Incorporation of a BV (a private company with limited liability under Dutch law)
The private company with limited liability (BV)
The BV offers protection to the director (there may be more than one director) of the company if the director:
- timely files the annual accounts;
- carries out no activities other than those permitted by the purpose clause;
- notifies the tax office immediately if the BV is unable to pay its debts;
- behaves as is fitting for a good director;
- refrains from entering into obligations that cannot be met by the BV.
The shareholders hold the shares in the capital of the company. Various rights may be attached to these shares. The most common situation in this respect is that profit-sharing rights (entitlement to dividends) as well as controlling rights (voting rights) are attached to the shares.
In a small BV the director is usually also the sole shareholder. In larger enterprises this is not always the case.
If the shareholder is also director of the BV, it is of the utmost importance that it is strictly distinguished by virtue of what title he shall act. The board of directors of the BV must serve the interests of the company, whereas the shareholder in principle wishes to serve his own financial situation.
Since the introduction of the Act on simplification and flexibilisation of rules governing Dutch BV’s (Flex BV Act), the statutory regulation regarding the BV has become more flexible and financially it has become easier to incorporate a BV. When setting up a BV there is no obligation to deposit a minimum capital. A BV can be incorporate with a share capital of € 0.01.
The new rules of the private company law are directed at the equity that is transferred out of the BV.
If equity (or part thereof) of the BV are transferred out of the BV, there must be a so called distribution test. If, for example, a dividend distribution is at issue, the general meeting (of shareholders) takes a resolution in this respect. This resolution can be implemented only after it has been approved by the board of directors.
The board of directors must decide whether the BV can continue to meet its obligations after a dividend distribution has been made. If a director knows or should reasonably anticipate that the BV will not be able to pay its immediately due and payable debts after making the dividend distribution, then this director is severally liable for the deficit. The shareholders on the other hand shall have to pay, at the most, the amount of the dividend distribution and in that respect they must look ahead at least one year or one year and six months.
Incorporation of a BV
Should you wish to incorporate a BV it would be wise to ask information about this from a civil-law notary. In such an information talk the following points shall in any case be at issue:
- the purpose of the company (will the BV perform management and holding activities or actual working activities?);
- the name of the company;
- where will the company have its registered office. This is the “domicile” of the BV and can be relevant in legal proceedings but also, for example, if a subsidy is applied for;
- where the company will actually be located, i.e. the address of the BV;
- what the share capital must be at the setting up of the BV and in what way this will be paid-up (in cash or, for example, by means of bringing in a company);
- who will become shareholder/shareholders and who will become director/directors of the BV;
- should there be special shares. In this respect one may think of nonvoting or profitless shares but also of cumulative preference shares, letter shares et cetera;
- whether upon setting up the BV a supervisory body (Board of Supervisory Directors) will be appointed or whether it may perhaps be desirable to do so in the future and that for that reason this possibility should already be included in the articles of association.
Furthermore we can inform you about specific rules to which BV’s which are going to carry out certain activities will be bound. In this respect one may think of companies working in the field of care. The regulations of the Wet Toelatingen Zorginstellingen (Wtzi) may apply to such activities. PlasBossinade disposes of a wide knowledge and experience and will be able to advise you in this field.
Should you wish to be informed in more detail about setting up a BV and/or about the possibilities in your specific situation, please do not hesitate to get into touch with one of the civil-law notaries of PlasBossinade.
Focus points BV
- To a director-major shareholder (DMS) who as an employee performs activities for his/her own BV, the usual pay regulation applies. This means that in view of the wage tax and social security contributions one is assumed to receive wages of at least € 45,000.00 (2018).
These wages will be taxable. There are nonetheless situations in which these usual wages can be fixed at a higher amount.
- If one operates through a BV, one is no longer eligible for the tax facilities self-employed have with regard to income tax. For instance start-up facilities.
- A major advantage in comparison with the one-man business/self-employed status is that the BV entails limited liability, whereas the entrepreneur with a one-man business is personally liable.