Partnerships to be revamped

Launching a company as a group of entrepreneurs is about to become easier. Minister for Legal Protection Sander Dekker has expressed his intention to revamp and modernise such partnerships. Following a clarification and simplification of the rules, this accessible legal form will fit the needs of business transactions more closely, which saves time and money. This legislative proposal was submitted for online consultation today.

The Netherlands is home to around 231,000 partnerships, which can be professional, commercial or limited partnerships. Such partnerships are found especially among SMEs and agricultural businesses, as well as in the service industry.

The current law is extremely outdated and incapable of meeting the needs of entrepreneurs and professionals (such as lawyers, civil-law notaries and doctors) to a sufficient degree. New partners currently face difficulties joining a partnership, while existing partners leaving a partnership will cause it to terminate. As a result, companies are restricted in their potential to grow or transfer ownership. Businesses trading with partnerships also experience uncertainty about which partner is liable for any debts and to what amount.

The present legislative amendment by Minister Dekker will increase the appeal of partnerships.

Dekker:

'Partnerships take up a key position in legal transactions within the business community and the Dutch economy. This update is intended to promote entrepreneurship, facilitate business and increase our competitiveness.'

 
The revamped partnership will lead to greater flexibility for entrepreneurs and professionals in entering into business transactions, without having to seek additional legal advice. Partners' rights and obligations, as well as their liability for debts, will also be clarified. Among other new opportunities, partners can now pledge claims to profit. This way, moneylenders will face fewer risks and provide financing more readily.

Partnerships will henceforth comprise not three but only two legal forms, which are the company and the limited partnership. While professional and commercial partnerships will continue to exist in name, they will no longer be distinct in terms of liability or other legal matters. As it stands, partners in a law firm are only liable for rent arrears in equal shares, whereas partners in a painting business are liable for the full amount. By updating the law and removing this arbitrary distinction, all partners will be liable for the full amount in future.

Another novel option is to limit liability for a company assignment, such as restoring a painting or issuing legal advice, to the partner who has been explicitly entrusted with this responsibility. This change addresses practical needs. With the present legislative proposal, Minister Dekker is responding to an earlier draft as published by a working group chaired by Prof. M. van Olffen.