Private Limited Company
The ‘Private limited company’ (B.V. (Ltd. Company)) is a legal entity with shares as capital. This capital is intended for the realisation of a specific objective.
Those who provide the capital of the company are called shareholders. Each shareholder has a specific number of shares in the company. The only obligation the shareholder has to the company is to pay the total costs of the shares he has agreed to purchase, in other words he pays to the company the value in money or in goods.
The B.V. form is a partnership of shareholders that is specifically characterised by its limited form. The shares in the company are not freely transferable. The B.V. can only grant named shares. Share certificates may not be issued. The limited character of the limited company is characterised by this fact.
The difference between B.V. (Private Limited Company) and N.V. (Public Limited Company)
The most important difference between a Private Limited Company and a Public Limited Company are:
· The B.V. may not issues share certificates but must keep a register where all names and addresses of shareholders are recorded. The N.V. may issue share certificates.
· The shares of a B.V. may not be freely transferred, the statutes of a B.V. must contain a blocking arrangement. This blocking arrangement may for example stipulate that when intending to transfer shares they must first be offered to co-shareholders. Such a blocking arrangement can also cover the transfer of inherited shares. The obligation to have a blocking arrangement is not needed in a N.V.
Every transfer of shares in a B.V. requires a notarial deed. For bearer shares and specific names shares in an N.V. this is not needed.
Establishing a B.V. can only be done with a notarial deed. There can be one or more founders. Preceding establishment a check is carried out on the financial and criminal history of those who will determine the policy of the B.V. This check is done by the Ministry of Justice. After a declaration of no objections has been issued then the process of establishing the company can begin. The checking of the content for establishment is completely in the hands of the notary (see elsewhere on the site for the statutes).
There are many legal requirements regarding the capital of the company. One of the most important requirements is that on establishment a minimum capital must be put into the company. The necessary capital is EUR 18.000. The amount doesn't have to be in money only, it can also be paid in kind. Examples of this kind of contribution can be a whole company or for example specific goods such as cars or computers. Should the contribution be in kind, then the value of the contribution is determined and defined by the founders. A qualified accountant must give a declaration that the value of the contribution is at least equal to the amount due. If the payment method is money, the bank needs to give a declaration that the amount due to be paid is or will be actually deposited in the B.V. Sometimes before the formal establishment of a B.V. actions will already be taken by the still to be formed legal entity. If you are considering establishing a B.V. with shares as capital, you are advised to consult your legal advisor.
Statutes and registration
The statutes of the company are recorded by the (assigned) notary in the deed of incorporation. In the statutes all important aspects of the company are recorded, such as the price of the shares the company can issue (the share capital), the method of appointing board members and the supervisory board, the authorisations of the diverse ‘bodies’ and the way in which they meet, the transference of shares, etc.
Lastly the B.V. needs to be registered in the trade register. This registration, which is necessary to avoid board members cannot be held personally liable, is normally organised by a notary.
If all the shares in a B.V. belong to one shareholder that is also stated in the trade register.
Every B.V. has at least one general assembly of the shareholders and a board. In many cases there is also a supervisory board, and in practice many other bodies exist.
A B.V. is directed by the board (directors), consisting of one or more board members, also sometimes called directors. Often there is a situation where the only director is also owner of all the shares. If the shares of the B.V. are all owned by one person (this is also the case if the shares are part of a marriage with community of property), then it is seen as a one man company. With regard to such a one man B.V. specific legalities must be observed concerning the registration of certain decisions and certain legal actions that have an influence on the relationship between the company and the only shareholder.
Board members are appointed and dismissed by the general assembly of the shareholders. All shareholders are members of this body. Alongside the authority to appoint and dismiss board members, the general assembly of shareholders have a number of other important competencies.
This concerns for example the authority to change the statutes, to issue new shares and to decide to dissolve the company.
If a supervisory board exists, it is their task to keep an overview on the directors and to advise the company. The method for appointing supervisory board members is arranged in the law. In the statutes the legal stipulations can be deviated from. With a small to middling company at least two thirds of the number of supervisory board members are appointed by the shareholders.
Liability of shareholders and board members
In principle shareholders are never liable for more than the amount for which they participated in the company. Shareholders are specifically not liable for the debts the company incurs. As earlier stated, the legal entity, such as with an individual, is independently responsible for the legalities and duties. This also means that other people involved with the company, such as the director or board members, in principle also cannot be held liable for debts incurred by the company. The director of the company is mostly an employee. If he has carried out his task as director well, he cannot be held responsible for debts of the company neither by the company nor by third parties .
This is different when the director has not been functioning properly and there is a case of ‘improper management’.
If the company suffers from a case of improper management, then the manager in question can be held liable by the company. In a case of improper management for which a third party suffers, a manager can be held privately responsible by that third party.
Likewise this applies to improper management by board members, should they exist.
The law states a large amount of situations in which a manager can be held liable.
The directors can be held personally responsible for the payment of payroll tax, V.A.T. and social premiums, also should the company be unable to pay and the tax authorities and/or company association where not timely informed of this (threatening) inability to pay.
Alongside this the director can be held responsible for bankruptcy of the company. This liability can only occur when obvious improper management played an important role in the bankruptcy. A claim against the directors can only be valid when there are grounds for improper performance over a three year period prior to the bankruptcy.
The supervisory board of a B.V. also fall within the scope of this anti-abuse law.
It is worthwhile seeking advice regarding which legal from to choose with regard to the possibilities of private liability and the possibilities for insurance against the risks.
Obligation to publish
Lastly, every B.V. And N.V. Is obliged to compile and publish an annual financial report. The legal requirements for the annual financial report vary according to the size of the company.