What does the Management and Supervision

On 1 July 2021, the Management and Supervision of Legal Entities Act will come into effect. This law provides more clarity about the role of directors of associations, foundations, cooperatives and mutual insurance associations. It will also be possible to set up supervisory bodies for these legal entities. For this purpose, alignment has been sought with the regulations that apply to BVs and NVs. In this blog I pay attention to 4 relevant changes for associations and foundations.

Read more: Shlomo Rechnitz – The Jerusalem Post

The interests of the legal person come first

From 1 July, both association and foundation boards must legally focus on the interests of the legal person and the associated company or organization. Regulations may be included in the articles of association regarding the manner in which directors must fulfill their duties. Furthermore , from 1 July, board members may no longer participate in the deliberations and decision-making if they have a direct or indirect personal interest that is also contrary to the interest of the association or foundation.

Supervision of the board

From 1 July it will be legally possible for associations and foundations to include in the articles of association that there will be a supervisory board (RvC). The task of this body is to supervise management policy and the general course of affairs. The management board must provide the supervisory board with the necessary information in a timely manner to properly perform this task. The Supervisory Board must also focus on the interests of the legal entity.

Far-reaching measures are assigned to the Supervisory Board, including the suspension of the director(s), unless the articles of association provide otherwise. If the association or foundation of which you are a director has a supervisory board and it is not the intention that the board can be suspended by this body, an amendment to the articles of association will have to be implemented before 1 July. This is because the Management and Supervision of Legal Entities Act has immediate effect (with a few exceptions, for which special transitional provisions apply).

Absence or inability to manage

If there is a lack (absence) of a director or inability (impossibility) to manage, the articles of association must contain provisions for this from 1 July. The transitional law stipulates that the Articles of Association must be amended accordingly at the next amendment to the Articles of Association.

Liability directors and supervisory directors in bankruptcy

The reason for the new law is abuses within (among other things) associations and foundations, which are
currently subject to even less strict rules than for BVs and NVs. In order to combat abuses (such as fraud)
, the Law on Management and Supervision of Legal Entities declares Article 2:138 of the Dutch Civil Code
applicable to association and foundation boards, among other things. 

This means that in a possible bankruptcy personal liability of you as a director may be lurking. For example, if there is manifestly improper performance of duties or if the statutory obligation to keep records has not been complied with. In this context, it is therefore advisable to check your directors’ liability insurance sufficient coverage.

Questions?

For questions about this subject, please contact us. The HJ Advocaten team
specializes in corporate/legal entity law and is happy to help you.

Postponement of payment in the corona crisis

Do you do business with companies in financial difficulties? Or are you struggling with payment difficulties yourself? Then it is good to know that since December 17, 2020, entrepreneurs can appeal to the Temporary Deferment of Payments Act 2020. This new law allows companies to fend off bankruptcy applications or other recovery actions from creditors for a period of six months. In this blog I will list the possibilities for you.

Goal of new legislation

With this new law, the legislator is trying to limit the economic damage of the corona crisis. The law therefore aims to minimize the number of bankruptcies caused by the corona crisis and to ensure the continuity of otherwise healthy companies.

Postpone decision on bankruptcy filing

When creditors apply for the bankruptcy of a company in dire straits, this company can ask the court to postpone the processing of the bankruptcy application by two months, invoking the Temporary Postponement of Payments Act 2020. On request, the court may extend this period twice by two months. In total, a postponement of up to six months can therefore be requested.

Lifting of attachments and suspension of execution

In addition, the court can be requested to suspend levied attachments and other enforcement measures until further notice. It is difficult for a company in dire straits to continue its business operations if attachments and enforcement measures are in force. In return for this suspension, the company in question may not terminate current agreements and must fulfill its obligations during the deferral period.

Exceptions

Bankruptcy applications by the tax authorities or other recovery actions by government agencies cannot be postponed by the new regulations.

Conditions for the Temporary Deferral of Payments Act 2020

To successfully invoke the Temporary Deferment of Payments Act 2020, a company must meet the following requirements:

• The company’s liquidity shortages must be a direct result of the corona crisis. This is the case if:
  • before the corona crisis, the company had sufficient resources to meet the outstanding claims of its creditors, and
  • the company has since suffered a loss of turnover of 20% compared to the average turnover over three months prior to the first corona wave. 
• If the request pertains to a postponement of the processing of a bankruptcy petition, the interests of the creditors who have filed for bankruptcy may not be materially and unreasonably prejudiced by the postponement. 
• The company must be able to demonstrate convincingly that it will be able to pay its debts after the set term. 

Consequences of granting a postponement request

If the court grants a request for postponement, the company is exempt from paying the due and payable claims. This only applies to outstanding debts to the creditor who has filed for bankruptcy, levied an attachment or proceeded to enforce its claim. After the court’s decision, there is therefore a risk that other creditors will take such measures.

Appeal?

Creditors cannot appeal against the court’s decision on a request for a stay of a bankruptcy petition, a stay of execution or the lifting of the attachment.

The Temporary Deferral of Payments Act 2020 was initially due to expire on February 1, 2021, but has been extended by Royal Decree until April 1, 2021. It is expected that the Act will subsequently be extended by two months.

Questions?

If your company is in financial difficulties and your creditors have seized, taken enforcement measures or even filed for bankruptcy, the Temporary Deferment of Payments Act 2020 can offer a solution. The HJ Advocaten team is happy to help you get through this difficult period. Our experts are ready for you! Even if you as a creditor have questions regarding this blog, you can always contact one of our specialists without obligation.