1. Which law is applicable to the legal capacity and right of representation of a legal entity?
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Art. 10:118 of the Civil Code (CC) provides that companies (or any other kind of corporation or organisation, which has no legal entity) are regulated by the law of the State where they completed the process of incorporation.
Article 10:119 CC determines that the law of incorporation applies to the power of representation of the bodies and functionaries of the cooperation.
As concerns national legislation regarding public and private limited companies, the main rules are found in the Dutch Civil Code Book 2.
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Article 10:119 CC determines that the law of incorporation applies to the power of representation of the bodies and functionaries of the cooperation.
As concerns national legislation regarding public and private limited companies, the main rules are found in the Dutch Civil Code Book 2.
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2. What criteria/rules are used to determine the applicable law (for example the law of incorporation or the actual seat)?
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See answer question 1: the law of incorporation.
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3. Which international conventions have to be respected?
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The Netherlands ratified the European Convention on the Recognition of the Legal Personality of International Non-Governmental Organisations. The convention only applies to non-governmental entities, which have a non-profit-making aim of international utility. See for further information about the Convention:
https://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/124
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https://www.coe.int/en/web/conventions/full-list/-/conventions/treaty/124
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4. Are there international conventions with regard to certain countries?
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No.
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5. Are all companies registered in a public register? What are the effects of registration? (please add a link to the register, if possible)
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All public and private limited companies incorporated in the Netherlands must be registered in the commercial register in the Netherlands kept by the Chamber of Commerce.
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6. Does a foreign company have to be registered in your public company register?
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Yes, when the foreign company has its seat transferred to the Netherlands, it has to register itself. Foreign companies with a branch in the Netherlands must also be registered in the commercial register. Companies which perform activities in the Netherlands may register as well. Foreign companies that lend employees to employers in the Netherlands must register in the commercial register, whether or not they have a branch in the Netherlands.
Companies with their seat outside the EU and with their office in the Netherlands, which are only established abroad but have no real connection with the state of incorporation, have to fulfil certain obligations in the Netherlands. Registration in the commercial registers is one of these obligations.
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Companies with their seat outside the EU and with their office in the Netherlands, which are only established abroad but have no real connection with the state of incorporation, have to fulfil certain obligations in the Netherlands. Registration in the commercial registers is one of these obligations.
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7. Who has the legal right of representation of a legal entity?
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Normally the board of directors represents the company, see article 2:240 of the Civil Code for the private limited company:
1 - The Board of Directors represents the Corporation as far as the law does not provide otherwise.
2 - Each Director may also individually represent the Corporation. The articles of incorporation may, however, provide that only one or more of the Directors may represent, next and in addition to the Board of Directors, the Corporation. The articles of incorporation may provide furthermore that a Director only has the power to represent the Corporation in cooperation with one or more other persons.
3 - The power of representation of the Board of Directors or of the Directors to whom such power is granted, either individually or jointly with others, is always unrestricted and unconditional, as far as the law does not provide otherwise. A legally permitted or required restriction or condition regarding the power of representation can only be invoked by the Corporation.
4 - The articles of incorporation may also grant other persons than Directors the power to represent the Corporation.
The same applies to public companies.
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1 - The Board of Directors represents the Corporation as far as the law does not provide otherwise.
2 - Each Director may also individually represent the Corporation. The articles of incorporation may, however, provide that only one or more of the Directors may represent, next and in addition to the Board of Directors, the Corporation. The articles of incorporation may provide furthermore that a Director only has the power to represent the Corporation in cooperation with one or more other persons.
3 - The power of representation of the Board of Directors or of the Directors to whom such power is granted, either individually or jointly with others, is always unrestricted and unconditional, as far as the law does not provide otherwise. A legally permitted or required restriction or condition regarding the power of representation can only be invoked by the Corporation.
4 - The articles of incorporation may also grant other persons than Directors the power to represent the Corporation.
The same applies to public companies.
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8. Must the right of representation be registered (if yes, please add a link to the register, if possible)?
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9. If the right of representation must be registered, what legal effect does the registration have with respect to third parties?
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The board and the individual directors are authorised to represent the company. The power to represent is unrestricted and unconditional, unless the law provides otherwise.
The articles of association may limit the representative power of the directors. A very common example is the provision that directors may only execute a certain transaction after the general meeting of shareholders or the supervisory board has approved the transaction. In principle, such a restriction has no effect on third parties.
