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Supervision of legal entities

Supervision of legal entities

Perhaps without you noticing it, the government has been conducting continuous supervision of all domestic legal entities and foreign legal entities with a principal or branch establishment in the Netherlands since 2011. This was not always the case. The development of the supervision of legal entities and current implementation thereof are the focus of this article.
As from 1928, supervision of legal entities consisted of a certificate of no objection to be issued by the Minister of Justice, which concerned (i) the content of the deed of formation (the articles of association in particular) and as from 1971 also (ii) the intentions or antecedents of the persons who were to (co) determine policy.[1] The Revision of Preventative Supervision Act led to a restriction of this supervision in 2001. The check of the deed by the Ministry ended as a result of this act and this was left to the notarial profession. Only the investigation into the intentions and antecedents of the natural persons and legal entities involved in the formation (the abuse test) was left in place.[2] That regulation proved easy to circumvent, however.[3] That is why the legislator replaced this regulation in 2011 by means of the Legal Entities (Supervision) Act (WCR)[4] with a continuous supervision regulation carried out by Justis, the Ministry of Justice Agency for Scrutiny, Integrity and Screening.[5]

The purpose of continuous supervision is preventing and dealing with fraud with and abuse of legal entities and the facilitation of the investigation thereof. Continuous supervision takes place automatically as much as possible on the basis of life course moments of the legal entity that modify the known data.[6] Examples of such life course moments are the registration and deregistration of directors, the transfer of shares and merger, split-off and the dissolution of a company. In case of a modification, the RADAR computer system checks automatically whether there is a risk of fraud or abuse on the basis of criminal or bankruptcy notifications. Justis picks up any reports and expands the investigation on the basis of information from the Tax and Customs Administration and the police if there is reason for doing so.[7]

This is how the system should prevent fraud and abuse as much as possible or, in any event, identify it on time. This form of continuous supervision ensures that fraud with and abuse of legal entities is combatted actively in a manner that causes no or hardly any nuisance to well-meaning entrepreneurs.

By Henk Hoving

[1] Asser/Maeijer 2-III 2000/61 and Van Schilfgaarde, ‘De medebeleidsbepaler in het ondernemingsrecht’, in: Willems’ wegen. Opstellen aangeboden aan prof. Mr. J.H.M. Willems, series published by the Van der Heijden instituut, dl. 102, Deventer: Kluwer 2010, p. 321-324, p. 322.
[2] Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/54.
[3] Van Schilfgaarde, Winter & Wezeman. Van de BV en de NV, 2013, p. 54.
[4] Act of 8 May 2003, introduced on 1 July 2011 by the Act dated 7 July 2010, Bulletin of Acts and Decrees 2010, 280).
[5] Dienst Justis, Evaluatie Wet Controle op Rechtspersonen Een verslag over doeltreffendheid en effecten van de wet in de praktijk, 11 November 2013, p. 6-8 (consulted via: http://www.dzw.gr/7ccd5).
[6] Nethe, WPNR 2009/6819, p. 910-914, p. 910-911.
[7] Rapport Dienst Justis, 2013, p. 6-14.

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