Article 2:389 DCC: participating interests at net asset value and the legal reserve

The short answer

Article 2:389 DCC requires participating interests in which the legal entity has significant influence, presumed from one fifth of the votes, to be valued at net asset value: the share in equity on its own accounting policies. A premium paid is goodwill. Retained profit that you cannot freely have distributed goes into a legal reserve for participating interests (paragraph 6). Micro and small entities follow it too.

Updated 30 October 2026

Key facts

Paragraphs 1 to 3: when and how at net asset value

1. Participating interests in companies in which the legal entity exercises significant influence over the business and financial policy are accounted for in accordance with paragraphs 2 and 3. If the legal entity or one or more of its subsidiaries can, alone or together, cast or have cast one fifth or more of the votes of the members, partners or shareholders at its own discretion, it is presumed that the legal entity exercises significant influence.

2. The legal entity determines the net asset value of the participating interest by valuing the assets, provisions and debts of the company in which it participates, and calculating its result, on the same policies as its own assets, provisions, debts and result. This method of valuation must be stated.

3. When the legal entity has insufficient data available to determine the net asset value, it may start from a value determined in another way in accordance with this title and adjusts this value by the amount of its share in the result and in the distributions of the company in which it participates. This method of valuation must be stated.

What this means. If the holding company has significant influence over the policy of a participating interest, that participating interest stands on the balance sheet at the net asset value: the holding's share in the equity of the participating interest, recalculated to the holding's own policies. The share in profit goes into the holding's result every year, even if nothing is distributed; a dividend only lowers the carrying amount. From one fifth of the votes that influence is presumed; whoever can show that it is nevertheless absent values differently (RJ 214.306). If the holding cannot recalculate the figures to its own policies, it starts from the equity as the participating interest itself reports it, adjusted for result and distributions (paragraph 3). In both cases the notes say which method was used. A participating interest with significant influence may not be valued at current value (RJ 214.304).

Paragraphs 4, 5, 7, 9 and 10: banks, goodwill, departing and the reconciliation

4. In the annual accounts of a legal entity that is not a bank as referred to in article 415, the accounting for a participating interest in a bank may be done in accordance with section 14 of this title. In the annual accounts of a bank as referred to in article 415, a participating interest in a legal entity that is not a bank is accounted for in accordance with the provisions for banks, with the exception of article 424 and without prejudice to the first sentence of paragraph 5. This exception need not be applied to participating interests in which activities are carried out that are directly an extension of the banking business.

5. In the annual accounts of a legal entity that is not an insurance company as referred to in article 427, the accounting for a participating interest in an insurance company may be done in accordance with section 15 of this title. In the annual accounts of an insurance company as referred to in article 427, a participating interest in a legal entity that is not an insurance company is accounted for in accordance with the provisions for insurance companies, without prejudice to the first sentence of paragraph 4 of this article.

7. If the value at the first valuation in accordance with paragraph 2 or paragraph 3 is lower than the acquisition price or the previous carrying amount of the participating interest, the difference is capitalised as goodwill. For this calculation the acquisition price is also reduced in accordance with article 385 paragraph 5.

9. For sound reasons to be stated in the notes, departure from the application of paragraph 1 is permitted.

10. Differences in equity and result according to the company annual accounts and according to the consolidated annual accounts of the legal entity are stated in the notes to the company annual accounts.

What this means. Paragraphs 4 and 5 are for groups with a bank or insurer: they may value such a participating interest under their own sector rules. Paragraph 7: if on purchase you pay more than the net asset value, you capitalise the difference as goodwill and write it off under article 2:386. Paragraph 9: with a sound reason, stated in the notes, you may depart from net asset value. RJ 214.304 names as examples international entanglement and an intermediate holding that uses the consolidation exemption of article 2:408; it may value its participating interests at acquisition cost. Paragraph 10: whoever also prepares consolidated annual accounts shows in the company notes why equity and result differ between the two.

Paragraphs 6 and 8: the legal reserves

6. The legal entity maintains a reserve equal to its share in the positive result from participating interests and in direct increases in equity since the first valuation in accordance with paragraph 2 or paragraph 3. Participating interests whose cumulative result since that first valuation is not positive are not taken into account. The reserve is reduced by the distributions to which the legal entity has acquired a right since then up to the time of adoption of the annual accounts, as well as by direct decreases in equity at the participating interest; distributions that it can bring about without restrictions are likewise deducted. This reserve may be converted into capital. The distributions referred to in this paragraph do not include distributions in shares.