The basic principle of the power of representation is that legal transactions should be hindered as little as possible by defects in the representation of the company by its directors. If the company is represented by a director authorised according to the articles of association, the company will generally be bound by the legal relationship established by the actions of the director with the third party. However, the fact that the director can bind the company does not always mean that he may do so. For example, the articles of association may limit the representative authority of a director. That is the case, if the articles of association prescribes that the company can only be represented by two directors acting jointly. This joint presentation can be seen in the excerpt from the company register at the Chamber of Commerce. In that case the signature of one director is therefore not binding on the company. Third parties are not protected, if only one director is representing the company, when the articles of association prescribe the signature of two directors.
That is therefore a form of limitation of the main rule that every director can represent the company and that limitation also works against third parties
The same applies to restrictions on other grounds (regulations or decisions). Such a limitation (for example, entering into transactions above a certain amount requires the approval of other directors) is considered permissible. The director may not act in such a case, due to the limitation. If he does, then in principle there is improper performance of duties. This concerns the relationship between the director and the company.
The question arises whether the violation of the restriction has consequences in relation to a third party. The starting point will be that the company is bound. After all, the director who has representative authority according to the articles of association, binds the company. Under exceptional circumstances, however, it is possible that exceeding the restriction imposed on the director may have consequences for the third party.
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The articles of association may limit the representative power of the directors. A very common example is the provision that directors may only execute a certain transaction after the general meeting of shareholders or the supervisory board has approved the transaction. In principle, such a restriction has no effect on third parties.
The basic principle of the power of representation is that legal transactions should be hindered as little as possible by defects in the representation of the company by its directors. If the company is represented by a director authorised according to the articles of association, the company will generally be bound by the legal relationship established by the actions of the director with the third party. However, the fact that the director can bind the company does not always mean that he may do so. For example, the articles of association may limit the representative authority of a director. That is the case, if the articles of association prescribes that the company can only be represented by two directors acting jointly. This joint presentation can be seen in the excerpt from the company register at the Chamber of Commerce. In that case the signature of one director is therefore not binding on the company. Third parties are not protected, if only one director is representing the company, when the articles of association prescribe the signature of two directors.
That is therefore a form of limitation of the main rule that every director can represent the company and that limitation also works against third parties
The same applies to restrictions on other grounds (regulations or decisions). Such a limitation (for example, entering into transactions above a certain amount requires the approval of other directors) is considered permissible. The director may not act in such a case, due to the limitation. If he does, then in principle there is improper performance of duties. This concerns the relationship between the director and the company.
The question arises whether the violation of the restriction has consequences in relation to a third party. The starting point will be that the company is bound. After all, the director who has representative authority according to the articles of association, binds the company. Under exceptional circumstances, however, it is possible that exceeding the restriction imposed on the director may have consequences for the third party.
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10. May the rights of the legal representative be restricted? If yes, please explain how (e.g. by laws or the articles of association)?
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The articles of association may limit the representative authority of directors. A very common example is the provision that directors may only execute a certain transaction after the general meeting or the supervisory board has approved the transaction. In principle, such a restriction has no effect on third parties.
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11. Does that restriction have any legal effect towards third persons?
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No, in general it does not. See answer to question 9.
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12. How can the representative prove the right of representation (e.g. extract in paper from the registry certified by some authorities, extract from public registry)?
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A recent extract from the commercial register can be used to prove the right of representation. The notary can also deliver a company passport based on the ENN tool.
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13. Are there any circumstances where the transactions entered into by the legal representative of a company are considered not binding on the company (e.g. for a valid transaction should there be a decision or consent of the shareholders, supervisory body)? If yes, please explain.
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If the articles of association contain a rule stating that the consent of a shareholders meeting or supervisory board is needed for certain decisions internally, that rule should be followed. But when consent is missing, in principle third parties are protected (see the answer to question 9).
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14. Is it possible to verify the right of representation by digital means from the register? Please indicate the source and in which language the inquiries should be conducted.
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Anyone can ask for a digital or a paper version of an excerpt of the commercial register. The excerpt can be given in Dutch or English, but the English version does not give all the information. See for information about the procedure: https://www.kvk.nl/producten-bestellen/bedrijfsproducten-bestellen/uittreksels/
The notary can legalise the excerpt for use abroad. The notary can also deliver the European passport on companies.
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The notary can legalise the excerpt for use abroad. The notary can also deliver the European passport on companies.
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15. When anti-money laundering measures are applied, how are the beneficial owners of a legal entity registered in your country identified? Would there be different possibilities for professionals from other countries to identify the beneficial owners? Please indicate the source and in which language the inquiries should be conducted.
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The UBO (Ultimate Beneficial Owner) register is planned to enter into force in the Netherlands on 1 January 2020. Companies and legal entities will be obliged in 2020 to register their (in)direct owners. Part of these personal data such as the name and the economic interest of the UBO is made public through the register. The UBO-register will be kept at the commercial register.
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