AN OVERVIEW OF THE LEGAL FORM OF THE COOPERATIVE (COÖPERATIE)

Transcription

1 AN OVERVIEW OF THE LEGAL FORM OF THE COOPERATIVE (COÖPERATIE) In recent years, increasing use is being made, often on the basis of tax advice, of the legal form of the cooperative (coöperatie) instead of a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) (B.V.) as an intermediate holding company when setting up structures or within the context of a restructuring process. This is mainly due to the fact that a cooperative structure could bring with it certain tax advantages. Although a cooperative, can function as an intermediate holding company in stead of a B.V., a cooperative is nevertheless a different type of legal entity subject to its own statutory provisions. This article deals with the following subjects with respect to a cooperative: What is a cooperative? Formation of a cooperative Corporate bodies of a cooperative Acquiring and terminating a right of membership in a cooperative The right of membership and the membership agreement Liability of members and former members Dissolution of a cooperative Contact Cars-Jan van Gool Ilse Marye Alwon T T M M E carsjan.vangool@boekel.com E ilsemarye.alwon@boekel.com 1

2 What is a cooperative? Pursuant to Dutch law, a cooperative should satisfy the following material characteristics: the cooperative has to provide for a material need of its members. This refers to all needs in the field of economics; providing for such need must occur pursuant to agreements entered into between the cooperative and its members within the context of the conduct of a business; the cooperative has to conduct a business. The term 'business' is used in a broad sense. This means that there need not always be a profit motive; the motive may also be to cut costs; the business must be conducted by the cooperative for the benefit of its members. Doing business with the members is the objective of the cooperative and the result benefits them; the following two possibilities exist as regards the business operations: (a) the cooperative performs business operations or (b) the cooperative causes a business to be conducted. Consequently, a cooperative is able to function via a business conducted by a third party, such as a subsidiary. In such cases it is allowed that not the cooperative itself, but rather the subsidiary enters into the agreements with the members of the cooperative; the articles of association may stipulate that the cooperative is allowed to enter into the agreements it enters into with its members with third parties as well, but it may not do so to such an extent that the agreements with the members are of only minor importance. If a cooperative does not satisfy or no longer satisfies the material characteristics as described above, the District Court will be required, following expiry of a so-called "terme de grâce" during which the cooperative is afforded the opportunity to comply with the requirements, to dissolve it at the request of an interested party or the Public Prosecution Service (Openbaar Ministerie). 2

3 Formation of a cooperative A cooperative is formed by means of a notarial deed; a multilateral legal act. This means that a cooperative is formed by two or more natural persons or legal entities. The deed must be executed in the Dutch language and the articles of association must cover several topics, including: the name of the cooperative. The name must include the word 'coöperatief' (cooperative) and the name must end with the letters W.A., B.A. or U.A.; the municipality where the cooperative has its seat; the objects of the cooperative; the obligations of the members towards the cooperative, or the manner in which these can be imposed; the manner in which the general meeting of the members is convened; the manner in which the directors are appointed and dismissed; the manner in which the credit balance of the cooperation will be applied in the case of dissolution or the manner in which the application will be determined. Following formation of the cooperative it must be registered in the Trade Register of the Chamber of Commerce. A director who performs a legal act between the moment of formation and the moment of its registration with the Chamber of Commerce, with which legal act he binds the cooperative, will be jointly and severally liable for said legal act, in addition to the cooperative. If legal acts have been performed on behalf of the cooperative i.o. (in formation) these can be confirmed, which procedure is similar to the procedure with regard to a private limited liability company (B.V.), following formation and registration, as a result of which the legal act passes to the cooperative. 3

4 Bodies of the cooperative: A cooperative has the following bodies: a management board (bestuur): The management board is responsible for performing its duties and it is autonomous within the boundaries set by law and the articles of association. This means that, within the boundaries of its powers, the management board is not required to follow instructions from any other body of the cooperative. The management board will represent the cooperative, to the extent the law does not provide otherwise. Furthermore, the articles of association may grant power of representation to one or more directors. The management board will be appointed from among the members, unless the articles of association provide otherwise. It may be provided, for example, that it is possible for nonmembers to be appointed as director. The general meeting will appoint the directors, unless the articles of association regulate appointment differently and each member who has not been suspended has the right to participate, directly or indirectly, in voting on the appointment of directors. The articles of association may also provide that the directors are appointed by persons other than the members. It is also possible to appoint directors on the basis of a binding recommendation. Directors are suspended or dismissed by the party competent to appoint, but also by the general meeting, unless the articles of association provide otherwise. Conduct towards the party competent to appoint must always be in accordance with the principles of reasonableness and fairness (redelijkheid en billijkheid). a membership meeting (ledenvergadering): The membership meeting of a cooperative is similar to a general meeting of shareholders of a private limited liability company (B.V.) or a public limited company (naamloze vennootschap) (N.V.). Every member who has not been suspended is welcome to attend the general meetings and in principle will have the right to cast one vote. The articles of association may grant more than one vote to certain members. As meetings may be impractical if there are many members, the law offers the opportunity to compose the general meeting of representatives who are appointed by and from among the members. The general meeting will be referred to in such cases as a meeting of representatives or a membership council. The manner in which representatives are elected and their number has to be regulated in the articles of association, whereby each member must be able to participate in the election, either directly or indirectly. The articles of association may provide that certain resolutions of the general meeting are subject to a referendum. Performance of the resolution will be suspended pending the outcome of the referendum. The referendum will therefore take place after the resolution has been 4

