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  • 01-07-2012


The new rules will have important consequences for group holding structures. For example, the top management will obtain a stronger legal basis for pursuing a group policy.

Please find below a number of Questions & Answers with regard to Flex BV and group holding structures.

Q&As regarding the Flex BV Act (effective 1 October 2012)

Will the entry into force of the Flex BV Act require existing BVs to amend their articles of association?

The Flex BV Act does not expressly require existing BVs to amend their articles of association, or at least not immediately. However, there are two changes that must be made, where applicable, when the articles are next amended. If the BV has a supervisory board, the articles of association must provide for the situation where positions on the board become vacant or board members are unable to perform their duties (ontstentenis of belet). Secondly, if depositary receipts for shares have been issued with the cooperation of the BV, the articles of association must grant meeting rights to the holders of those receipts.

Moreover, in order to take full advantage of the flexibility offered by the new legislation, other amendments may be necessary or at least advisable. One example is an amendment granting a power to the general meeting of shareholders to issue specific instructions to the management board.

The articles of association of many existing BVs contain provisions that incorporate or are derived from the current statutory rules (such as in relation to dividends, financial assistance and share buy-backs). An important question is whether these provisions will remain in force or be disregarded when the new statutory rules are introduced. Some of these provisions may, from the date of entry into force of the Flex BV Act, be treated as an election and hence become binding on the company. In those cases, an amendment to the articles of association may be necessary or at least advisable. The brochure 'Flex BV Guide to the BV's articles of association' sets out how the Flex BV Act and One-Tier Board Act will affect a number of important common provisions in a BV's articles of association.

The transitional legislation provides that if the articles of association refer to a statutory provision that was valid before the entry into force of the new law or if they incorporate the substance of such a provision, the articles will be deemed to refer to or incorporate the relevant provision of the new law. As it remains unclear how strictly this 'formal' transitional rule will be interpreted, we would advise you not to rely on it and to therefore amend the articles of association.

Is it possible under the Flex BV Act for a parent company to issue specific instructions to its subsidiaries ('enter into a contract with X', 'suspend that payment to Y')?

Under the new company legislation, it will be possible to include a provision in the articles of association of a BV requiring its management board to follow the specific instructions of another corporate body of the BV. Within a group structure this will often be the general meeting of shareholders. The inclusion in the articles of association of one or more subsidiaries of a specific power on the part of the relevant subsidiary's general meeting of shareholders to issue instructions to the management board gives the group management an extra legal basis for pursuing a group policy.

The parent company – as the sole or in any event controlling shareholder – can, for example, instruct the management board of its subsidiaries to conclude or terminate certain contracts, suspend payments, appoint or dismiss personnel, establish or close down departments, and so forth. The management board must then comply with these instructions unless they conflict with the subsidiary's interests. At present, the articles of association may only provide for a power to issue instructions about general policies.

Caveat: even where the general meeting of shareholders issues specific instructions, the management board must still assess the BV's interests independently. If the management board does not act in the interests of the company and/or its business (taking into account the broader interests of the group) it will be liable, even if the action was carried out on specific instructions. It should also be noted that a parent company that systematically issues instructions to the management board of a subsidiary runs the risk of being treated as a de facto policymaker (i.e. as a de facto member of the management board). The parent company may then be liable as though it were a management board member of that subsidiary.

Under the new rules, can simple 'one-pager' articles suffice?

Yes. The number of matters that must be included by law in a BV's articles of association will be reduced. This will make it possible to draft even shorter articles of association ('one pagers') for group companies that would include a number of basic elements, such as (i) the seat and object of the company, (ii) the nominal value of the shares, (iii) arrangements for the interim management of the company if one or more positions on the management board become vacant or board members are unable to perform their duties (and similar arrangements with respect to the supervisory board, if any) (ontstentenis of belet) and (iv) if applicable, the granting of meeting rights to holders of depositary receipts issued with the cooperation of the BV.

Group-wide rules, policy rules and approval arrangements could then be included in group by-laws with which all or some of the group companies must comply. Unlike articles of association, group by-laws would not have to be made public and could be easily amended without the need to amend the articles of association. The downside is that by-laws are not binding on the company but this could be overcome by including an obligation in the articles of association to comply with the group by-laws.

Which of the existing capital protection rules will be abolished or become more flexible?

The following capital protection rules (among others) will be abolished under the new legislation:

- the minimum capital requirement of EUR 18,000;

- the obligation to provide a banker's capital contribution statement when payment is made in cash;

- the obligation to provide an auditor's statement when shares are paid for in kind;

- the obligation to include the authorised capital in the articles of association;

- the obligation to denominate share capital in euros;

- Nachgründung: the additional requirements in respect of transactions entered into by a BV with its founders or shareholders within two years of its initial registration in the trade register; and

- the financial assistance rules governing the provision of assistance by the BV upon the acquisition of shares.

It will also become easier to reduce the capital of a BV. Various requirements and restrictions will cease to apply. These include:

- the requirement that a resolution to reduce capital be deposited at the trade register;

- the two-month protection period for creditors;

- the need for a shareholders' resolution in the case of a share buy-back (the management board will in future be entitled to buy back shares if the distribution test is fulfilled); and

- the restriction that dividends and other distributions are permitted only if there are sufficient distributable reserves.

Q&As regarding the One-Tier Board Act (expected effective date 1 January 2013)

How must a management board member act in the event of a conflict of interest: may he/she represent the company despite the conflict?

Yes. Once the One-Tier Board Act enters into force, a management board member who has a conflict of interest may represent the BV even if this is explicitly prohibited by the articles of association. The Act provides that a conflict of interest has consequences only for internal decision-making. A management or supervisory board member who has a direct or indirect personal interest that conflicts with the interests of the BV in relation to a particular transaction may not participate in the deliberations and decision-making on that transaction. If he/she nonetheless does so, the decision will be voidable and the board member in question may be held liable towards the BV. The transaction with the third party will, however, be valid.

Background: Under the current law on BVs, a management board member who has a conflict of interest with the company is not authorised to represent the BV. If he/she nonetheless does so, a transaction with third parties can, in some circumstances, be invalid. That rule will be abolished.

Must the articles of association be amended in order to take advantage of the new conflict-of-interest rules?

No, that is not necessary. With the entry into force of the One-Tier Board Act the current conflict-of-interest rules will automatically cease to apply in relation to the representation of a BV and any provision in the articles of association which contains the current rules will be deemed to be not applicable. To avoid misunderstandings, however, we would advise that any such provisions be removed from the articles of association (and possibly replaced by the new rules).

Can the new conflict-of-interest rules be set aside in the articles of association?

Yes. The new rules can be set aside (insofar as all management board members and supervisory board members have a conflict of interest and it thus becomes impossible to make a decision) by including a provision in the articles of association authorising management board members with a conflict of interest to participate in the decision-making in that situation.

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