Netherlands: Legal changes the Netherlands in 2020/2021
In the past year, the Dutch legal system has once again changed on essential points and there are even more major legal amendments in the pipeline. In the article below, we have set out the most important legal amendments.
The Covid-19 Pandemic has caused the expedient introduction of a new restructuring tool, namely the Court Confirmation of Extrajudicial Restructuring Plans Act (Wet Homologatie Onderhands Akkoord – "WHOA"). With this introduction the Dutch legislation anticipates to the expected major financial ramifications for companies due to that the Covid-19 Pandemic. Companies have been granted deferral of payment by banks and the tax authorities. A wave of bankruptcies is expected once these creditors start to collect their outstanding claims. The expedient introduction of a tool to combat the adverse effects of bankruptcies on the economy was deemed warranted.
This article will provide a short insight into the WHOA, describe other major legal changes in 2020, expected changes in 2021 and an overview of measures that were introduced to provide assistance to companies for dealing with the effects of Covid-19.
Court Confirmation of Extrajudicial Restructuring Plans Act
In the past years, a lot of effort has been put into enacting a tool for restructuring legal entities on the brink of bankruptcy. This has culminated in the so-called Court Confirmation of Extrajudicial Restructuring Plans Act (Wet Homologatie Onderhands Akkoord – "WHOA"), which will enter into force on 1 January 2021.
Any Dutch legal entity, foreign legal entity which has its Centre of Main Interest in the Netherlands or foreign legal entity which has sufficient ties to the Dutch legal sphere can apply for a restructuring procedure.
On the basis of the WHOA, a debtor may offer an extrajudicial restructuring plan to its creditors or shareholders. In case certain requirements are met, the restructuring plan can become binding on these creditors and shareholders by order of the court. The plan can include a cross-class cram-down and group company obligations. Furthermore, it can even entail the termination of onerous contracts.
The procedure can be initiated by a debtor or a creditor and is aimed at achieving a quick and legally binding restructuring.
The Management and Supervision of Legal Entities Act
The Management and Supervision of Legal Entities Act (Wet Bestuur en Toezicht Rechtspersonen – "WTBR") has been adopted by the Senate and the House of Representatives. The law is expected to enter into force on 1 January 2021.
This act will increase the quality of the board and supervision of foundations, associations, cooperatives and mutual society.
Board members will have to abstain from taking part in deliberations or making decisions in cases where they have a conflict of interest. Previously, it was not possible to formally install a supervisory board in foundations, associations, cooperatives and mutual guarantee companies. This act enables the introduction of a supervisory board in these legal entities. Furthermore, the act ensures uniformity with regard to the liability of directors and supervisors in the event of mismanagement and simplifies the dismissal of directors and supervisors of foundations.
The introduction of a register for ultimate beneficial owners by the Dutch government is a direct consequence of the European Anti-Money Laundering and Anti-Terrorist Financing Act. The so-called UBO register has been introduced on 27 September 2020 to comply with the goals of the European Anti-Money Laundering and Anti-Terrorist Financing Act.
On the basis of the UBO-register, specific legal entities must provide the Chamber of Commerce with a number of details about the UBO (ultimate beneficial owner). In short, a person qualifies as an UBO in case an interest of more than 25% is held, directly or indirectly, in a legal entity.
The purpose of this registration is that certain data becomes public and others can be requested by government departments. An UBO must submit information like his/her name, date of birth, home address, nationality and nature of the economic interest, and its extend. For existing entities, data has to be registered within 18 months of implementation. Therefore, the deadline is 27 March 2022. Newly established entities must immediately fulfill the registration requirement.
