3.2 Dutch law: Analysis and Proposed Improvements

Under Dutch law, a general partnership aimed at conducting a commercial business under a joint name is deemed by law to be a commercial partnership (VOF). Like in Germany, no full clarity exists as to the exact meaning of the requirements ‘joint name’ and ‘commercial business’. Also, these requirements have a substance-over-form nature. As such, they limit people’s organisational freedom. To address these issues, the author recommends that the legal requirements for VOF status be changed. He proposes that a general partnership meeting said substance requirements is no longer automatically deemed a VOF and that VOF status is made dependent on whether the partners choose to register the partnership as such in the Dutch Commercial Register (or earlier adoption of that status in a notarial deed). Furthermore, he proposes that both maatschap and VOF may forthwith be used for all types of business, including non-commercial investment management.

Like the maatschap, the VOF is not a legal person distinct from its members. It does, however, seem to be some sort of legal entity. How and to which extent is unclear and debated in legal literature. Certain provisions in the Dutch Commercial Code do appear to allow for the same solution as applied in Germany to Auβen-GbR, OHG and KG: the combination of legal entity status and joint ownership. In this solution, the partners from time to time (as a group), in their capacity as such, are considered as owner, debtor, party, to assets, obligations and other legal relationships standing in the name of the VOF. The author favours this view of the VOF. The VOF can thus be said to have legal capacity. The further step of attributing legal personality distinct from the members to a VOF, appears unnecessary. Legal capacity will differentiate VOF from maatschap. Legal capacity is expected to be an attractive feature of the VOF as it will avoid the need for the transfer of assets and other items upon partners leaving the VOF and upon admission of new partners.

The partners of a VOF are jointly and severally liable for the VOF’s debts. As clarified by the Dutch Supreme Court in 2015, this means inter alia that, by law, a new partner will become personally liable for the VOF’s debts which already exist at the time when he joins the firm, as is the case with the French SNC and the German Auβen-GbR and OHG. The author proposes to preserve these VOF features. They send a clear message to creditors and are justified on the basis that the partners have expressly consented with the partnership’s VOF status. As a result of the VOF’s legal entity status, the partners’ personal liability will be of a secondary nature (the VOF itself being the primary debtor). If the VOF’s obligation is contractual, the partner’s liability for it will not be contractual as well. Instead, it will stem directly from the relevant statutory provisions. The new partner’s personal liability for old VOF debts is consistent with the conceptual starting point in which VOF is taken to mean ‘the partners from time to time(as such)’. Some softening of this personal liability rule seems appropriate. The author recommends that, as a general rule, a new partner be not held liable for old VOF debts incurred outside the ordinary course of business, if at the time of joining the VOF the partner was not aware of the old debt and – by exercising reasonable due diligence – he would not have been aware of it. Leaving the VOF does not terminate a partner’s personal liability for the VOF’s debts, but like in Germany the remaining exposure can be limited to five years following deregistration of the old partner from the Commercial Register.

The author recommends application by analogy of said proposals to the CV and its general partners. Under current Dutch law, limited partners may not interfere with management or represent the CV, not even on the basis of a power of attorney. On infringement of this rule, a limited partner will be jointly and severally liable for the CV’s debts. In a breakthrough decision given in 2015, the Dutch Supreme Court has held that liability under this rule is justified only in cases where the limited partner can be made a reproach and that the amount of liability must be proportionate to the gravity of the infringement. The author concurs with proposals made to terminate the existing prohibition on interference with management. The prohibition to represent the CV can be softened such that a CV agreement may allow a limited partner to represent the CV in cases where the position of general partner is vacant or the general partner is unable to act (e.g., in conflict of interests situations). Also, more generally, a limited partner can be allowed to represent the CV under a power of attorney. The author also proposes that rules on director and shadow director liability applicable to directors of companies be applied by analogy to limited partners interfering with management.