On 18 December 2019 a bill was submitted to expand the prohibition of legal entities. With the bill, the legislator wants to make it easier to prohibit legal entities who act in conflict with the public order. The bill is currently still discussed by the House of Representatives.
Pursuant to current law, a legal entity can be declared prohibited by the court on the basis of Article 20 of Book 2 of the Dutch Civil Code and dissolved if the activity is in conflict with the public order. If the objects of the legal entity are in conflict with the public policy, the only option is to dissolve the legal entity.
With the bill, the legislator wants to broaden the possibilities of prohibiting legal entities. On the basis of the bill, not only the legal entity whose activity is in conflict with the public order, but also the legal entity whose objects are in conflict with the public order can be declared prohibited.
The definition of “public order” is not given in current law. This makes it difficult to determine the inconsistency between this and the activity or object of the legal entity. That is why the bill offers a more detailed interpretation of the definition of public order.
The proposed paragraph 2 defines that in any case there is a conflict with the public order if the object or the activity induce threatening national security or the international legal order or to disrupt the democratic constitutional state or public authority. In addition, there is a presumption of a conflict with the public order if the objective or the activity threatens to lead to harm to human dignity, violence or incitement to hate or discrimination.
A civil-law administrative prohibition of at least three years
Finally, a civil-law administrative prohibition of at least three years is introduced. The prohibition on management concerns directors and supervisory directors of legal entities who have been declared prohibited on the basis of the above. This prevents dubious directors from remaining active in other legal entities and continuing to act in conflict with the public order.
The Combined Committee on Company Law believes that the prohibition on management should also apply to directors who resign as directors before or during the prohibition procedure. According to the Committee, the bill does not clearly show how the prohibition on management relates to these directors.