Setting up a business in The Netherlands

Foreign companies who want to open a subsidiary company sometimes experience difficulty starting up their business in the Netherlands. The same goes for internationals in the Netherlands who wish to set up their own enterprise. It is not the business itself that presents certain issues, but the unfamiliar rules and regulations. Here are some key points to consider.

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Employee or contractor? Recent changes in the Dutch business climate

For companies who are deciding to establish an office in the Netherlands, the legal form of the business is important. Equally important are the people who are going to work for the company: does the company want to hire employees or contractors? These two are very different. 

Employee

The three main features of an employment relationship are: that the work is performed personally; for which the employee is paid; and that a relationship of authority exists between employer and employee.

In the Netherlands, the law protects employees. An example of this protection is that an indefinite contract cannot be terminated without prior approval from the UWV (Employee Insurance Agency) or a sub-district court. Also, an employer is always obliged to withhold payroll taxes (loonheffing).

Contractor

As a contractor (or ZZP’er in Dutch), one does not have to perform the work personally. Furthermore, there is no relationship of authority between the employer and the employee. In other words, a contractor works independently.

An agreement with a contractor can be terminated by giving notice. Generally no compensation is due and termination is possible at all times. Another difference is that the company does not have to withhold payroll taxes. Therefore, it is understandable that many companies hire contractors instead of employees. A contracting relationship can be more easily ended and offers more flexibility to the hiring company.

But how can one be sure that the contractor is indeed a truly independent business person? Until May 1 2016, contractors obtained a so called VAR from the Dutch Tax Authorities. If the contractor was in the possession of a VAR, the company could be sure that this person was truly independent and that they did not need to deduct wage taxes and make social security contributions.

Recent changes in the Netherlands

Since May 1 2017, the VAR no longer exists. A new legislation has been introduced, the DBA (Deregulering Beoordeling Arbeidsrelaties) law. The enforcement of this law has been postponed until July 1, 2018.

This law entails the re-assessment of work relationships. It concerns a system of general fixed contracting agreements in order to gain security over the character of the working relationship and check whether it really concerns an independent contractor relationship (and not an employment relationship).

However, another possibility is for the company to submit its own contract for approval by the Tax Authorities. If this contract is approved or if one uses the model contracts, a company can be sure that it will not be liable retroactively for the payment of payroll taxes. But don’t forget: even when using such a contract, a company must make sure that parties act according to an independent contractor relationship and not according to an employment relationship.

Changes for managing directors

The recent changes also apply in the case of managing (statutory) directors: employees but also directors of a company. Do note that the general meeting of shareholders has authority over the managing director, meaning that they mostly work as employees. The general meeting appoints and dismisses managing directors, taking into account the notice period. No prior approval of UWV or a court is necessary in this situation.

Questions?

If you have any questions about hiring an employee or contractor or if you are a contractor with questions about the implications of new legislation about contracts, please contact one of our lawyers or submit your question online.

 

Update article: November 2017.

The right to privacy in the European Union

What ever happened to privacy? New technologies gather, store and share information as never before. And we ourselves happily take part in the gathering, storing and sharing of information. At the same time, we know how important privacy is to modern life and how endangered privacy has become.

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Start-up permit as of 01-01-2015

As of 01-01-2015 it will be possible to apply for a residence permit to start-up a business which permit will be issued initially for one year.

Conditions to qualify for a start-up permit:
-the entrepreneur to be must have a facilitator with a reliable and experienced record
-the entrepreneur to be should run an innovative business and must have sufficient financial means
-the business should be registered at the Dutch Chamber of Commerce

Whether or not the business is innovative will be determined by the RVO (Rijksdienst voor Ondernemend Nederland), a subsidiary of the Ministry of Economic Affairs.

After this initial year conditions for renewal of the permit must be in line with criteria which are currently valid to qualify as an entrepreneur.

The former Dutch Euro Commissioner, Mrs Neelie Kroes, has been appointed to further strengthen the international position of the Netherlands as  “the ultimate country to start-up a business” to attract an increasing number of start-ups from other countries with the aim to rank innovative Dutch companies in an international top position.

It is not known as yet what other conditions will apply to further simplify immigration procedures but we will update you as soon as we know.

If in the meantime you have any questions then please get in contact with us.

