The Netherlands

The most common for-profit organizational forms used in the Netherlands are the private limited liability company (besloten venootschap met beperkte aansprakelijkheid) ("Private Company") and the public limited liability company (naamloze vennootschap) ("Public Company" and together with Private Company "Companies"). These legal forms are quite comparable with respect to fiduciary duties of management board directors, governance requirements and limited liability for shareholders. The Public Company is less flexible with respect to governance and describing shareholder agreements, because this legal form is based on a European Union directive, with comparable counterparts throughout Europe. The Private Company is (by far) used more often than the Public Company.

In addition, the Netherlands provides for several types of partnerships ("Partnerships"), incorporated pursuant to an agreement: the more generic type called the partnership (maatschap), the general partnership (vennootschap onder firma) and the limited partnership (commanditaire vennootschap) - which has general partners and limited partners. Partnerships are most often used by small businesses or sometimes in a holding structure (for tax purposes, as partnerships may be disregarded for taxation). However, Partnerships are not often utilized in larger business because the (general) partners are personally liable for the partnerships' liabilities and obtaining bank financing is more difficult.

Finally, the Netherlands recognizes the legal form of a cooperative (coöperatie) ("Cooperative") which is often used for worker-owned initiatives such as law firms or as a holding entity.

a. Enterprises that seek financing from investors and have multiple owners mostly tend to use Companies. Sometimes a Cooperative is used as a holding company, but this is less standard. It is difficult attract investors for Partnerships, because the (general) partners are personally liable for the liabilities of the partnership and it is more difficult to obtain bank financing.

b. The most common for-profit organizational form used by Social Enterprises is the Private Company. Private Companies can attract outside investors, which makes the Social Enterprise less reliant on grants / other donations and bank financing. The Private Company can also issue shares without voting rights to outside investors; this allows investors to profit from the (limited) financial returns, but precludes them from voting in the general meeting. Furthermore, it is possible to define the social purpose of the Enterprise in the articles of association of the Company and (for example) provide that the articles may only be amended with the affirmative vote of all shareholders or the approval of another corporate body – a way to protect the social purpose of the Social Enterprise.

The foundation (stichting) ("Foundation") is not a common organizational form for for-profit Social Enterprises, as Dutch corporate law does not allow Foundations to distribute dividends. However, the corporate structure of Social Enterprises often consists of a combination of Private Companies with a Foundation. An example is the so-called "golden share-structure" in which a Foundation acquires specific (approval) rights in the Social Enterprise, which itself is a Private Company. The Foundation sees to it that the Social Enterprise focuses on - and continues to pursue - its social purpose on a long-term basis.

Under Dutch corporate law, management board directors of Companies are guided by the interests of the Company and its business in performing their duties. Serious mismanagement by a management board directors is a ground for liability towards the Company. A determining factor is if a management board directors fails to act in the interest of the Company and its business. The "interest of the Company and its business" is generally understood to include the interests of all stakeholders, including (besides the shareholders) for example employees and creditors, as well as the public interest. The extent to which the public interest is factored into the interests of the Company and its business depends on the specific circumstances and could, for example, be greater if the articles of association of a Company include a social purpose.

The Netherlands does not have organizational forms specifically designed for Social Enterprises.

The Dutch government is currently drafting a legislative proposal pursuant to which the Social Enterprise shall be recognized as a specific type of Private Company: the Social Purpose Private Limited Liability Company (maatschappelijke besloten vennootschap met beperkte aansprakelijkheid) ("SPC"), as evidenced by a Letter from the State Secretary of the Ministry of Economic Affairs and Climate dated 10 July 2020, 'Kabinetsinzet Sociaal Ondernemen' ("Letter").

As of yet, it is unclear which specific requirements and benefits for SPC's will be included in the legislative proposal. What is clear from the Letter is that the Dutch legislator does not intend to introduce a new legal form, but will make a distinction between the "normal" Private Company and the Private Company designated as an SPC (and registered as such with the Dutch trade register) if certain requirements are met. These requirements are not exhaustively crystalized yet but will in any case consist of the following: (i) the social objectives must be included in the articles of association, (ii) part of the revenue must be reinvested towards the social objectives and/or dividend distributions must be limited, (iii) the relevant stakeholders are identified, (iv) the SPC must be transparent on its website and/or in its annual accounts on the social impact it has created.

The State Secretary of the Ministry of Economic Affairs and Climate is expected to provide an update on the status of the legislative proposal in the first quarter of 2021.