Data Protection Collective Act
The General Data Protection Regulation ("GDPR") is directly applicable in the Netherlands as European legislation since 25 May 2018. The GDPR leaves space for Member States to specify the rules or to make exceptions. In the Netherlands, this has resulted in the legislative proposal "Data Protection Collective Act". This contains an amendment of the Dutch Insolvency Law (Faillissementswet), which allows the trustee to lawfully process some personal data in the performance of his legal duties. The newly (proposed) section 68a of the Dutch Bankruptcy Act specifies which data the trustee is allowed to process in the case of certain activities and is now under review of the House of Representatives.
In February 2020, the Franchise act was introduced in the house of representatives. The main aim of this act is to achieve a balance of power between franchisor and franchisee. On the basis of this act, this is achieved by creating more transparency and control for the franchisee.
Franchisor and franchisee will have to act reasonably and diligently towards one another, even before entering into the franchise relationship. In that light, the franchisor will have to provide the franchisee with information on a timely basis on matters such as required investments. On the basis of this act, the substance of franchise agreements will also be regulated. Non-competition clauses will for example be limited to a duration of one year.
It is expected that this law will enter into force on 1 January 2021.
Balanced Labour Market Act
On 1 January 2020, the Balanced Labour Market Act (Wet Arbeidsmarkt in Balans – "WAB") entered into force. The main principle of the WAB is to make it more attractive for employers to hire employees on a permanent basis by reducing the gap between permanent contracts and flexible contracts. That is why the WAB imposes more obligations on employers with regard to on-call workers. The WAB requires employers to offer on-call workers an employment contract after each 12-month period. The employment contract has to provide for the average working hours spent in on-call employment over the past twelve months. If the employer does not make this offer or in case this offer has been made too late, the employee has the right to claim non-payed wages over these average hours from the date on which the employer should have made the offer at the latest.
Please contact Mareine Callemeijn for more information on the Balanced Labour Market Act.
Legislative amendment Public Administration Act
On 1 August 2020, the first tranche of the amended Public Administration Act (de Wet Bibob) entered into force. This amendment is intended to further strengthen the tackling and prevention of subversive crimes by public authorities in which public authorities are unintentionally included.
To achieve that goal, the reach of the Public Administration Act has been widened to include all public contracts. Furthermore, the participation in real estate transactions in the widest sense of the word will fall under this act. Not only the National Bibob Agency (Landelijk Bureau Bibob), which is directly involved with the prevention of subversive crimes,can conduct a research as to potential subversive crimes, but now also regional public authorities can conduct such research. On the basis of this new legislation, research can now also be conducted into information concerning third parties.
The Dutch Environment and Planning Act
A legislative proposal for the introduction of an act to encompass all public legislation on environmental matters has been a hot issue during 2020. At the moment, public law in the Netherlands on matters regarding the environment in the broadest sense of the word is divided into many sectoral laws and regulations for example with regards to spatial planning, nature, the environment, noise, soil, odor and water. The proposed Environment and Planning Act aims to provide one piece of legislation that regulates all activities in the field of the environment. The reason for the introduction of such a piece of legislation must be found in the central government's wish to provide more transparency to citizens, entrepreneurs and local governments on environmental legislation.
At this present date, the legislative proposal still raises a lot of questions in the political arena. As such, the implementation date has been postponed by another year to 1 January 2022.
The structural approach to the nitrogen problem
In order to structurally tackle the nitrogen problem, the Dutch government has announced a package of measures and investments. The aim is twofold, on the one hand nature restoration and on the other hand nitrogen reduction.
With regard to nitrogen reduction, efficient source measures will be taken in industry and energy, agriculture and construction. These include innovative stables, cleaner mobile equipment and financial arrangements for farmers who want to transform. Over the next ten years, the national government will reserve an average of 200 million euros per year for this purpose. Besides that, an annual amount of up to 300 million euros is available for nature investments.
The government's ambition with this investment package is to bring at least half of the nitrogen-sensitive hectares of nature in Natura 2000-areas below critical deposition values by 2030.
