NL: Management and Supervision of Legal Entities Act (MSLE)

 

 

On 1 July 2021, the Act on the Management and Supervision of Legal Entities will come into effect. The MSLE is intended to improve governance and supervision of associations and foundations. The law clarifies and supplements the regulation for management and supervision of associations, foundations, cooperatives and mutual insurance associations. This is in line with the existing rules for public limited liability companies (NV) and private limited liability companies (BV). Below are the most important changes.

Supervision

• The law includes a basis for setting up a supervisory body for all legal entities mentioned. This can be a supervisory board or a so-called 'one-tier board'. In a one-tier board (monistic board model), the board consists of executive and non-executive directors. In that case, the non-executive directors are charged with supervising. A legal basis for setting up a supervisory board already existed for the NV, BV, cooperative and mutual insurance association. But this was still missing for the foundation and the association.
• There is also an obligation to (timely) provide information to the supervisor.

Norm

• In the performance of their duties, directors and supervisors must be guided by the interests of the legal person and the company or organization associated with it. This standard already applied to directors and supervisory directors of the NV and the BV. The meaning of this has been further elaborated in case law.

Liability

• With regard to the performance of duties by directors and supervisory directors, the existing company law rules on liability in the event of bankruptcy due to improper performance of duties are declared applicable accordingly. This means, among other things, that if the board has not complied with its administrative obligation or the annual accounts (if required) have not been published on time, it is (irrefutable) established that the board has performed its task improperly. In addition, it is (refutable) suspected that the improper performance of duties is an important cause of the bankruptcy. These legal presumptions do not apply to directors and supervisors of non-commercial associations and foundations.

Conflict of interest

• The conflict of interest scheme will also be standardised. Pursuant to this regulation, a managing director (or supervisory director) does not participate in the deliberations and decision-making if he has a direct or indirect personal interest that conflicts with the interest of the legal person. It is important to mention that this regulation is an internal rule. In principle, an invalid decision as a result of such a conflict of interest does not affect the external representative authority of the legal person.

Dismissal of board members and supervisory board members of the foundation by judge

• The judge will have more options (extra grounds) to dismiss a director or supervisory director of a foundation if the Public Prosecution Service or an interested party so requests.

Multiple voting rights

• The regulation for multiple voting rights will also apply to foundations, associations, cooperatives and mutual insurance associations. The regulation means that a managing director or supervisory director cannot cast more votes than the other managing directors or supervisory directors together.

Inhibited or absent

• The MSLE obliges to include a regulation in the articles of association that provides in the event of the absence or absence of directors and supervisory directors.

 

The MSLE will come into effect on July 1, 2021 with immediate effect. However, the transitional law has further regulations for a number of subjects. For example, an (existing) statutory regulation stipulating that a managing director or supervisory director can cast more votes than the other managing directors or supervisory directors together, is valid for a maximum of 5 years after the entry into force of the MSLE or until the next amendment to the articles of association, whichever is earlier.

 

 

For further information, contact:

Maarten Blommaert,  Partner

Keizers Advocaten, Eindhoven

e: m.blommaert@keizersadvocaten.nl

t: +31 40 2445600

 

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