Social Enterprises are permitted to be formed and operated as Nonprofits, for which (generally) a Foundation is used.

a. Nonprofits that are Social Enterprises are not treated differently under Dutch corporate law as compared to Nonprofits that are not Social Enterprises. A Nonprofit that meets certain requirements may be designated as a Public Benefit Organisation (Algemeen Nut Beogende Instelling, ("PBO")) and therefore (in short) be exempt from gift and inheritance tax. A Social Enterprise will not easily qualify as a PBO, because at least 90% of the Social Enterprises' activities will need to be focused on the public benefit (thus the Social Enterprise has to be a Nonprofit).

b. No

c. No

d. Roughly 24% of the Social Enterprises in the Netherlands have the organizational form of a Non-Profit Foundation, as evidenced by the European Commission report on social enterprises and their ecosystems in Europe of January 2019.

Yes, the Cooperative is an organizational form in the Dutch jurisdiction.

There are no material benefits for, and/or restrictions on, using the Cooperative as opposed to the Private Company. Dutch corporate law is quite flexible and a Cooperative may be tailored to resemble a Private Company and vice versa. When dealing with a large (and changing) number of members/shareholders, it may be beneficial to use a Cooperative as limited formalities apply to becoming a member and terminating the membership, whilst acquiring and disposing of shares in a Private Company requires the execution of a notarial deed before a Dutch civil-law notary.

The legislative proposal will only provide for the SPC as a specific type of Private Company and not as a specific type of Cooperative.

No. It is noted that according to the Letter, the legislative proposal will prescribe that the SPC is transparent on its website and/or in its annual accounts on the social impact it has created.

No.

There are various ESG requirements applicable to Dutch Enterprises pursuant to European Union directives and regulations.

Under the Pollutant Release And Transfer Register Regulation (EC 2006/166), certain industrial Enterprises which are considered to be (potential) large polluters are obligated to publish an annual environmental report (milieujaarverslag). The disclosed information of the companies pertains to their environmental performances and their environmental management systems. These reports are not required to be verified by an external party. 

Under Dutch law, based on the Accounting Directive (EU 2013/34), Dutch listed companies (independent of their size) and large non-listed companies need to elaborate on CSR in their annual accounts.

Furthermore, pursuant to the Non-Financial Reporting Directive (EU 2014/95) as implemented in Dutch law, public-interest companies with more than 500 employees are required to include a non-financial statement in their annual report containing information on environmental, social and governance factors.

In March 2021, the Regulation on Sustainability-Related Disclosures in the Financial Services Sector (EU 2019/2088) will enter into force. The goal of this regulation is (amongst others) to (i) ensure financial enterprises are transparent about certain negative effects on sustainability and sustainability risks and (ii) provide a uniform standard for the integration of ESG factors into investment decisions of "financial market participants" (such as pension funds, Alternative Investment Fund Managers and Undertakings for Collective Investment in Transferable Securities ).

No.

There are a few ESG requirements applicable to investors pursuant to European Union directives and regulations.

The Directive on Long Term Shareholder Engagement (2017/828/EU), which pertains to shareholders of Public companies, has increased the transparency obligations for institutional investors and asset managers. Pursuant to this Directive, these parties are required to inter alia (i) develop and disclose an engagement strategy including a description of how they monitor investee companies on financial performance, social and environmental impact and corporate governance, and to (ii) disclose how their engagement policy has been implemented on an annual basis.

In 2018 the European Commission adopted a proposal for a Regulation that will introduce disclosure obligations for institutional investors and asset managers on the integration of ESG in their risk analyses. The proposal is being discussed within the European Counsel (or its preparatory bodies), but the latest development dates back to 2019, so this proposal seems to have been halted.

Dutch law, based on the Directive on the Activities and Supervision of Institutions for Occupational Retirement Provision (EU 2016/2314), requires pension funds to look at ESG issues when making investment decisions:

• The annual report must include wording on how environment and climate, human rights and social relations are taken into account in the investment policy of pension funds;
• Pension funds need to include environment and climate, human rights and social relations in their risk management;
• Pension funds have to record their considerations with respect to responsible investing and shall ensure that these records are available to the stakeholders;
• Pension funds shall ensure support amongst the stakeholders with respect to responsible investing.

Currently, no other major investor classes are required to look at ESG issues (other than as mentioned under question I.11 above). Both investment funds and (institutional) investors have increased focus on ESG topics, and factor those in when making investment decisions.

It should be noted that the following upcoming developments will make ESG factors increasingly important for the financial sector in Europe and its participants:

• In March 2021, the Regulation on Sustainability-Related Disclosures in the Financial Services Sector will enter into force as mentioned under I.9; and
• On 8 June 2020, the European Commission submitted several bills to amend the delegated Regulations to (i) Markets in Financial Instruments Directive II (EU 2014/65), (ii) Alternative Investment Fund Managers Directive (EU 2011/61) and (iii) Undertakings for Collective Investment in Transferable Securities Directive (EC 2009/65), all implementing ESG topics. It is not clear when the amended delegated Regulations will enter into force.

