On 9 June 2010 the Upper House of the Dutch parliament approved the “Bill amending, among other things, Book 2 of the Dutch Civil Code and the Companies (Documentation) Act”.

Effective from 1 July 2011
Consequently, as from 1 July 2011 a declaration of no objection for the incorporation and the amendment of the articles of association of a private limited liability company (“Besloten Vennootschap or B.V.”), a public limited company (“Naamloze Vennootschap or N.V.”) or a European Company (“Societas Europaea or S.E.”) in the Netherlands is no longer required.

System of preventive monitoring ineffective
The reason for the abolishment of this preventive supervision was explained by the Ministry of Justice as follows:

“In practice, the existing supervision does not work well. The supervision is linked to a number of formal acts (incorporation or amendment to the articles of association), but the abuse may actually take place during the practice of the business or other activities. Moreover, preventive supervision cannot adequately address the use of straw men without negative antecedents. The current supervision ... is therefore ineffective while placing an administrative burden on companies with share capital.”

New system of continuous monitoring
The new law aims to improve the measures for preventing and combating abuse of legal entities by introducing a new system of continuous monitoring of the legal entity during its existence.

Moreover, the law intends to facilitate investigation and prosecution of offences which have been committed by a legal entity.

Scope of monitoring extended to other legal entities
The scope of the monitoring will not be restricted to B.V.’s, N.V.’s and S.E.’s, but will be extended to cover legal entities, such as foundations (“stichtingen”), associations with full legal authority (formal associations) (“verenigingen met volledige rechtsbevoegdheid”), cooperations (“coöperaties”), mutual insurance associations (“onderlinge waarborgmaatschappijen”), European Cooperative Societies (SCEs) and European Economic Interest Groups (EESV), provided that they have their statutory seat in the Netherlands.

To the extent possible, monitoring will be based on digital information already available to the government in certain databases, such as the Trade Register and the Municipal Personal Records Database.

In addition, the Ministry of Security and Justice will obtain data from the tax authorities, the Judicial Information Service, the Central Insolvency Register and the National Police Services Agency.

This tightened monitoring will be performed using risk profiles and automated risk reports that can be followed up by investigation and prosecution. Quality control will be established through enforcement covenants and enforcement partnership between supervisory and enforcement agencies aimed at combating abuse.

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