It regularly happens that parties act in various capacities in one transaction, for example acting on behalf of the buyer, as well as on behalf of the seller. Book 2 of the Dutch Civil Code lays down the rules for such a conflict of interest. This regulation applies to both directors and supervisory directors of a private limited company (BV) and public limited liability company (NV). In this blog the position of the management board member is described.
The concept of conflict of interest
Article 2:239 paragraph 6 Dutch Civil Code provides that a director may not participate in de deliberation and decision-making on a subject if, in so doing, he has a direct or indirect personal interest that is contrary to the interests of the company and its affiliated enterprise. When the management board is then unable to take decisions because all managing board members have a conflict of interest, the decision shall be taken by the supervisory board pursuant to Dutch law. In the absence of a supervisory board, the decision shall be made by the general meeting. It is possible to include a different provision in the articles of association with regard to decision-making in the event of a conflict of interest.
When exactly do we speak of a conflict of interest?
This is the case if the management board member is no longer able to guard the interests of the company in a way that may be expected of an honest and unbiased management board member, because his personal interest is unconsistent with this. All the circumstances of the case are taken into account. For example, a conflict of interest may arise if a management board member enters into an agreement on behalf of the company with a BV of which he is the shareholder. Or when a managing director enters into a management agreement with himself on behalf of the company and awards his own compensation in doing so. This type of legal act does not necessarily mean that there is a conflict of interest. There must actually be a personal interest that makes it impossible for the management board member to be guided solely by the interests of the company.
Consequences
It sometimes happens that a management board member with a conflict of interest still participates in deliberations and decision-making. In that case, the resolution is annullable because it was passed in violation of the law or the articles of association (article 2:15 paragraph 1 Dutch Civil Code). Nullity means that the resolution remains in force until a claim for nullification of the resolution is filed. Such a claim can be filed by any person who has a reasonable interest in the annulment of the resolution. Think of fellow directors, shareholders, supervisory directors or trustees. A period of one year applies for filing a claim.
A BV with one director
The above is different if there is a BV with one director. In that case, the decision was taken by the wrong legal body (the management board instead of the general meeting). This means that the decision itself was taken in violation of the law and the articles of association. In that case, the decision is null and void, which means there has never been a valid decision (article 2:14 Dutch Civil Code).
The company may hold the director who has wrongly participated in the decision-making process liable for the damage suffered. This possibility is also available to shareholders who have suffered damages.
Bill on the governance and supervision of legal entities
With the introduction of the bill on governance and supervision of legal entities, the regulation of conflict of interest with respect to the BV / NV, will also apply to directors and supervisory directors/supervisors of associations, foundations, cooperatives and mutual insurance companies. This bill is currently being debate by the Senate.
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