Social Enterprises may receive different kinds of funding. Funds like Stichting DOEN, Start Foundation and the Anton Jurgens Fund support Social Enterprises by way of donations and loans.

There is not a lot of other philanthropic funding per se, but various ways of funding focused on Social Enterprises. For example, various 'impact funds' like Social Impacts Ventures and the SI2 Fund are available if the Social Enterprise is looking for growth capital. These funds offer risk or growth capital and venture assistance and guidance to Social Enterprises in the start-up and growth phase. Furthermore, banks offer business loans to entrepreneurs who want to make a positive contribution to the world with a focus on sustainability and a fair economy. For example, the Social Impact Fund of ABN AMRO makes investments between EUR 500,000 and EUR 1.5 million in 'social and sustainable enterprises'. Crowdfunding platforms are another example of support available to Social Enterprises.

For-profit impact investments have been increasing in the Netherlands and are therefore becoming more prevalent. 

Social entrepreneurs are not always aware of the existence of government funding. Some government funding is limited to Social Enterprises. For example, the Netherlands Enterprise Agency (Rijksdienst voor Ondernemend Nederland) provides subsidies, among other things, for sustainable entrepreneurship.

As a Social Enterprise it is fairly easy to obtain this subsidy, if the requirements are met.

The funding is not limited to Enterprises incorporated using Social Enterprise forms as there is no specific legal entity designated for Social Enterprises.

The government stimulates Social Enterprises. For example:

• The government facilitates a subsidy guide, in which a Social Enterprise can search for subsidies by region, type of scheme and themes such as 'Energy and Environment' or 'Research and Innovation'.
• In March 2019 the Fund for Responsible Business (Fonds Verantwoord Ondernemen) opened, which provides support for international corporate social responsibility.
• The 'Startup Box' helps Social Enterprises with a technical initiative. This tool, accessible through the website of the Dutch trade registry, can be used to find the applicable arrangements for subsidies for a Social Enterprise.
• There is also an instrument called 'Social Impact Bond'. A Social Enterprise, financed by an investor, takes on a social task of the government and agrees to certain parameters. After the intended social impact has been achieved, the Social Enterprise will be paid by the government and the investor receives a positive return on investment.

No. There are several companies listed in the Netherlands that are not Social Enterprises per se but are ESG aware. For example, Heineken and ABN AMRO are included in the Dow Jones Sustainability Index.

Please refer to question I.9 above. In addition, briefly put, Dutch Public Companies listed in the Netherlands or elsewhere ((i) in the European Union, on a regulated market or multilateral trading facility, or (ii) outside of the European Union on certain comparable systems) must comply with the Dutch Corporate Governance Code ("DCGC") or explain why they deviated therefrom in their annual report (principle referred to as 'comply or explain'). Some Private Companies voluntarily apply the DCGC.

Under the DCGC, the management board of a Company should pay attention to (i) environmental, social and employee-related matters, (ii) the chain within which the Enterprise operates, (iii) respect for human rights and (iv) anti- corruption and anti-bribery. The Monitoring Committee of the DCGC keeps track of international developments in the area of corporate governance by holding annual meetings with other corporate governance committees (among other things). The last meeting – held in 2019 – focused on emerging ESG challenges.

With respect to such challenges, Euronext has created guidelines to help listed companies understand how to address ESG issues and the main principles to consider when preparing an ESG report.

Social Impact Bonds were introduced in 2013 (see also under II.4, last bullet), which are not actual bonds but rather public-private financing agreements/partnerships. So far, more than 10 Social Impact Bonds have been launched in which significant parties – such as large bank and insurers – have invested. In 2019, the Netherlands was the first state with triple A rating to issue green bonds, and a few companies have followed.

There are currently no restrictions on foreign investments or donations that are unique to Social Enterprises. However, the Dutch government recently submitted a bill on transparency of Social Enterprises (Wet transparantie maatschappelijke ondernemingen) that obliges Social Enterprises to disclose an overview of donations of at least EUR 4,500 from parties outside the EU.

In the Netherlands, it is legal to collect investments from the general public through crowdfunding. However, a license from the Dutch Authority for Financial Markets is required in case of loan based or equity based crowdfunding.

It is noted that the European Parliament has recently adopted the Regulation on European Crowdfunding Service Providers for Business (EU 2020/1503), enabling crowdfunding platforms to offer their services across the EU. This Regulation will enter into force on 10 November 2021.

There are no specific laws that make it easier for smaller businesses or Social Enterprises to collect money from retail investors.

No

The only tax exemptions available are for Foundations (if they do not conduct a business) or PBO's. As mentioned under question I.5 above, PBO's are organizations of which at least 90% of its activities are focused on the public benefit (very few Social Enterprises will meet that standard).

