What are the implications of the WBTR?
Since 1 July 2021, the Act on Management and Supervision of Legal Persons, or WBTR for short, has become active.
This law was created due to numerous incidents and abuses that occurred in recent years. This had to do with poor governance.
The purpose of the WBTR is professionalization by, among other things:
- Improving governance and supervision of associations and foundations
- Preventing mismanagement, irresponsible financial management, self-enrichment, abuse of position and other undesirable activities, harming associations and foundations.
- Driving good governance
This concerns associations, foundations, cooperatives and mutual insurance companies. VVEs and church communities are not covered by the WBTR.
What is new in the law as of 1 July 2021?
Liability in bankruptcy (Article 2:138 paragraph 1 and 3-10 BW)
In bankruptcy, it may immediately be assumed that there has been mismanagement and the trustee may proceed immediately. The directors and/or supervisors may be held liable.
Joint and several liability (Article 2:9 BW).
This means that the entire board is liable and could have prevented the mistakes. Here, private assets may also be seized.
These matters must be discussed and laid down before 1 July 2021. There is a transitional period of 5 years for recording them in the articles of association.
What needs to be regulated/recorded for the new law?
- Good governance
- Liability
- Inactivity and absence
- Multiple voting rights
- Supervision
- Binding nomination (Association)
- Consultative vote (Association)
- Board resignation
- Articles of association
Good governance for financial affairs
- Focus: all decisions should be in the interest of the association or foundation
- Transparency
- Bringing risk management into focus: both short- and long-term
- Accountability: sharing decisions with members
- Democracy: abiding by the law
- Effectiveness
- Integrity
Liability, both internal and external liability
Internal: liability of board members from within their own organization
External: from outside, for example, a contractor who cannot be paid.
Do you need help in complying with the new law?
If you need help in complying with the new law, you can hire a legal advisor. However, be aware of the high cost per hour.
The IVBB has made a step-by-step plan to comply with the new law. They guarantee that it will take 3 hours for research and recording. The costs are € 120 with a discount code, provided that you are registered with the umbrella organisation. This can be found on the website. Without a discount code, the cost is a one-off € 240.
Finding out everything yourself is also an option, but this takes a lot of time and ultimately also a lot of money.
How will this change affect directors' and officers' liability insurance?
For the time being, it has no consequences for the coverage of liability insurance. The policy conditions will adapt to the law.
Presumably there will be a clause in the policy that the WBTR must be complied with. If requested, this must be demonstrated to the company. As a result of the WBTR, an increase in the number of claims is expected. This is due to the extra control within foundations/associations and due to the handles of the law to be held liable.
This underlines the importance of directors' liability insurance.
Calculate the premium for a directors' and officers' liability insurance here
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