5 adopted by the general meeting. The resolution will not enter into effect until it has been confirmed by the outcome of the referendum. Adopting resolution outside meetings is also possible. The management board must be aware of the fact that the members or representatives will be adopting a resolution and all members and any non-members with voting rights or representatives have to vote in favour of the motion. And finally, all powers not vested in other bodies of the cooperative by law or the articles of association will vest in the general meeting. if applicable: an audit committee (kascommissie): A cooperative is subject in principle to Title 9 of Book 2 of the Civil Code and that is why the Article that regulates the formation of an audit committee does not apply. Only in case the cooperative can be designated as a 'small legal entity' 1, if there is no supervisory board and no external accountant is charged with auditing the documents as referred to in Article 2:393, paragraph 1 of the Civil Code, will the general meeting be obliged to each year form an audit committee consisting of at least two members who are not members of the management board. In such cases, the audit will be performed by the audit committee that will report on its audit to the general meeting. optional: a supervisory board (raad van commissarissen): The articles of association may provide that there will be a supervisory board. The supervisory board will be charged with the supervision of the management board policy and the general course of affairs at the cooperative and the related business. The supervisory board will advise the management board. 1 The term small legal entity applies if 2 out of the following 3 criteria are met: (1) the asset value is less than EUR 4,400,000; (2) sales are less than EUR 8,800,000; or (3) the average number of employees for the financial year is less than 50. 5

6 Acquiring and terminating membership rights: A. Admission The management board of the cooperative will decide in principle on the admission of a member. If the management board decides not to admit a member, the general meeting will be able to overrule this decision and decide to admit regardless of the board s decision. This follows from the idea that the members decide who form part of the cooperative. It may be stipulated in the articles of association that a different body or even a third party will be competent to decide on admission of members. An admission procedure may also be provided for in the articles of association or in the internal regulations. In those cases, too, the general meeting will still have the right at all times to decide to admit a member after admission was initially refused. B. Resignation Membership of the cooperative will end (i) as a result of the death of the member, unless the articles of association allow for transmission pursuant to inheritance law; (ii) as a result of resignation by the member; (iii) as a result of termination by the cooperative; and (iv) as a result of disqualification if a member acts contrary to the articles of association, regulations or resolutions, or if the member prejudices the cooperative in an unreasonable manner. The articles of association may attach conditions to disqualification, however, while retaining the possibility of voluntary resignation from the cooperative. 6

7 Membership rights and the membership agreement: Membership is governed by the statutory rules of the law of associations (verenigingenrecht) and the law of obligations (verbintenissenrecht). In principle, membership is personal. In other words, membership cannot be transferred nor is it subject to transmission. However, the articles of association may provide that membership can be transferred or that it is subject to transmission. By making membership rights transferable, possibly subject to conditions under the articles of association, membership becomes a property right (vermogensrecht) and consequently subject to encumbrance with a right of pledge. Transferability is necessary in the case of a pledge, as a right of pledge to a right of membership will only be enforceable by means of a transfer of the right of membership. The right of membership consists of the membership itself and the rights under property law that arise from the right of membership. Providing for a material need of the members must take place pursuant to agreements, such as membership agreements. The entering into of membership agreements is not an object in itself of the cooperative, but rather the means for cooperating with each other within the business of the cooperative. There is often an obligation to supply or purchase towards the cooperative under the articles of association on the basis of this agreement. The membership agreement can only be transferred by means of transfer of contract. All rights and obligations pursuant to the contract that has been transferred will then be transferred. Commitments can only be attached to membership under or pursuant to the articles of association, for example by a specific body or pursuant to internal regulations. These commitments comprise all property-law liabilities (vermogensrechtelijke verplichtingen) towards the cooperative, fellow members or third parties. In principle, the agreement concluded between the cooperative and the member in the exercise of its business cannot be changed unilaterally by means of a resolution of the cooperative. There is one exception to the above: in case the power to amend has been reserved for the cooperative in the agreement in an explicit manner. The cooperative will not be able to invoke such a unilateral amendment towards the member until it has been notified to the member in writing. 7

8 Liability of members and former members Members do not have a legal basis for individual claims to the assets during the existence of the cooperative, only in the event of dissolution. Combined with the fact that membership cannot be transferred, if not otherwise provided for, the assets are consequently considered in mortmain (in de dode hand). Those who were members at the time of dissolution or who ceased to be members less than a year before, will be liable towards the cooperative (therefore not towards creditors) for a deficit in the assets according to the standard included in the articles of association. The articles of association may provide a term of more than a year. If the articles of association do not provide a standard for the liability of each member, each member will be liable for an equal part. In derogation of the above, a cooperative will be able to exclude any obligation of its member to contribute to a deficit or to limit it to a maximum amount in its articles of association. The members will only be able to invoke this if the cooperative has placed the letters U.A. (liability excluded) or the letters B.A. (limited liability) respectively, at the end of its name. A cooperative that has not limited its liability as referred to in the previous sentence will be obliged to carry the letters W.A. (statutory liability) at the end of its name. A scheme under the articles of association that determines liability other than in equal parts, but does not limit it to less than the total deficit, will not affect the fact that the name of the cooperative can end with the letters W.A. 8

9 Dissolution A cooperative may be dissolved: a. pursuant to a resolution of the general meeting; b. if an event occurs that leads to dissolution according to the articles of association and that does not constitute a resolution or act aimed at realising dissolution; c. after being declared bankrupt, either through completion of the bankruptcy in connection with the condition of the assets or through insolvency; d. as a result of the fact that there are no members; e. pursuant to a decision of the Chamber of Commerce; f. by the court in those cases provided for in law. 9