Expansion of administrative enforcement instruments
To be able to intervene earlier and more efficiently at educational institutions, the legislative proposal "Expansion of administrative enforcement instruments" has been introduced in the past year. The legislative proposal covers all education sectors, but the proposed measures are not identical for all sectors due to differences within the education system. The proposed measures extend the Minister's enforcement instruments. One of these new instruments is that the Minister can give instructions to a competent authority of the educational institution in urgent cases. Mismanagement can be qualified as an urgent case. The legislative proposal also extends the concept of maladministration, so that the minister can intervene sooner.
The Data Protection Impact Assessment
At the same time as the General Data Protection Regulation ("GDPR"), the Data Protection Impact Assessment ("DPIA") has been introduced as a new instrument. In certain cases where a breach of privacy is possible, the DPIA must be carried out by the data controller before parties start using new forms of personal data. In this way it is verifiable whether the specific data processing is permitted or not.
In general, the DPIA must be carried out when it concerns the processing of personal data using (new) technologies, which may involve a high risk for the privacy of individuals. In addition, the GDPR describes a number of concrete situations where a check with a DPIA must be done. These descriptions are vague and unclear. That is why the Dutch Data Protection Authority (de Nederlandse Autoriteit Persoonsgegevens - "AP") had to create a list describing for which concrete processing operations the execution of a DPIA is required. This list was published last year and includes health data, location data, camera surveillance, and more.
Since the outbreak of the COVID-19 Pandemic, the Dutch Government introduced a considerable amount of measures to assist companies with tackling the financial effects of the pandemic. There's a plethora of measures, but the measures as listed below are the most important. Specific requirements must be met in order to obtain assistance under these measures. Note therefore that we have included the most important measures below in short.
1. NOW 3.0: Temporary Emergency Bridging Measure to Preserve Employment (Tijdelijke Noodmaatregel Overbrugging voor Werkgelegenheid ). Through this measure, employers can be compensated for a substantial part of their wage costs. In essence, an employer is eligible for compensation under this act in case a certain predetermined treshold of reduction in turnover has been met.
2. Deferral of payment for taxes: companies can request a deferral of payment from the Tax and Customs Administration until 1 January 2021 with regard to income tax, corporation tax, turnover tax and wage taxes for a period of 3 months.
3. TVL: Fixed costs compensation for SME (Tegemoetkoming vaste lasten). Entrepeneurs with a maximum of 250 employees who have lost a predetermined threshold of their revenue due to the coronavirus can apply for a compensation of a maximum of EUR 90,000.
4. BMKB-C: The SME Credit Guarantee Scheme (BMKB) exists to meet the liquidity needs of businesses. Under this scheme, SME entrepreneurs can obtain a guarantee for part of a bank financing arrangement. The Ministry of Economic Affairs and Climate (EZK) is the guarantor for this part. The scheme enables entrepreneurs to borrow more than they could obtain on the basis of their collateral security. This measure has been extended as a result of the coronavirus crisis (BMKB-C).
5. KKC: Corona Small Credit Guarantee Scheme. On the basis of this scheme, the government can facilitate a company's financing by means of a state guarantee for loans between EUR 10,000 and EUR 50,000.
6. BL-C: Extension of the Agricultural Credit Guarantee Scheme. A specific credit guarantee scheme (BL) exists to meet the liquidity needs of agricultural businesses. On the basis of this scheme, agricultural businesses can obtain a guarantee for part of a financing arrangement. The government guarantees this part. The scheme enables agricultural businesses to borrow more than they could obtain on the basis of their collateral security. This measure has been extended as a result of the coronavirus crisis (BL-C).
7. GO-C: Business Finance Guarantee Scheme. Under the GO-C scheme, the government can support the financing of medium-sized or large businesses by providing a guarantee to the bank. This arrangement existed prior to the coronavirus crisis, but has now been extended. Under the extended GO-C Scheme, the government provides a guarantee up to 80% for large enterprises and 90% for small and medium-sized enterprises for loans between EUR 1.5 million and 150 million.
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