14 March 2019

Dutch rules on business partnerships to be made fit for purpose

In order to improve the business climate in the Netherlands and modernise the law on partnerships, the government has published a draft bill open for public consultation through 31 May 2019. The draft bill is based on a proposal by a working group chaired by De Brauw partner Martin van Olffen.

The draft bill proposes reducing the existing three partnership options to two: a general partnership (vennootschap), which combines two existing types of partnership, and a limited partnership (commanditaire vennootschap). Both types of partnership can be used for professional and business activities. Contrary to the current system, every partnership would be a legal entity. This would facilitate business transfers and, more specifically, the acquisition of assets in the company’s name, and the joining and exiting of partners.

The draft bill has a special rule for acquiring real estate, allowing partnerships to do this only if they are registered with the Trade Register. To improve access to credit for entrepreneurs and professionals, the draft bill clarifies how partners can use their distribution rights, and any compensation when they leave a partnership, as security for credit facilities.

Finally, the draft bill includes some new provisions on partners’ external liability, and also specifically limits the liability of new and departing partners. As a general rule, the partners will be jointly and severally liable for the partnership’s obligations, but only to the extent that the other party to the contract can demonstrate that the partnership will not comply with the obligation in question. In addition, where the performance of specific services has explicitly been entrusted to a particular partner, only that partner is fully liable in addition to the partnership itself. A new partner is only liable for the partnership’s obligations that arise after the partner becomes a party to the partnership agreement. A departing partner’s liability expires five years after departure from the partnership.

The consultation ends on 31 May 2019. Click here for the draft bill and here for the working group’s report. Both documents are only available in Dutch.

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