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JPR Advocaten

Company Law

JPR Advocaten employs lawyers that specialise in company law. These experts work on the structures of companies, mergers and acquisitions, the legal regulations regarding companies and legal entities, and also conduct proceedings for partners, shareholders and/or the statutory director in case of internal disputes or disputes with third parties. JPR Advocaten cover much more under company law than only private limited company law and public limited company law. JPR Advocaten also treat foundations, associations and so-called partnerships as being part of company law. The various aspects of company law and what JPR Advocaten can do for its clients is discussed briefly below.

Book 2 Civil Code

Book 2 of the Dutch Civil Code contains all regulations regarding legal entities. The legal entities described in Book 2 are:

  • The association;
  • The cooperative;
  • The mutual insurance association;
  • The public limited company;
  • The private limited company;
  • The foundation.

Apart from the legal entities detailed in Book 2 of the Dutch Civil Code, the State, the Provinces, the municipalities, the water boards and all bodies that have been granted regulatory authority under the Constitution all have legal personality. Moreover, authorities can form a legal entity and church societies have legal personality as well under public law. Entities can only participate in legal matters independently and, as such, perform legal acts as 'real' persons if they possess legal personality. If an entity does not have legal personality, then it is possible there is separate capital. However, eventually the person who acted on behalf of that entity will always be obliged and liable for that entity. Examples of entities without legal personality are the partnership, the general partnership and the one-man business.

Association

As indicated, company law distinguishes between a range of legal entities. The association is one such entity and is based on a cooperative idea. A group of people have a joint purpose and unify to achieve their goal. The persons affiliated with the association become members of the association, and to ensure that membership is not too noncommittal and to ensure the association can cover its costs, the members pay a contribution. The association distinguishes itself from the cooperative and mutual insurance association by the fact that it does not focus on providing its members their material needs. The association is usually used for practising hobbies, such as football, tennis and athletics. Moreover, it is also common for people with the same interests to form an association, such as for building a shared road, or developing a piece of land as joint project commissioning, or having a joint network, for example.

The formation of an association requires a notary. The notary will incorporate the association by notarial deed and record the internal regulations for the association in the articles of association. These articles of association could, for example, include quality requirements for the membership or board, or include rules for the termination of membership. If the association was not formed by notarial deed, then it is called an 'informal association'. In this case, the directors of the association are jointly and severally liable for the association's actions. Hence, it is important for directors to ensure that there is at least a notarial deed of incorporation so private liability is prevented as much as possible.

JPR Advocaten provides advice to associations with respect to how members can and should be handled based on the articles of association. Moreover, associations come to JPR Advocaten's company law experts with questions about, for example, treasurers who have stolen funds. It is also possible that there is disagreement in the association regarding the policy. The company law specialists at JPR Advocated could act as mediators or arbiters in these cases to make sure everyone is on the same page again for as much as possible.

Cooperative and mutual insurance association

Both a cooperative and mutual insurance association (OWM in Dutch) are associations, but for the purpose of meeting its members' material needs. The difference between the OWM and the cooperative is that the OWM enters into insurance agreements with its members and a cooperative does not. Both legal forms are incorporated by notarial deed and, as a result, agreements with members are entered into in both cases.

The cooperative especially has many prime examples that properly illustrate the idea behind this legal form. The most well-known example is the milk cooperative. Dairy farmers are members of the cooperative and deliver milk to the cooperative based on an agreement. The cooperative processes and sells the milk like a company. If the cooperative makes a profit, then the profit is distributed amongst its members and thus provides for the members' material needs. People often think of the agricultural sector when hearing the word cooperative. This idea, however, has been outdated for many years. The cooperative occurs in many sectors. Rabobank, for example, is a cooperative, as is JPR Advocaten.

If you together with a group of entrepreneurs strive towards the same goal, and would you like your (material) needs fulfilled, then the cooperative is a good option. JPR Advocaten's company law experts will gladly tell you more.

Foundation

The foundation is a legal entity that, contrary to the association and cooperative, has no members. Moreover, the foundation has a prohibition on distributions. The foundation's goal cannot be to distribute funds to the founders or to those that are part of the foundation's bodies unless these distributions have an idealistic or social nature. The foundation also requires a notarial deed by law, and thus a visit to the notary will be necessary if you wish to establish a foundation.

There are various types of foundations. There are idealistic foundations whose purpose it is to improve society or strive towards certain goals. There are also more functional foundations, such as a supporting foundation that manages funds for an association, or the trust office foundation that is a shareholder in the capital of a private limited company.

As a foundation has no members or shareholders and the executive board of a foundation is often self-sufficient, it is possible that management of the foundation is lacking and no one is seemingly authorised to appoint a general director. In such cases, the lawyers of JPR Advocated can provide advice and submit a petition to the court asking for the appointment of a new general director. The company law experts of JPR Advocaten also possess the required expertise should you have any other issues or questions with respect to foundations.

Private and public limited companies

The private company with limited liability and the public company with limited liability are different due to the private or public nature of the company. The private limited company knows its shareholders, because the name and address information of each shareholder is registered in the shareholders' register. This differs from a public limited company for which the company is not obliged to issue the shares in a person's name, but is also authorised to issue shares in bearer form. The shares of the public limited company can be freely tradeable, whereas the shares of the private limited company usually are not. The private limited company has transfer restrictions contained in the articles of association preventing this. You can find more about this in the 'transfer restriction' on our website.

Apart from the transfer restriction article, you can also find information about:

Partnerships

As stated before, company law is about legal entities as well as partnerships. These partnerships differ from legal entities, because they do not have an independent right to participate in legal traffic even though they are considered as separate entities. The consequence of this is that the people that are part of the partnerships are liable for the actions of the partnerships.

Professional partnership

The professional partnership is the agreement in which two or more persons agree to undertake something in society for the purpose of sharing the benefits created in this undertaking. The professional partnership is very common among service providers; lawyers, notaries and medical service providers traditionally enter into a professional partnership. They work together to create a profit and share both the costs and that profit.

It is very important that the members of the professional partnership make clear and concrete agreements about the capital coming into the professional partnership, the manner in which liability is handled, the way in which profit is distributed, as well as the consequences of dissolution and termination of the professional partnership. Unclear agreements could have nasty consequences often leading to long and complicated proceedings. JPR Advocaten's company law experts conduct these kinds of proceedings and can provide advice. Nevertheless, the company law experts of JPR Advocated would much rather provide advice on creating the professional partnership agreement and draw up a deed so later proceedings might be prevented.

General partnership

The general partnership is a derivative of the professional partnership. Whereas a professional partnership is entered into by persons practising a 'profession', the general partnership is entered into by people running a 'company'. Contrary to the professional partnership, for which regulations in Book 7A of the Dutch Civil Code have been included, the regulations regarding general partnerships have been included in the Dutch Commercial Code. The Commercial Code refers to the regulations regarding the professional partnership and applies them directly to the general partnership.

Apart from the general partnership, there is also the limited partnership. In short, the limited partnership is a general partnership in which one or more persons only provide capital, but do not act on behalf of the company. The difference being that in a general partnership, all partners are jointly and severally liable for the debts of the general partnership.
The company law experts will draw up the general partnership contract and will assist the partners if the general partnership needs to be dissolved.

The above only provides an overview of company law and the components of company law the experts of JPR Advocated work on. If you would like more information or if you have a question, then please keep an eye on our website for new articles and/or feel free to contact us.

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