On July 1, 2021, the Law on Management and Supervision of Legal Persons (Wbtr) will enter into force. This will supplement and clarify the current legal framework for management and supervision of legal persons. This has consequences for you as a director or supervisor and possibly also for the articles of association of the legal entity. In this article, we list the changes.
Supervisory body
The title of the Wbtr speaks of “supervision” as an umbrella term for the supervisory board and non-executive directors in the monistic governance model. In practice, we see that it is also common in associations and foundations to refer to the supervisory body as the supervisory board. This has no consequences for the legal qualification, as long as the supervisory board complies with the supervisory board concept. Therefore, the association or foundation does not have to set up a supervisory board under the articles of association.
Rationale Wbtr
The current statutory regulations for management and supervision leave much to be desired in terms of uniformity and completeness. For example, while the law provides regulations for the management and supervisory boards of private companies (bv and nv), such regulations are lacking or incomplete for foundations, associations, cooperatives and mutual associations. In practice, this leads to ambiguity. This is undesirable. The purpose of introducing the Wbtr is therefore to achieve a more uniform regulation by supplementing and clarifying existing legislation.
Direct effect and transitional law
The Wbtr takes effect without a transition period. As of July 1, 2021, you must comply with the new rules. For some subjects an exception has been made and a transitional arrangement applies. When we discuss the outlines, we make mention of them.
What changes?
We will take you through the Wbtr in outline form.
- One-tier board model: for the foundation, association, cooperative and mutual benefit society, there will be a statutory basis for the one-tier board model in which the board consists of both executive and non-executive directors. In addition, the foundation and association will also have a legal basis for establishing a supervisory board (the two-tier board model). This is in line with the existing regulation for the bv and nv.
- Uniform standard for the performance of the duties of a management board member or supervisory board member: the standard will be made the same for all legal entities as the existing standard for BVs and NVs. In discharging his duties, a director or supervisory director must be guided by the interests of the legal entity and its affiliated enterprise or organization.
- Conflict of interest rule: the rule that a director or supervisory director refrains from participating in deliberations and decision-making if he has a direct or indirect personal interest that conflicts with the interest of the legal entity and its affiliated enterprise or organization, will apply to all legal entities. A situation may then arise in which no management decision can be taken. In that case, the decision is taken by the supervisory board. If there is no supervisory board or it cannot take a decision due to a conflict of interest of one or more of the supervisory board members, the general meeting will decide on the decision. Since the foundation does not have a body called a “general meeting,” a different rule applies there. Namely that the decision is still taken by the board with a record of the considerations on which it is based. The aforementioned rule also applies to the supervisory board if it is present.
With effect from July 1, 2021, an association, cooperative or mutual insurance company can no longer invoke a provision in its articles of association that, in the event of a conflict of interest, leaves the representation to a person other than the director concerned or the management board.
If the association, cooperative or mutual insurance company was represented before the entry into force of the Wbtr and there was a conflict of interest, the general meeting of members can ratify the representation as of July 1, 2021. - Uniform rules on liability: directors and supervisory directors of an association or foundation are jointly and severally liable for the deficit in a bankruptcy if they have improperly fulfilled their duties. If the administration obligation and the timely publication of financial statements have not been met, improper performance of duties is established and is presumed to be a major cause of the bankruptcy. The latter only applies to directors and supervisory directors of an association or foundation that is subject to corporate tax or is required to prepare financial statements.
- New dismissal criteria foundation directors and supervisory directors: with the introduction of the Wbtr, a director can be dismissed for neglect of his duties, for other serious reasons or for a drastic change of circumstances on the basis of which the continuation of his directorship or supervisory directorship cannot reasonably be tolerated. These new criteria grant more discretion to the court for dismissing a director or supervisory director of a foundation.
- Default and inability to act: the articles of association must specify the manner in which the duties and powers of officers are to be performed in the event of the absence or inability to act of all officers of a body. ‘Inability’ may be further defined in the bylaws.
Check or have checked that your bylaws comply with this. If this is not yet the case, it must be corrected at the next amendment of the articles of association. There is no transitional arrangement for BVs and NVs, but the advice is the same. - Multiple voting rights: for the foundation, association, cooperative and mutual insurance company, as for the bv and nv, it will be legally enshrined in the articles of association that an officer will be granted more than one vote, but that this officer cannot cast more votes than the other officers collectively.
An existing provision in the articles of association that is contrary to the Wbtr will retain its effect for a maximum of five years after the Wbtr enters into force or until the next amendment of the articles of association. The provision must then be simultaneously brought into line with the Wbtr.
How to prepare for the Wbtr
Have a check whether the bylaws need to be amended as a result of the Wbtr. Do not wait until July 1, 2021 to do so, but be prepared. Our corporate law attorneys are happy to assist you with an articles of association check and further advice.
This article was written by Mr. Cristian Plomp and Mr. Rien Hoek , affiliated with the Corporate Law Practice Group.