 

European recommendations on bankruptcy and insolvency

A whole raft of changes are being made to bankruptcy law. The European Commission has published recommendations on a new approach to business failure and insolvency. These recommendations were published on the Commission’s website on 12 March 2014.

Recommended minimum standard harmonises procedures

Similar to the Dutch draft “Business Continuity I Act”, the recommendations focus on the pre-bankruptcy phase. The aim is to offer businesses that are viable a way of avoiding bankruptcy when experiencing financial difficulties. The European Commission believes there is a need for a new procedure available in all European countries, which meets certain minimum requirements laid down by the Commission.

The moves are designed to make it easier for businesses to implement a restructuring procedure before bankruptcy in all European countries, to give businesses a better chance of survival and to simplify the process of restructuring cross-border businesses. What’s more, by harmonising bankruptcy procedures, the Commission hopes to encourage foreign creditors to register their claim in a bankruptcy and, if possible, recover that claim. Obviously, this measure will surely also benefit the workings of Europe’s internal market.

The principles

The Commission’s recommendation contains a number of principles which any restructuring procedure must meet. One of the principles is keeping involvement of the courts to a minimum. The Commission aims for an informal and flexible procedure, which slots in nicely with all kinds of situations and keeps costs low. The Commission does not see the need for a compulsory appointment with a supervisor or mediator. Rather, the idea is to give entrepreneurs the scope to take measures by suspending individual enforcement measures and retaining control over their assets.

Guidance

In principle, every entrepreneur can restructure his business as he deems appropriate. The Commission’s recommendations serve as a guide to entrepreneurs so that they can maximise their chances of success. The restructuring plan lies at the very heart of this approach. To ensure that this procedure is not used to deliberately disadvantage creditors, all creditors must give their consent to the plan. They must be able to give their consent by letter or by electronic means. Electronic means enables creditors in other countries to take part in the agreement process.

If the creditors do not unanimously back the restructuring plan but a specified minimum number of them, it is necessary for the court to give consent. The court will assess whether the proposed plan has a reasonable chance of successfully averting bankruptcy. If the restructuring plan is approved, it is binding on all creditors.

The Commission furthermore points out that entrepreneurs must have the option of raising new finance. They should not risk the underlying juristic act of being declared void on the grounds that it is detrimental to the creditors, should the company eventually go bankrupt. With this setup, the entrepreneur has leeway to restructure the business without the constant threat of collection measures.

Second chance

The Commission also wants to give entrepreneurs a second chance, post-bankruptcy, by introducing a discharge period of three years for all debts which form part of the bankruptcy. However, more stringent stipulations must be applied to entrepreneurs who have acted dishonestly and in bad faith.

The aim is to enable entrepreneurs to set up a new business sooner. The idea behind this is that entrepreneurs who have already experienced bankruptcy are more likely to succeed second time around.

Conclusion

With these recommendations, the Commission’s primary aims are to enable honest entrepreneurs to potentially avoid bankruptcy by means of restructuring or to have another stab at launching a business sooner in the wake of a bankruptcy. The thinking behind this is very much in tune with the Dutch draft “Business Continuity I Act”.

The availability of similar procedures in all European countries would surely be a positive development, potentially making it easier to do business across borders. Without doubt the most obvious difference compared to the Dutch draft Act is the central importance of the appointment of a prospective administrator or receiver in the Dutch draft. The advantage of this is that the entrepreneur always has access to legal advice, whatever the situation – and in the critical pre-bankruptcy phase, this can prove vital.

Legal advice

Therefore, it is advisable to seek legal advice if you need to restructure your business. GMW lawyers has a team of specialists in company law and bankruptcy law who are able to give you excellent advice on restructuring or the threat of bankruptcy.

Please do not hesitate to contact us should you have any questions.

 

Update article: December 2017

 

Jurisdiction over international consumer purchases

Which court has jurisdiction over disputes when a consumer purchases an item abroad? What does this mean for your rights as a consumer?

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Hyperlink: a copyright infringement?

A hyperlink (or simply a link) contains a hypertext that refers to a website on the Internet. This is usually a text, but an image can also be used as a hyperlink. In recent case law, the question has arisen whether hyperlinks infringe copyright.

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Cookie legislation: have you brought your website into line?

Under the Dutch Telecommunications Act (DTA), several new provisions have been made regarding cookies. Under the new rules, websites are required to ask visitors for their consent before setting a cookie (or other information) on their PC, laptop or mobile phone.

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