THE DUTCH PARTNERSHIPS
(PROPOSED) NEW REGIME
1.1 3 forms of partnership can be distinguished:
1 Civil Partnership (maatschap);
2 General Partnership (vennootschap onder firma);
3 Limited Partnership (commanditaire vennootschap).
1.2 The rules for partnerships in general and the civil partnership are included in the Dutch Civil Code (Book 7A, Title 9).
1.3 The rules for general partnerships and limited partnerships are included in the Dutch Mercantile Code (Book 1, Title 3).
1.4 Partnerships are organized by agreement between the partners. No formal requirements exist for the agreement. Criterion for the existence of a partnership is that the parties to the agreement join labour and/or (the use of) goods with the purpose to share the revenues thereof.
1.5 It is not allowed to provide that all revenues will be attributed to one partner only (societas leonina). It is possible to provide that all the losses will be attributed to one or more of the partners.
1.6 Partnerships themselves cannot acquire title to goods. Assets acquired by a partnership become the joint property of the partners.
1.7 The partners of a civil partnership are to creditors of the partnership each liable for an equal share of the debt.
1.8 The partners of a general partnership are joint and several liable to creditors of the partnership.
LIMITED PARTNERSHIP - CV
1.9 The managing partner of a limited partnership is fully liable to creditors of the partnership. The liability of the limited partner for losses of the partnership is limited to his agreed upon contribution to the partnership. However, if the name of the limited partner is included in the name of the partnership, or the limited partner represents the partnership in its relations with third parties (even on the basis of a power of attorney), the limited partner becomes joint and several liable for all debts of the partnership.
1.10 Partnerships are only required to register with the Commercial Register in the Netherlands, if they conduct a business in the Netherlands.
1.11 Under the current regime a partnership is transparent for Dutch corporate income tax purposes, provided that it is a closed partnership. A partnership is considered “closed” if admission and substitution of partners is subject to the consent of all partners. Transparency means that the profits of the partnership are taxed at the level of the partners.
1.12 If the partners of a closed partnership are not residents of the Netherlands and do not, directly or indirectly through a permanent establishment or permanent representative, trade or conduct a business in the Netherlands, and the principal place of business of the partnership is located outside the Netherlands, there will be no Dutch corporate income tax liability on income or profits generated by the partnership.
PROPOSED NEW REGIME
2.1 On 6 December 2002, the Dutch government submitted to the Parliament a proposal for an Act for modernizing the regime for partnerships. It is expected that the Act will be adopted by the Parliament shortly, and that the Act will enter into force mid 2003.
2.2 The Act provides for a number of important changes to the regime for partnerships.
2.3 The provisions of the Act are imperative rules of law.
2.4 A partnership is defined as the agreement between two or more natural persons or legal entities (the partners) to co-operate with the purpose to gain financial profits for all partners through contributions to the partnership of each partner. (Article 800) Partnerships are organized by agreement between the partners. No formal requirements exist for the agreement, except in the event legal personality is required.
2.5 The Act provides that all partners are obliged to contribute to the partnership, especially in the form of monies, goods, the use of goods or labour. Such contributions form part of the community property of the partnership, or in the event the partnership has legal personality, to the capital of the partnership. (Article 805)
FORMS OF PARTNERSHIP
2.6 The Act provides for 2 main forms of partnership:
1 Undisclosed partnership (maatschap);
2 Public Partnership (openbare vennootschap).
2.7 Four different forms of public partnership are distinguished:
Public Partnership with legal personality (openbare vennootschap met
Limited Partnership (commanditaire vennootschap);
Limited Partnership with legal personality (commanditaire vennootschap
2.8 A partnership only qualifies as an undisclosed partnership, if the partners do not act with third parties under a common name. Otherwise the partnership qualifies as a public partnership. (Article 801)
2.9 An important advantage of the Act is that it is possible to obtain legal personality for public and limited partnerships. Legal personality makes it possible for partnerships itself to acquire title to goods. In the absence of legal personality, title to goods cannot be acquired by the partnership itself, but only by one or more of the partners. Therefore, legal personality facilitates the economic functioning of partnerships.
2.10 The requirements for organizing a partnership with legal personality are (Article 802):
1 The partnership agreement must provide for legal personality.
2 The partnership agreement must be executed as a notary deed in the Dutch language.
3 Powers of attorney of the partners to the notary to execute the deed must be in writing.
4 Legal personality is acquired the day after the legal personality of the partnership is filed with the Commercial Register.
2.11 A public partnership with legal personality must start or end its trade name with “Openbare Vennootschap met rechtspersoonlijkheid” (Public Partnership with legal personality), or with the abbreviation “OVR”. The same applies to limited partnerships, except that “Commanditaire Vennootschap met rechtspersoonlijkheid” (Limited Partnership with legal personality), or “CVR” must be added to the trade name.
