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The “Act on Management and Supervision of Legal Entities” enters into force

09 June 2021

As of 1 July 2021, the Act on Management and Supervision of Legal Entities (in Dutch: Wet Bestuur en Toezicht Rechtspersonen, hereafter “WBTR”) will enter into force. This means that the rules governing the management and supervision of associations, foundations, cooperative associations and mutual benefit organizations will change. For these entities, the law will provide more clarity on the duties and responsibilities of managing and supervisory directors. For the director of a foundation, the preventive dismissal test will also lapse.

Most important changes

The WBTR contains the following main changes:

  1. Supervision: the WBTR makes it possible for all legal entities to introduce a supervisory body, either by setting up a supervisory board (dualistic) or by setting up a one tier board (monistic).
  2. Conflict of interest: a managing or supervisory director of an association, foundation, cooperative or mutual benefit organizations, shall not participate in the decision-making on a subject if they have an (in)direct personal interest that conflicts with the interest of the legal entity.
  3. Multiple voting rights: the multiple voting rights for the foundation, association, cooperative and mutual benefit organizations are limited. This means that a managing or supervisory director can never cast more votes than the other managing or supervisory directors together.
  4. Liability: in the event of bankruptcy of foundations, associations, cooperatives and mutual benefit organizations, managing or supervisory directors who have failed to perform their duties can be held jointly and severally liable.
  5. Absence or inability: after 1 July 2021, foundations, associations, cooperatives and mutual benefit organizations will be obliged, when amending their articles of association, to provide for a scheme to cover the absence or inability of the management board or supervisory board.

 

Dismissal managing or supervisory director of a foundation

As of 1 July 2021, the regulations regarding the dismissal of a managing or supervisory director will be changed. In short, there are two possibilities for dismissal of a director:

  • By a decision of the board or the supervisory board, with the consent of the director, or the intervention of the UWV or a court.

Currently, the termination of the directorship does not lead automatically to termination of the employment contract. The managing or supervisory director of a foundation enjoys the same protection against dismissal as an 'ordinary' employee and cannot be dismissed without the intervention of the UWV or a court.

As of 1 July 2021, this will change. If a director is dismissed by the managing board or supervisory board of a foundation, his or her employment contract ends by operation of law. However, there must be a reasonable ground for dismissing the director.

  • By the court, at the request of the Public Prosecutor's Office (in Dutch: Openbaar Ministerie) or any party with an interest.

Currently, at the request of an interested party or the Public Prosecutor's Office, the court can dismiss a managing or supervisory director of a foundation on the grounds of acting in violation of the law or the articles of association, mismanagement or failure to comply with an order to provide insight into the organisation and finances of the foundation. These grounds for dismissal are extended by the WBTR to neglecting duties, radical change of circumstances, failure to comply with an order of the preliminary relief judge or other serious reasons.

 

Would you like to know more about the Act on Management and Supervision of Legal Entities and its consequences for you? Please contact one of our lawyers.



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