Wbtr: New rules for foundations and associations as of July 1st, 2021
As of July 1st, 2021 additional laws pertaining to the Management and Supervision of legal entities have come into effect. Regulations surrounding the management and supervision of foundations and associations will be equated with those of public limited companies and private companies. In Dutch, the law that is now applied to foundations and associations is called Wbtr. Changes in the Wbtr will result in stricter regulations regarding the liability of the board of an organisation. Your organisation is obligated to comply with these new regulations and some amendments to your articles/statutes may be necessary. Therefore it is important that the board and supervisors are aware of the changes. We will briefly explain what the consequences are for your foundation or association.
Why Wbtr for associations and foundations?
The purpose of the additions to the Wbtr is - in short - to prevent mismanagement by the board and to improve supervision. With the new law, conflicting interests or bad financial policy at the expense of an organisation can be prevented. Abuse of power or self-interest should also be prevented with the Wbtr.
By far most foundations or associations are managed properly. In these organisations, the Wbtr will have little to no consequences. However, when there is a risk of mismanagement, then this can be prevented more easily with this law and when mismanagement does occur this can be countered with the Wbtr more efficiently.
Provisions
To prevent damage from mismanagement, the Wbtr has the following additional provisions for foundations or associations (for other legal entities these regulations already apply):
- Task performance: board members are obligated to focus on the interests of the association or foundation when performing their tasks. When a board member serves an interest that conflicts with these, then he or she can be excluded from counselling or decision-making. This prevents self interest damaging the legal entity.
- Voting right: A single board member may no longer hold more votes than the other board members combined. This prevents the votes of one board member weighing more heavily than the votes of the other board members. This provision ensures the board remains democratic.
- Liability: In cases of negligence, board members can be made liable. For example, when there are financial shortages within the organisation because of self-interest, then all board members can be made liable for this. This provision limits the risk of (financial) mismanagement.
- Dismissal: as of July 1st, 2021 there are additional grounds on which board members and supervisors can be dismissed. When the interests of the foundation or association are severely damaged by bad management (for example by mismanagement, abuse of power, self-interest, undesired activities or conflicting interests), then the Wbtr makes it easier to dismiss that person.
Statutes
Overall, the consequences of the Wbtr are minimal to none for most organisations. However, it is important that every legal entity amends their articles/statutes within five years of the laws coming into force (so before July 1st, 2026). Before that time, there are two necessary changes that need to be made:
Firstly, you will need to determine who takes decisions during absence or when all board members are impeded (when all the board members are removed because they are suspended or have stepped down). Usually there is an appointed (continuity) commission.
Secondly, the limitation on holding multiple votes, as described in the second point of the list above, will need to be recorded in the statutes.
Further reading
The official announcement of the altered regulations in the Wbtr applicable from July 1st, 2021 can be found on overheid.nl (in Dutch). Would you like to know more about founding and the fiscal organisation of a foundation (in English)? Click here. Or if you have any questions or need more information, please contact us. We are always happy to help.