A ‘partnership’ is an alliance between individuals who jointly practice a profession or conduct a business, such as a maatschap (professional partnership) and a VOF (general partnership). Unlike limited liability companies (such as BVs), which are incorporated and thereby acquire legal personality, a partnership is based on an agreement entered into. A new preliminary draft bill to modernise partnership law was launched for consultation on 10 October 2022 (the Bill). The second consultation closed on 10 February 2023.

Reason for the Bill

The current legislation dates from the 19th century and does not adequately address the needs of contemporary businesses. It also contains several ambiguities. By introducing this Bill, the government aims to facilitate business ownership and to make a clear and simple arrangement that contributes to certainty for commerce. This Bill is also intended to give partners and creditors appropriate protection. In light of the scope of the Bill, only its main points will be addressed in this article.

New legal forms

Under the Bill, professional partnerships and general partnerships will substantively disappear and be replaced by the openbare personenvennootschap (Public Partnership). The commanditaire vennootschap or CV (limited partnership) will continue to exist as a stille personenvennootschap (Silent Partnership).

Legal personality

A Public Partnership has legal personality. This means that a Public Partnership may act independently in commerce under a common name. It may, for instance, be the owner of or hold title to property and may enter into agreements. The Bill also introduces the Silent Partnership. Unlike the Public Partnership, the Silent Partnership lacks legal personality. Partners in a Silent Partnership act in their own names.

Legal personality means, among other things, that the Public Partnership has its own assets, which makes it easier to transfer property, create security and obtain financing.

Trade Register registration

Registration in the Trade Register is not required for the Public Partnership to acquire legal personality. However, registration by the joint partners of the Public Partnership in the Trade Register does give it full legal capacity.

Joint and several liability

All partnerships may conduct both professional and business activities. Because the distinction between the performance of professional and business activities is no longer made, the distinction in liability between partners in a professional partnership and those in a general partnership will disappear. The Bill provides that partners in a Public Partnership are jointly and severally liable (in addition to the Public Partnership itself) for all the obligations of the Public Partnership towards third parties.

Board representation

In principle, a partnership is managed by all the partners jointly (except for limited partners in a limited partnership). In a Public Partnership, each partner is authorised, in principle, to represent the partnership. Any restrictions on the power of representation must be registered in the Trade Register in order to be effective in relation to third parties. A limited partner may represent the Silent Partnership only on the basis of a power of attorney. A limited partner acting on the basis of a power of attorney does not become jointly and severally liable. A Silent Partnership can be represented only on the basis of a power of attorney.

Joining and retiring of partners

Current law does not provide for a joining or retiring arrangement. In practice, the old partnership agreement must be terminated and a new one must be entered into, or the partnership agreement provides for complicated accrual clauses.

The Bill makes it easier to join and retire form a Public Partnership that is registered in the Trade Register, on the basis of the existing partnership agreement A retiring partner is also released from obligations towards third parties five years after his or her retirement. A joining partner is better protected against claims against the partnership that arose before he or she joined. This will lower the threshold for conducting a business in the form of a partnership. The retiring partner will furthermore be entitled to a retirement fee based on the value of the partner’s share in the partnership.

Creditor protection

Creditors are protected in several ways. They may consult public registers to see what property, if any, is registered in the Public Partnership’s name. The Bill also clarifies who may act on behalf of the Public Partnership: partners must be registered in the Trade Register and any conditions that restrict the actions of partners must also be registered. Finally, creditors of a Public Partnership have additional recourse: in addition to the partnership, each of the partners may also be sued.

Entry into force of the Bill

The Bill clarifies and simplifies partnership law compared with existing legislation in several respects. Please note, however, that the Bill has yet to be debated and adopted before the new rules enter into force. It is entirely possible that the Bill will not be adopted or will be adopted in a different form. Vestius will closely monitor the further developments.

For the present at least, the existing legislation will continue to apply to partnerships (professional partnerships, general partnerships and limited partnerships).

Please contact Sabine Chan (+31-6-578 911 13) or Sander Pieroelie (+31-6-222 878 65) if you have any questions about this Bill.

This article was published in the Newsletter Vestius of April 2023