The new Management and Supervision (Public and Private Companies) Act: Is an amendment of the articles of association necessary?

Rosalie Wols  |  30 April 2021  |  Reading time: about 4 minutes

On 1 July 2021, the Act on Management and Supervision of Legal Persons (Wet bestuur en toezicht rechtspersonen (Wbtr) enters into force. This Act provides measures to improve the quality of management and supervision of foundations and associations. The Act also has consequences for cooperatives, mutual insurance companies and, to a small extent, for BVs and NVs. The main changes concern supervision, conflict of interest, liability, dismissal of directors and supervisory directors, multiple voting rights and inability to act or absence. What does this mean for you? Must the articles of association of your legal entity be amended at once? No, that is not necessary, but it is advisable. Some provisions currently included in the articles of association that are not in line with the Wbtr must be regarded as unwritten and are therefore no longer valid. By amending the articles of association on these points, confusion can be avoided. It is therefore advisable to carefully review the current articles of association and, where necessary, ensure that they are brought into line with the provisions of the Wbtr. We will, of course, be happy to assist you in doing so.

 Amendments

The Wbtr contains regulations with regard to supervision, conflict of interest, liability, dismissal of directors and supervisory directors, multiple voting rights and inability to act or absence.

Supervision

For all legal entities, the Wbtr provides for the possibility of setting up a supervisory board or a one-tier board. In a one-tier board, the board consists of executive and non-executive directors. The non-executive directors are charged with supervision.

Conflict of interest

The BV and the NV already have conflict of interest rules. The Wbtr now also provides conflict of interest rules for other legal entities. The conflict of interest rules mean that a director or supervisory director is not allowed to participate in the decision-making process if he or she has a personal interest that conflicts with the interests of the legal entity. If no decision can be taken at all due to a conflict of interest, another body of the legal entity may be designated to take the decision concerned. If this is not possible, the decision must be taken with a written record of the considerations.

Liability

The Wbtr stipulates that for all foundations, associations, cooperatives and mutual insurance companies, the directors’ liability arises in case of bankruptcy due to improper performance of duties. The exception that this was only the case for foundations and associations subject to corporate income tax and for formal associations has abolished.

Dismissal of directors and supervisory directors by the court

The court has a number of additional grounds on which it may dismiss a director or supervisory director of a foundation. Currently, the court may, at the request of an interested party or the Public Prosecution Service, dismiss a director or supervisory director on the grounds of acting contrary to the law or the articles of association, on the grounds of mismanagement or failure to comply with an order to provide insight into a foundation’s organisation and finances. When the Wbtr comes into force, these grounds for dismissal are expanded and the court may also dismiss a director or supervisory director on the grounds of neglecting one’s duties, a drastic change in circumstances or other serious reasons.

Multiple voting rights

The Wbtr regulates multiple voting rights. This regulation already existed for the NV and the BV, but is now also available for other legal entities. The regulation implies that a director or supervisory director may be granted more than one vote in the meeting, but that this director or supervisory director can never cast more votes than the other directors or supervisory directors added together.

Inability to act and absence

It will be compulsory to include provisions in the articles of association governing the inability to act or absence of both the board of directors and (if applicable) the supervisory board. The articles of association then provide regulations in the event of the inability to act or absence of one or more directors or supervisory directors. The articles of association may also specify when there is an inability to act and may appoint a temporary director or supervisory director. The temporary director/supervisory director is considered equivalent to a director or supervisory director.

Immediate effect

The Wbtr enters into force with immediate effect on 1 July 2021. What exactly does this mean for you? Must the articles of association of your legal entity be amended immediately? No, that is not necessary, but it is advisable. Provisions concerning, for example, a conflict of interests that are currently included in the articles of association but that are not in line with the Wbtr, must be regarded as unwritten and are therefore no longer valid. By amending the articles of association on this point, confusion can be avoided.

If the articles of association currently do not contain a regulation concerning the inability to act or absence, such a regulation must be included in the next amendment to the articles of association. A regulation in the articles of association regarding multiple voting rights, where one director/supervisory director can cast more votes than the other directors/supervisory directors jointly, is either valid for another five years, or must be amended at the time of the next amendment of the articles of association, whichever comes first.

It is therefore advisable to carefully review the current articles of association and, where necessary, ensure that they are brought into line with the provisions of the Wbtr. We will, of course, be happy to assist you in doing so.

Do you have any questions? Please contact Rosalie Wols or Xander Blokzijl.

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