In context

New legal entity for social entrepreneurs to be introduced in the Netherlands

July 15, 2020
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In context

On 10 July 2020, the Dutch government announced plans to introduce the BVm (maatschappelijke BV) in Dutch corporate law. The BVm will be a new private legal entity for social entrepreneurs which are active in addressing societal issues regarding energy, climate, healthcare, education, safety or labour force participation. The details of the legal framework for the BVm will be published before the end of 2020, when the draft bill is submitted to a public internet consultation. The government wants to put the final version of the bill to parliament before the March 2021 elections.

 

For clients, the BVm option may offer new business and legal opportunities, especially as the Dutch government has announced that social enterprises will receive legal recognition and active government support in connection with legislation and regulations, knowledge sharing and funding.

Social enterprise requirements

The letter about social entrepreneurship sent by the State Secretary for Economic Affairs and Climate to the lower house of parliament indicates that the draft bill will set out:

  • the legal requirements regarding the social enterprise’s business and articles of association;
  • rules on when the “maatschappelijke BV” may be used; and
  • provisions on registration of the BVm in the Trade Register.

 

Need for new type of entity

The introduction of the BVm follows from the latest Dutch coalition agreement’s desire for “appropriate rules and more space for companies with social or societal objectives”. The Dutch government intends to offer social entrepreneurs more legal recognition so that it can determine whether a company has a positive, social impact on society. This is in line with advice issued by BMC and KPMG / Nyenrode, which conducted independent research into social enterprises on behalf of the Ministry of Economic Affairs and Climate.

 

By introducing the BVm, the Dutch government follows an international trend to provide a legal framework that supports social entrepreneurship. A recent example is the PACTE Law in France, which allows French companies to amend their objects in order to incorporate social and environmental goals into the corporate interests and explicitly go beyond the sole objective of being profitable.

 

Although Dutch law does not explicitly provide for this, there are a few companies that include provisions on specific social or environmental interests in their articles of association. Under current Dutch corporate law, we see that for-profit companies stress that they focus on working for the interests of all stakeholders by getting certified as a Beneficial Corporation (B Corp). This certification enables companies to publicly commit to “balancing profit and purpose” in order to meet the highest ESG, legal and transparency standards. However, B Corp certification does not create a separate legal entity.

 

Additional research on legal challenges for social entrepreneurs

The Dutch government will do further research on the challenges social enterprises face under the current legal framework. Companies with a business in the circular economy, for example, have to deal with challenges and uncertainties related to financing and taxes.

 

What next?

There is no need to act now, as we are still waiting for further details of the BVm framework. We will continue to update you on this topic. Please reach out to your De Brauw client team, or to one of our corporate advisory experts, to discuss any questions you may have.

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