Wbtr: New rules for foundations and associations as of July 1st, 2021
As of July 1st, 2021 new additions to the Law Management and Supervision legal entities will go into effect. With this, the regulations of the management and supervision of foundations and associations are 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.
The changes in the Wbtr will result in stricter regulations that apply to the liability of the board in organizations. In addition to obligated adherence, some will need to be recorded statutory. It is therefore 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 of the Wbtr is - in short - to prevent mismanagement by the board and to improve supervision. With the new law, conflicting interest or bad financial policy at the expense of organization can be prevented. Abuse of power or self-enrichment should also be prevented with the Wbtr.
By far the most foundations or associations are management properly. In these organizations, 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.
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 interest of the association or foundations when performing their tasks. When a board member serves an interest that conflicts with that, then he or she can be excluded from counselling or decision-making. This way, it is prevented that the self-interest damages the legal entity.
- Voting right: with the Wbtr it is no longer allowed that a board member with multiple votes has more votes than the other board members combined. This way, it can be prevented that the votes of one board member weigh more heavily than the votes of the other board members. The purpose of that provision is - with other words - that the unbalance in the board is democratized.
- Liability: in the case of negligent performance, board members can be made liable. For example, when there are financial shortages within the organization because of self-enrichment, then every board member can be made liable for this. This way, risks as a consequence of (financial) mismanagement are limited
- Dismissal: as of July 1st, 2021 there are more grounds on which board members and supervisors can be fired. When the interest of the foundation or association is severely damaged by bad management (for example by mismanagement, abuse of power, self-enrichment, undesired activities or conflicting interests), then the Wbtr makes it easier to dismiss that person.
Again, in general, the consequences of the Wbtr are minimal to none for most organizations. However, it is important that every legal entity changes their articles/statutes within five years of the start of the new law (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 the decisions with absence or when all board members are impeded (when all the board members are removed because they are suspended are they stepped down). Usually there is an appointed (continuity) commission.
Secondly, the limitation of having multiple voting right, as described in the second point of the list above, will need to be recorded in the statutes.
The official announcement of the altered regulations in the Wbtr that starts on July 1st, 2021 can be found on overheid.nl (in Dutch). Would you like to know more about founding and the fiscal organization of a foundation (in English)? Click here. Or if you have any questions or need more information, please contact us. We would love to help you.