What is a limited liability company?

Organs

A limited liability company has the following bodies:

1. a general meeting of shareholders, authorized to:

• appoint and remove directors;
• amend the bylaws;
• issue new shares;
• to decide to dissolve the company.

2. a board/directorate consisting of one or more directors.

Often there is also a supervisory board, whose role is to supervise and advise the management. The appointment of supervisory directors is regulated by law and detailed in the articles of association.

Financial responsibility

In principle, shareholders are never liable beyond the amount for which they participate in the company.

Because the SA has legal personality, board members and supervisory directors are in principle not liable for debts of the company. In case of ‘improper management’ and damage to the company, the company can hold the board members and supervisory directors liable.

Improper management

Improper management occurs, for example, if directors or supervisory directors have not put their accounts in order and have not filed them with the Chamber of Commerce on time. This also applies if the management has approved (too) high dividend payments resulting in the bankruptcy of the company. Furthermore, it is important to pay all tax debts and pension contributions on time or, in case of emergency, at least report the inability to pay.

Minimum capital

The law has many regulations on the capital of the company. One of the most important regulations is that a minimum capital of €45,000 must be paid into the company at incorporation. This amount may also be in kind. Consider the contribution of an entire company or goods such as cars and computers.

Sometimes, before the formal incorporation of the limited liability company, the legal entity yet to be incorporated already acts. If you are considering this, it is advisable to consult a legal advisor first, especially since you are personally liable until the time of incorporation.

Statutes

Once the required capital is paid up, the notary will record the articles of incorporation of the limited liability company for you in the deed of incorporation. The articles of association contain such things as:

• Up to what amount the company can issue shares;
• the method of appointment and removal of directors and auditors
• The powers of the various bodies and how they meet;
• the transfer of shares.

Trade register registration

Finally, the SA must be registered in the Commercial Register to avoid personal liability of the directors. This registration is usually supervised by the notary.

Publication requirement

Every SA is required to prepare and publish financial statements. The requirements under the law vary according to the size of the company. If a director fails to publish the financial statements on time, he or she runs an increased risk of being held personally liable in the event of bankruptcy.