The incorporation of a digital Dutch BV
Following up on European legislation, it has been possible to digitally establish a private company with limited liability (hereinafter referred to as: ‘Dutch BV’) in the Netherlands since January 1, 2024. The legislative proposal in question – ‘Digitaal Oprichten Besloten Vennootschap’ (DOBV) is based on the European Directive 2019/1151. Where previously the notarial deed of incorporation of a Dutch BV had to be passed in person or by signed power of attorney, it is now possible to deliver, pass and manage a large amount of the documents electronically.
In this blog I will this discuss the change in law in more detail and describe the most important points for the digital incorporation of the private company with limited liability.
Change of law
The aim of the European Commission was to use this Directive to create a competitive market that should me able to operate effectively. The law is intended for entrepeneurs, notaries and advisors who want to make progress in the digital field. The digital incorporation of the Dutch BV is further elaborated in Title 5 of Book 2 of the Dutch Civil code (hereinafter referred to as: BW). Article 2:175a BW prescribes that a Dutch BV can be established by electronic notarial dees by one or more subjects of the European Union. EU subjects are: (i) individual persons who are residents of a Member State within the European Union or (ii) companies incorporated under the law of an EU Member State and whose registered office, main manager or principle place of business is in the European Union.
If one of the conditions cannot be met, it seems obvious that it is not possible to digitally establish a Dutch BV under European law. However, there are possibilities to fall under this scheme while you as an individual person or Dutch BV are established outside Europe. An important link for these companies are European trust offices. To ensure that these offices do not violate any rules, these offices are monitored by ‘De Nederlandsche Bank (DNB)’. In other European coutries, there are also chosen financial institutions who strictly monitors the trust offices. A trust office within a Member State of the European Union falls under the concept of ‘EU subject’ of article 2:175a BW. This trust office can then transfer all shares of the office to a company outside the Union, whereafter this non-European company becomes the sole shareholder of the trust office and is therefore subject to EU legislation. In that way, it is possible for a company to set up a Dutch BV according to European requirements, without actually having a European branch.
Internationalization within the notarial profession
A major advantage of this change in law is that the notarial deed of incorporation can be executed in the English language, where previously this was only possible in the Dutch language. In the case of a Dutch BV that has been incorporated digitally in the English language, the articles of association are also written in English. For deeds of incorporation that are executed in person, the Dutch language remains the only language that can be used. The internationalization of the digital Dutch BV also continues after its establishment. It is also possible that an amendment of the articles of association can take place in the English language if the Dutch BV has been incorporated electronically in English. An advantage of this is that when cooperating with a Dutch BV with English articles of association, international parties have less uncertainty about the texts in the articles of association of this company: after all, the English articles of association are now leading. There will therefore be fewer disputes about the articles of association, since the judge only has to consider the English articles of association in such issues.
From idea to a Dutch BV
As soon as an entrepreneur wants to establish a digital Dutch BV, he can enter his personal details and the details of the company to be established in the relevant online system. The identification of the founder is an aspect that requires and deserves a lot of care and attention when digitally establishing the Dutch BV. The reliability level of this means of this system of identification must therefore be ‘high’ according to the eIDAS standards. If the reliabilty level is too low, the founder will not gain access to the system. After processing the personal data, the entrepreneur must also digitally supply the necessary documents for incorporation. After these steps, the notary can pass the documents. By drawing up and signing the notarial deed of incorporation by the founders and the notary, the digital incorporation of the Dutch BV is complete.
(Dis)advantages
The possibility of digitally establishing a Dutch BV has modernized, simplified and accelerated the process of incorporation. The client no longer has to visit the notary in person and the deed of incorporation is stored digitally. In addition, the English language can provide a lot of clarity for international clients. However, there are also limitations to this change in law. An example of this is that no input other than money can be made in a digital incorporation. If the founders want to make (a part of their) contribution in kind, this will have to be done in the old manner. The reason behind this is that the legislator initially wants to limit digital incorporation to simple situations. If this proves to work well, expansion is possible.
The future
In European Directive 2019/1151, there is an option open to EU Member States to enable digital incorporation for other company forms. The Dutch legislator has not yet opted for this: it can be first be examined whether the digital incorporation of the Dutch BV is a positive development within the Dutch law. The question remains whether and when this possible expansion will happen.