The articles of association (also known as the articles of incorporation) contain the regulations regarding the (internal) organization of the company and, among other things, the names and the purpose of the company. This set of rules can be considered as a user’s manual for the company because they outline how the day-to-day tasks must be completed. The articles of association of a BV contain, inter alia, the following provisions:
- Name and registered office: The BV must have a name and a registered office and it is found in the articles of association. The registered office must be in the Netherlands. The company’s registered office is of significance, as the general meeting of shareholders generally needs to be held in the municipality of the registered office and any legal actions against the company generally need to be brought before the court of the municipality in question.
- The company’s objectives: The objectives of the company must also be stated in the articles of associations. The description of the objectives may be very general but must at least include the BV’s main activities (otherwise the BV cannot carry out these activities). Although legislation does not give information about how precise the definition of the company’s objectives need to be, inexact and unnecessarily extensive definitions should be avoided.
- Shareholders’ register: The BV must keep a shareholders’ register, which lists the names and addresses of all shareholders, the number of shares held and the amount paid-up on each share. The BV must be notified of any transfer of shares. The shareholders’ register must be kept up-to-date by the management board.
- Shares: A BV may issue ordinary shares, which may be registered shares A BV may also issue priority shares to which certain (usually voting) rights are allocated in the articles of association. Alternatively, the BV can issue preference shares. Within a given type of share, the articles of association may also create different classes of shares (e.g. A, B and C shares). Moreover, it is possible to create non-voting shares and shares without any profit right. But non-voting shares must grant a profit right.
When shares are purchased, the amount of their nominal value must be paid immediately. It may be agreed that the amount remains unpaid until the BV asks for the unpaid amounts on the shares.
- Share transfer restrictions: Share transfer restrictions do not have to be included in the articles of association. But if a BV opts to do so, it can also include detailed rules for determining the share price. The articles of association may also include a lock-up clause, as well as provisions imposing additional obligations on shareholders.
- Share capital: A BV must have share capital that is divided into shares with a nominal value denominated in euros or another currency. It is possible to incorporate a BV with only one share having a nominal value of EUR 0.01.
Payment for shares can be in cash or in kind. If payment in cash has been arranged, the funds used to pay the shares issued on incorporation must be paid into a Dutch bank account in the (still to be incorporated) company’s name. Payments-in-kind (contributions of property or other non-cash items) are restricted to items that can be objectively appraised. The founders/directors must describe the contributed assets. The description must relate to the condition of the contributed assets at a date not earlier than six months before incorporation.
- Management board: A BV requires the appointment of at least one managing director, who is mentioned in the deed of incorporation. Both natural persons and legal entities are allowed to act as managing directors. As an alternative to the two-tier management/supervisory board structure, Dutch law provides for the possibility of having a one-tier board structure comprising a single board with both, executive and non-executive directors.
Under Dutch law, each individual managing director has full authority to singularly represent the BV. Such authority may be restricted, for example, by incorporating a dual signature system. Restriction must be included in the articles of association. The articles of association may also stipulate that the board of directors needs to get prior approval from the general meeting and/or the supervisory board for certain actions. However, the articles of association may not give either body a general power of instruction or direction over the management board.
One or more supervisory directors, who must be natural persons, may be appointed. However, for smaller companies, supervisory directors are usually not necessary.
- Financial statements: The financial year of a BV must cover a 12-month period. Depending on fiscal and intra-group accounting policies, the first financial year may be shorter or longer than 12 months but no longer than 18 months.
- General meeting: At least one general meeting must be held annually, during which the financial statements are approved. This meeting should take place within the first six months of the following financial year, unless this term has been extended by the general meeting by no more than five months. Shareholders’ resolutions are adopted by a majority of votes, unless the articles of association provide otherwise.