2.12 Existing public partnerships may acquire legal personality as follows (Article 832):
1 The partnership agreement must provide for legal personality.
2 The partnership agreement must be executed as a notarial deed in the Dutch language.
3 The community property of the partnership must be contributed to the capital of the company.
4 Legal personality is obtained the day after filing the legal personality with the Commercial Register.
2.13 A partnership may also abandon its legal personality by agreement executed in the form of a notary deed and filing such fact with the Commercial Register. (Article 833)
2.14 Each partnership has one or more managing partners (besturende vennoten). Unless otherwise agreed each partner is a managing partner. (Article 809)
2.15 Each managing partners is authorized to perform any and all acts for account of the partnership, falling within the object of the partnership. For other acts the approval of all other partners is required, unless otherwise agreed. (Article 810)
2.16 Each managing partner has unlimited power to represent the partnership when acting in the furtherance of the object of the partnership, unless otherwise agreed. Limitations to the power to represent the partnership must be registered with the Commercial Register, in the absence whereof the limitation cannot be invoked against third parties. (Article 811)
2.17 The partners of a public partnership are joint and several liable for debts of the partnership. However, in the event the partnership has accepted an assignment (opdracht) a partner is not liable for default in performing the assignment, if the default cannot be attributed to him personally. (Article 813)
2.18 The managing partner(s) are obliged to maintain the books of the partnership in such a manner that the rights and obligations of the partnership may be known at any and all time. The books must be kept for 7 years after the end of the respective financial year (Article 814)
2.19 At least once a year, within 6 months (extendable to 11 months) after the end of the financial year the managing partners must draw up a balance sheet and profit and loss account. (Article 814)
2.20 All partners share equally in the profits and loss, unless otherwise agreed. A contractual provision that a partner will not share in the profits is void. The same applies to clauses providing that a partner is entitled to a certain interest or fixed fee, if this effectively excludes a partner from sharing in the profits. (Article 815)
2.21 Different from the current regime, it is possible to provide in the partnership agreement that upon retirement of a partner the partnership agreement is not terminated for all partners. If so agreed the partnership agreement is only terminated for the retiring partner, and continued by the other partners. (Article 818)
2.22 Upon retiring from the partnership the share of the retiring partner in the community property or capital of the partnership is automatically acquired by the other partners. The retiring partner obtains a claim on the partnership equal to the economic value of his share in the community property or capital. (Article 821)
2.23 For succession of existing partners or accession of new partners the co-operation of all partners is required, unless otherwise agreed. For the transfer of a partner’s share in a partnership with legal personality a notarial deed is required. (Article 823)
2.24 Claims against partners are barred upon expiration of 5 year from the date of filing his retirement as a partner with the Commercial Register. (Article 824)
PRIVATE LIMITED COMPANY
2.25 A public partnership may be reorganized in a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid). In addition to the co-operation of all partners, or 2/3 of the partners if the partnership agreement so provides, and a notary deed, authorisation of the District Court is required for such reorganisation. Further a statement of no objections is required from the Minister of Justice. (Article 834)
2.26 With more or less the same procedure a private limited liability company may be reorganized into a public partnership with legal personality. (Article 835)
LIMITED PARTNERSHIP - CV
2.27 A limited partnership has except for the managing partner(s) one or more limited partners. (Article 836)
2.28 A limited partner:
1 Does contribute more than only labour.
2 Is not authorized to bind the partnership.
3 Is not liable for losses of the partnership in excess of his contractual contribution to the partnership.
2.29 The limited partnership does not have a capital divided in shares, but for administrative purposes ownership certificates may be issued to the partners.
2.30 The managing partners are joint and several liable for all debts of the partnership. The limited partner is not liable to third parties for debts of the partnership. However, if the limited partner represents the partnership, whether or not on the basis of a power of attorney, to third parties, or has a decisive influence on the management of the partnership, he becomes joint and several liable for all obligations of the limited partnership resulting form his actions or arising thereafter, unless his actions do not justify such joint and several liability. Also if the name of the limited partner is included in the name of the partnership, the limited partner will be joint and several liable for all obligations of the partnership arising in the period such name is included in the partnership name. (Article 837)
2.31 All public partnerships that wish to acquire legal personality and all public partnerships that conduct a business in the Netherlands are required to register with the Commercial Register. For public partnerships that wish to acquire legal personality registration is a requirement for obtaining legal personality.
2.32 It is not clear yet which data public partnerships that wish to acquire legal personality must file with the Commercial Register. In particular, it is not clear whether it will be necessary to file a copy of the partnership agreement with the Commercial Register.
2.33 For public partnerships without legal personality, a lack of registration does not affect the existence of the partnership. However, a lack of registration makes it impossible to invoke agreed upon limitations to the powers of individual partners to represent the partnership. (Article 811)
2.34 Under the current regime general and limited partnerships that do not conduct a business in the Netherlands may not register with the Commercial Register in the Netherlands. It is not yet clear whether further to the introduction of the Act, this will also apply to public partnerships without legal personality that do not conduct a business in the Netherlands.
2.35 On the basis of statements of the Dutch Ministry of Finance it is expected that the introduction of the Act shall not affect the Dutch corporate income tax treatment of partnerships. The main principle that a partnership is transparent for Dutch corporate income tax purposes will be maintained for all partnerships, with or without legal personality, provided they are “closed”.
PUBLICATION ANNUAL ACCOUNTS
2.36 Under the current regime partnerships are not obliged to publish annual accounts. It is expected that also under the new regime no such obligation will exist.
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