Specific conditions have to be met to acquire the PBO-status, such as the 90% criterion mentioned above. Once met, a PBO does not pay Dutch inheritance tax or donation tax on inheritances, nor does it pay Dutch donation tax on donations that the organization awards to the public benefit.

Only the following legal entities can obtain an PBO-status:

• Foundations;
• Associations; and
• Churches.

No, although PBO donations are deductible – PBO's can never be for-profits. 

No, unless the Social Enterprise qualifies as PBO (see question III.1 above).

No. Any foreign company has to apply for the PBO-status to benefit from a tax-exempt status in the Netherlands and have a registered office in certain states (such as a member state of the European Union).

No. However, there have been some developments for policy frameworks for Social Enterprises since 2015. The Social Economic Council (Sociaal Economische Raad) ("SEC") wrote a first exploratory advice in 2015. In 2016, the Foundation Social Enterprise NL wrote a vision document on what legal form a Social Enterprise should take. In 2018, an initiative memorandum for entrepreneurship with a social mission was submitted. The Dutch government was until recently working on policy frameworks, as the coalition agreement stipulates that this cabinet wants to introduce appropriate rules to give Social Enterprises a level playing field.

The government makes resources available such as tax benefits, innovation credit or subsidies (see also question II.4 above). In addition, the government organizes network organizations for the entrepreneurs behind Social Enterprises. Also, the government helps with the recruitment of personnel for Social Enterprises, through the 'entrepreneurs square'. If a Social Enterprise wants to employ people facing barriers to the labor market, the government provides support in finding such people. Lastly, if a Social Enterprise employs people facing barriers to the labor market, it is rewarded with a higher ranking in a public tender.

No.

The Ministry of Economic Affairs and Climate is responsible for the development of Social Enterprises (entrepreneurship). The Ministry provides tools for social entrepreneurship and determines the policy frameworks for Social Enterprises. The legislative proposal for SPC's was initiated by and is under the supervision of this Ministry.

No.

Under Dutch corporate law, legal entities are incorporated pursuant to a notarial deed, executed before a Dutch civil-law notary. Depending on the complexity of the articles of association of the legal entity and on how quickly the necessary information is received, a legal entity may be incorporated within a matter of a few business days. Notarial fees differ per notary and are usually calculated based on time spent. There is a one-time fee of EUR 50 to be registered with the Dutch commercial register, which is mandatory.

The application process to be designated as a PBO and receive the associated tax benefits take up to a few months, due to review by the Dutch tax authorities.

None, other than PBO's (which will rarely be Social Enterprises, please be referred to question I.4 above)

Yes, the Netherlands has an investment friendly climate. It is easy and cheap to incorporate a legal entity. Also, the Dutch civil code allows for quite some flexibility for the organization of a corporate structure, a legal entity and the relevant governance. Furthermore, smaller companies have limited reporting requirements.

Yes, in view of the answers provided to questions II.4, V.2 and VI.3 above. It is noted the Netherlands does not have a specific legal entity for Social Enterprises, but this is expected to change soon (see question I.4 above). The only thing that may be a bit more difficult is obtaining the status of a PBO, with the relevant tax exemptions, in view of the 90% public benefit criterion (see inter alia question III.1 above).

Social Enterprises do not have a separate legal position in the Netherlands yet, therefore a concentration and uniformity of regulations are currently missing. For example, Social Enterprises dealing with municipalities are faced with a variety of municipal policy (e.g. company policy, social policy, the Social Support Act 2015 (Wet maatschappelijke ondersteuning), livability and sustainability, social cohesion and so on). The more social objectives a Social Enterprise pursues (for example reintegration and sustainability), the more different civil servants and policy desks they have to deal with.  Uniformity in regulations and procedures within municipalities and other authorities will make a public-private partnership more accessible.

More in general, upon introduction of a separate legal entity there is general clarity on which requirements need to be complied with to constitute a Social Enterprise and which legislation and regulations apply (as mentioned above). This may also facilitate obtaining financing (from investors or financers).

No.

1. Providing tax benefits to Social Enterprises utilizing for-profit Enterprise forms.

2. The introduction of a new legal entity – although it is noted this is already in process (please be referred to question I.4). This will enable Social Enterprises to be recognized and – as such – flourish in the Netherlands, also see the reasons set out under question VI.5 above.

1. Amending environmental regulations to obligate Enterprises to comply with energy saving obligations and limiting pollution.

2. The introduction of more sustainability subsidies from the government if an Enterprise meets sustainability requirements.

3. Additional tax incentives or additional tax depreciation for investments in certain environmentally friendly or social enhancement activities

No.