Two main advantages of the Dutch cooperative:
- You can add members and terminate membership without going to a public notary, this in contrast to a BV. This will save you time and costs if you have a group of investors that varies.
- You can attribute voting rights and profit rights in a flexible way, as long as the way to calculate it is clear. Voting rights may for example vary with the number of years that you are a member, and profit rights can be attributed according to investments, yearly turnover or number of locations, or many other aspects.
Further basic knowledge on the cooperative
The law on cooperatives (‘coöperatie‘) as a legal entity (‘rechtsvorm‘) in the Netherlands is extremely short and mostly refers to the (also relatively short) law on associations. There are only few functional limitations and the best news is: even foreigners and foreign legal entities can incorporate a cooperative or be a member. Once established, the cooperative keeps its own record of members.
For the rest the coöperative is comparable to the BV: it is a separate legal entity, you can transfer the ownership and if the cooperative goes bankrupt, you will only loose the capital you brought in. At least, if you use the variety ‘Coöperatie U.A.’, the one with excluded liability for the member, with most people do.
Less formalities and more privacy
If you want to become shareholder in a BV, you will have to identify yourself with the notary public, or at least provide a power of attorney that is signed by a notary public in your own country. Or if you represent a company, you will have to prove that in a similar way. If you want to become a member of a cooperative, the board of the cooperative may decide on how you should identify yourself.
If you or your company are a shareholder in a BV, this will always be visible in the records of the Chamber or Commerce, which is the Dutch company registry. A cooperative doesn’t have to publish who are the members. Only the board of the cooperative needs to keep a record, although under Dutch law they need to make sure that they know the Ultimate Beneficial Owner (UBO), and also the bank may ask for this information.
Usage in corporate financing
There are several ways how you can use the flexibility of the coöperative for financing your company:
1. As a direct alternative for the BV:
In this case you structure the coöperative comparable to the BV, with member accounts to record the investment of each of the members. The higher the investment, the more voting and profit rights. What mostly counts here is the flexibility and the privacy.
2. As a start-up cooperative
The interesting thing about the cooperative is that you can assign profit rights also according to non-financial investments, such as investments in time. Especially for a start-up, where cash is tight but the time of the founders is available, it can be useful to build your equity in the company on basis of the hours that you make.
We have developed a model for this: the start-up cooperative.
3. As a structure for crowdfunding
If you don’t want a big group of investors directly involved in your company, but you want to let them share in the profits, you can use a cooperative to group them. The cooperative will collect their money and use it to buy shares in the company, which then mostly is a Dutch BV. The members of the cooperative will elect a board, who will execute the voting rights (if any) connected to the shares.
This structure is comparable to a ‘STichting Administratie Kantoor (STAK)’ that was previously used to issue certificates of shares.
There is much more to know about the Dutch cooperative and its applications. Contact Alfred Griffioen for more information.