8. Increases or decreases in value of participating interests resulting from translation of the equity invested therein and the result from the currency of the participating interest into the currency in which the legal entity prepares its annual accounts are credited or charged to a translation reserve. Exchange differences on loans taken out to hedge the currency risk of foreign participating interests are likewise credited or charged to this reserve. The reserve may have a negative balance. On full or partial disposal of the interest in the relevant participating interest, the part of the reserve relating to the disposed part of that participating interest is released from this reserve. If the translation reserve has a negative balance, no distributions may be made at the expense of the reserves up to the amount of this balance.

What this means. After valuation at net asset value, the profit of a participating interest is in the holding's result, but the money is still in the participating interest. Paragraph 6 prevents the holding from distributing that profit. For the retained profit since the first valuation it forms a legal reserve, except for the part that it can itself have distributed without restrictions. If the holding has the majority and there are no bank or statutory restrictions, it can bring about that distribution and usually no reserve is needed. With a minority interest it cannot, and it does form the reserve. You determine the reserve per participating interest; a participating interest with a cumulative loss is not counted and offsetting between participating interests is not allowed (RJ 240.232). The reserve lowers what the BV may distribute (art. 2:216 DCC; see article 2:216).

Paragraph 8 concerns foreign participating interests in another currency. Translation differences on the invested equity, and on loans that hedge that currency risk, go through a translation reserve, not through the result. That reserve may be negative, but up to that negative amount the legal entity may distribute nothing from the reserves. Elaboration: RJ 122 foreign currency, RJ 214 and RJ 240.

Participating interests per class and with tax-based policies

With tax-based policies (micro and small) the holding values the participating interest as in the tax return: within a fiscal unity that may be the tax equity of the subsidiary, outside it follows the valuation from the tax return, usually cost. If the participating interest is not at cost, a legal reserve may also be at issue then; those reserves are not a valuation policy and therefore do not disappear through the tax choice (RJk D3). For financial years 2025, 2026 and 2027 the statutory text is the same. RJ 214 and RJk B3 were amended for financial years from 2027; the 2027 RJk edition, unlike the 2025 edition, also mentions the legal reserve for participating interests in the valuation of participating interests itself (RJk B3.121).

Case: a holding with a 40% minority interest

Beheer Zuidwal BV (fictional, small) buys on 1 January 2026 for € 500.000 a 40% interest in Kozijnfabriek Noordkaap BV. The equity of Noordkaap, recalculated to Zuidwal's policies and at fair value, is € 950.000 on that date; 40% of that is € 380.000. Noordkaap makes € 150.000 profit in 2026 and pays € 50.000 dividend in December. Zuidwal has 40% of the votes and cannot force a distribution in the general meeting. It writes off the goodwill over the expected useful life of ten years.

Check: 380.000 + 120.000 = 500.000 paid; 380.000 + 60.000 − 20.000 = 420.000; 60.000 − 20.000 = 40.000. In Zuidwal's result there is € 60.000 result from participating interests and € 12.000 amortisation of goodwill. Of the profit of € 48.000 this yields, € 40.000 is not distributable as long as it stays in Noordkaap. If Zuidwal held all the shares and there were no bank or statutory restrictions, it would form no reserve, because it can then bring about the distribution itself.

Mistakes with participating interests

• Leaving a participating interest with significant influence at cost without a sound reason in the notes.
• Taking the net asset value from the participating interest's annual accounts without recalculating to your own policies, and not stating that (paragraph 3).
• Not forming a legal reserve for a minority interest at net asset value.
• Offsetting the legal reserve between a profitable and a loss-making participating interest.
• Letting translation differences on a foreign subsidiary run through the result instead of through the translation reserve.

How it works at Jaarrekening.io

When mapping the trial balance, the app explains per item where a participating interest, the result from participating interests and the legal reserves belong, and that dividend from a participating interest that is not at net asset value gets its own line. How high the reserve is and whether you can bring about a distribution is assessed by the board. The first annual accounts in your account are free, for every size class.

Sources

• Art. 2:389 BW: participating interests, net asset value and legal reserves (wetten.overheid.nl)
• Art. 2:386 BW: amortisation of goodwill (wetten.overheid.nl)
• Art. 2:408 BW: intermediate holding (wetten.overheid.nl)
• Art. 2:216 BW: distributions by the BV (wetten.overheid.nl)
• RJ bundle for medium-sized and large entities (rjnet.nl)
• RJk bundle for micro and small entities (rjnet.nl)

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