Management and Supervision Act (part 2): new rules for foundations and associations on conflict of interest

On 1 July 2021, the Management and Supervision Act (in Dutch: WBTR) will enter into force in the Netherlands. What does this Act mean for entrepreneurs? This week part 2 in our series of articles: rules on conflict of interest for foundations and associations.

Conflict of interest: the situation in which the (in)direct interest of the management board member or supervisory board member of a legal entity is contrary to the interest of the legal entity and its affiliated enterprise or organisation. A typical example is a director who sells private property to the legal entity. The director has a private interest in a high price, while the legal person obviously does not.

To deal with this kind of situation the Dutch Civil Code contains rules for BV's (private limited companies) and NV's (public limited companies) on conflicts of interest. For foundations, however, no such regulations exist yet. For associations, cooperatives and mutual benefit associations it is currently the case that if one board member has a conflict of interest, the entire board is not authorised to represent the company. It is then up to the general meeting to appoint a person to represent the legal entity. This rule will be abolished as of 1 July 2021.

When the WBTR enters into force, the rules on conflicts of interest that already apply to BVs and NVs for some years, will also apply to foundations, associations, cooperatives and mutual benefit associations. This means that if a management board member or supervisory board member has a direct or indirect conflict of interest with regard to a particular subject, he/she may no longer take part in the deliberations and decision-making on that subject. In short: the management board member or supervisory board member must temporarily leave the meeting and may not take part in the decision-making. If he/she nevertheless participates in the decision-making, the resulting decision may be annulled (and is therefore contestable). However: such annulment does not affect the legal act of the legal entity or the representation authority of the board/managing director. So, in principle, the contracting parties are not affected by the conflict of interest of a management board member under the new legislation.

If no decision can be taken because the management board member cannot participate in the decision-making process, the Supervisory Board is competent. If no Supervisory Board has been established, the decision will be taken by the general meeting, unless the articles of association stipulate otherwise. The new rules of the WBTR have no retroactive effect

It is likely that the articles of association of your association, foundation, cooperative or mutual benefit association are still based on the regulation prior to 1 July 2021. This may lead to misunderstandings in the future. Therefore, we recommend the aforementioned legal entities to have their articles of association adjusted to the WBTR.

Questions about the WBTR and/or conflict of interest? Ask the corporate lawyers of SPEE advocaten & mediation.

SPEE advocaten & mediation Maastricht