Branch & Subsidiary
When establishing a branch, it serves as an operational extension of the main company without being a separate legal entity. The main company remains liable for any claims arising from the branch’s activities.
On the other hand, a subsidiary is an independent legal entity controlled by the parent company. Control can be achieved through ownership of over 50% of the subsidiary’s shares or through special voting rights. With control, the parent company can influence the subsidiary’s board composition.
A subsidiary offers limited liability, ensuring that shareholders are generally only liable up to the amount of capital they have invested.
Private Limited Company – BV
A BV (Private Limited Company) is a legal form that allows a company to be seen as a separate legal entity and enter into obligations on its own. This means that the founder is not personally liable for any debts incurred by the company. Limited liability is why it is the most popular choice when starting a business. In most cases, directors of a BV cannot be held personally liable. However, there are exceptions to this rule in cases of improper management.
In a BV (Private Limited Company), the company’s shares are distributed among a select group of shareholders, creating a closed ownership structure. These shares are registered and not freely tradable like in a Public Limited Company. Each shareholder holds a portion of ownership in the company. It is not uncommon for all shares to be owned by a single individual known as the director-majority shareholder (Dga). The company’s governance may include a supervisory board to oversee its management.
Shareholders have the option to directly manage the company or appoint a board of directors. This board works on behalf of the shareholders and has the authority to make decisions. To keep shareholders informed, an Annual General Meeting (AVA) is typically held at least once a year, providing an opportunity for shareholders to receive updates and participate in decision-making.
Difference between NV and BV
A Public Limited Company (NV) is similar to a Private Limited Company (BV). Both are considered legal entities. The key difference lies in the fact that anyone can become a shareholder in a Public Limited Company. The shares of an NV are freely tradable, allowing for easier transfer of ownership.
Public limited liability company (NV) & differences with the BV
In the Netherlands, there are rules for two types of companies: BVs and NVs. They have some similarities, but also some important differences.
For an NV, there’s a requirement to have a minimum amount of authorized capital, and at least 20% of that capital must be issued. Moreover, at least 25% of the value of the issued shares must be paid up. The total issued and paid-up capital of an NV should be at least €45,000. NVs can offer both registered and bearer shares, and they can also issue share certificates.
For larger NVs and BVs meeting specific criteria, a “structure regime” applies. This means they must have a supervisory board with certain powers, like hiring and firing the management board and approving major governance changes. The Cooperative may also fall under these regulations. However, multinational companies with their main office in the Netherlands but most employees working abroad can choose to follow the structure regime voluntarily.
A cooperative is a legal group formed by at least two members (people or companies) through a special written agreement with a notary. Its main purpose is to provide goods or services to its members. The agreement can be changed if the group decides to do so.
The members of the cooperative usually aren’t personally responsible for the cooperative’s debts, but they might be responsible if the cooperative goes bankrupt or dissolves, as stated in the agreement. The cooperative can change the agreement to limit members’ responsibility or create different types of members with varying levels of responsibility.
Unlike some other business types, a cooperative doesn’t need a minimum amount of money to start. It can share profits among its members. The cooperative must have rules about how any remaining money will be divided if it’s dissolved. A cooperative can also be used as a way to manage taxes and make business operations more flexible, especially for international activities.
A foundation is a type of organization in the Netherlands that has specific goals and is managed by a board. Unlike companies, it doesn’t have owners or members. Its main purpose is to achieve a particular objective using the money set aside for that purpose. To create a foundation, a formal legal document is needed, and the law doesn’t allow it to give money to its founders or board members, except for certain social or charitable reasons. The board can be made up of individuals or other organizations, and they usually choose the board members themselves, unless the rules say otherwise. Foundations are commonly used to keep ownership of assets separate from those who benefit from them.
Governance and Supervision of Legal Entities
Starting from July 1st, 2021, the Governance and Supervision of Legal Entities Act (Wet Bestuur en Toezicht Rechtspersonen) will be enforced for all legal entities mentioned earlier. The aim of this act is to enhance the quality of governance and supervision in the semi-public sector. This act extends the rules that were previously applicable to directors and supervisory directors of BVs and NVs to all other legal forms with legal personality.
The concept of trust is not recognized under Dutch civil law, which only distinguishes between personal and real rights. The distinction between legal interests in property and beneficial interests in property rights is therefore not recognized.
Other Common Business Forms
Sole Proprietorship (eenmanszaak)
A sole proprietorship, or “eenmanszaak” in Dutch, is a business structure where one individual, who is a natural person, assumes full responsibility and liability for the enterprise. Unlike other legal entities, a sole proprietorship does not possess separate legal status or capacity. As such, there is no distinction between the assets of the business and the private assets of the individual running the business.
General/Commercial Partnership (VOF)
A commercial partnership is defined as a public partnership conducting business rather than a profession. Therefore, a VOF and its partner must pass registration in the Commercial Register at the Chamber of Commerce.
In some professions like doctors, lawyers, and graphic designers, entrepreneurs often form partnerships called “maatschappen.”
A partnership is when two or more people or companies come together to run a business. Each partner contributes money, goods, or work to the business, and they are personally responsible for the partnership’s debts, either together or individually. The partnership itself is not a separate legal entity, and it only needs to register with the Chamber of Commerce if it does business activities (usually the case).
There’s a type of partnership called a “public partnership” or “openbare maatschap.” In this setup, the partnership operates under a shared name and can be involved in legal matters. The assets of the public partnership are separate from the partners’ personal assets.