How much dividend may I distribute from my BV?
A BV may distribute dividend within the free space above statutory and articles reserves, if the board approves the distribution test (art. 2:216 DCC).
The short answer
A BV may distribute dividend within the free space above statutory and articles reserves, if the board approves the distribution test (art. 2:216 DCC).
Basis: art. 2:216 DCC
How do you calculate the balance sheet test?
The balance sheet test looks at whether equity exceeds the statutory reserves and the reserves under the articles of association. What exceeds that is in principle distributable.
Suppose equity according to the last adopted balance sheet is € 120.000 and the statutory reserves and reserves under the articles together are € 30.000. The room under the balance sheet test is then in principle at most € 90.000. That is not yet a licence to transfer that amount: results after the balance sheet date can change the current room. Also check whether a share premium reserve or another equity item has restrictions. With negative equity, or reserves that lock up the capital entirely, the meeting cannot resolve a distribution on the basis of expected future profit.
What does the board examine in the distribution test?
The board assesses whether the company can continue to pay its payable debts after the distribution. The relevant foreseeable period depends on the circumstances; the law mentions no general fixed period of exactly one year. Without board approval the distribution resolution has no effect.
The board then looks at whether the BV can continue to pay its payable debts after the proposed distribution. Make a liquidity forecast with taxes, payroll, suppliers and repayments. For example: € 70.000 in the bank, € 45.000 of VAT and suppliers payable, and a loan instalment of € 20.000 within three months leave little room for a dividend of € 50.000, even if the balance sheet shows enough equity on paper. A fixed test period of exactly twelve months is not literally stated as a universal limit in art. 2:216 DCC; assess what is foreseeable in the circumstances.
Which steps do you record before payment?
If directors, at the time of approval, knew or reasonably should have foreseen that the BV could not pay its payable debts afterwards, they may be liable for the shortfall under the conditions of art. 2:216(3) DCC. Record the forecast used and the resolutions.
Have the general meeting take the distribution resolution and then document the board approval. Without that approval the resolution has no effect. Note the balance sheet used, forecast, assumptions and any uncertainties about large customers. Also check dividend tax and shareholder agreements before you pay. If the BV can no longer pay its debts because of an irresponsible distribution, directors and sometimes recipients may become liable under the statutory conditions. Good records do not automatically prove that the test was right, but they do show which information the board took into account.
What do you record for a dividend resolution?
Note the proposed amount, the shareholders taking the resolution and the position of the statutory reserves and reserves under the articles. Attach the balance sheet and a current liquidity forecast. A BV with € 150.000 of free capital still cannot bear a distribution of € 100.000 if a large loan is about to become payable and its most important customer is not paying. Make visible which assumptions on receipts, taxes and credit headroom were used. Also state whether large losses have arisen after the balance sheet date. The distribution test must fit the real situation at the time of approval.
Discuss separately whether dividend tax must be withheld and declared; that tax handling is not the same as the civil-law balance sheet test. Check shareholder agreements and possible restrictions in financing contracts. After payment, keep the bank proof and the minutes with the annual accounts file. If the board later cannot explain why the distribution was justified, the mere presence of annual accounts offers little support. When in doubt about the financial room, use a current liquidity budget and ask for advice before you distribute. Corrected annual accounts may moreover be a reason to reassess an earlier dividend resolution.
Sources
Frequently asked questions
May I distribute the entire bank balance as dividend?
No. A bank balance is not the same as freely distributable capital and must also be able to cover future obligations.
Who approves the dividend?
The shareholders take the distribution resolution; the board must then approve it under art. 2:216 DCC.
Is there a fixed statutory horizon of twelve months?
Assess all foreseeable payable debts in the circumstances; a rigid period does not follow from the statutory text.
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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.
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