rights applies to all legal entities. Do your articles of association still state that a director may cast more votes than the other directors combined? Then this agreement is valid for a maximum of 5 years. If you change the articles of association before that time, you must also adjust this agreement.
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.
Suspension and absence regulation mandatory
All legal entities must have a suspension and absence regulation in the articles of association. Do you not have this yet? In that case, you must record such a regulation with the next amendment to your articles of association.