Appropriation of result (resultaatbestemming)
The decision on what happens to the profit: distribute it as dividend, add it to the reserves or offset it against losses. Adopted by the general meeting.
What does appropriation of result (resultaatbestemming) mean?
The decision on what happens to the profit: distribute it as dividend, add it to the reserves or offset it against losses. Adopted by the general meeting.
In a BV the competent meeting decides, under the law and the articles, what happens to profit. A proposal is not yet a final decision. A dividend distribution additionally requires a test of the available reserves and approval by the board.
How does it work?
In a BV the general meeting decides on the profit determined by the adoption of the annual accounts, insofar as equity exceeds the statutory and articles-based reserves (art. 2:216(1) DCC). The articles can restrict that power or give it to another body. A resolution to distribute has no effect as long as the board has not approved it (paragraph 2).
The balance sheet may show equity before or after appropriation of result; the heading states which of the two it is (art. 2:362(2) DCC). After appropriation the annual profit is distributed according to the decision or, as long as there is none, the proposal. Medium-sized and large entities state the appropriation or the proposal (art. 2:380c DCC); small entities are exempt from that (art. 2:396(7) DCC). A foundation or association that falls under Title 9 (art. 2:360(3) DCC) states the articles-based arrangement and the appropriation of the result even if it is small (art. 2:383a DCC).
Example
A BV closes the year with € 30,000 profit. Equity before appropriation is: capital € 1,000, statutory reserve for development costs € 9,000, other reserves € 40,000 and result for the financial year € 30,000, together € 80,000. Distributable according to the balance sheet test: 80,000 − 9,000 = € 71,000. The meeting decides to add € 20,000 to the other reserves and to pay € 10,000 dividend; the board approves after a liquidity forecast. After processing and payment: other reserves € 60,000 and equity € 70,000.
In the annual accounts
Equity and notes; treatment depends on decision-making around the balance sheet date.
Difference from dividend
Appropriation of result is the decision on the whole annual profit; dividend is one of the possible outcomes. In the example, of the € 30,000 profit € 10,000 is dividend and € 20,000 stays in the BV. Conversely, dividend can also come from reserves of earlier years, regardless of this year’s result.
Common mistakes
- Booking a proposal as an already paid liability
- Distributing a statutory reserve
What to watch for
- Read the articles: some prescribe a mandatory reservation or give the decision to another body (art. 2:210(7) DCC).
- Medium-sized and large entities include the articles-based profit arrangement in the other information (art. 2:392(1) DCC, point (b)); micro and small entities need not. A foundation or association under art. 2:360(3) DCC does state that arrangement, even if it is small (art. 2:383a DCC).
- If the dividend decision was taken after the balance sheet date, read dividend after the balance sheet date before you book a liability.
Legal basis and sources
art. 2:216 and 2:373 DCC
Frequently asked questions
Who decides on the profit in a BV with one shareholder?
The DGA (director-major shareholder) acting as the general meeting. Record the decision in writing and also sign as director for the approval of a distribution; they are two different decisions.
What happens to a loss?
A loss is charged to the reserves. The articles can have another body decide how it is dealt with (art. 2:210(7) DCC).
Read more
Preparing Dutch annual accounts?
Your first set of annual accounts is free, for every size class. Create an account and prepare the annual accounts of your Dutch company under Title 9 of Book 2 of the Dutch Civil Code.
Get started