Limited, partnership or something else?
We all know companies that are a separate legal entity and that have shares: we call them Limited Liability Companies, Private Limiteds, GmbH’s, BV’s or just the term that is used in your country. And we have contractual agreements, where partners work under one mutual name, but are all personally liable for joint commitments: in English you call them partnerships, but also here there is a variety of names and concepts.
The share structure of the Limited however is not so flexible, as the number of shares mostly is limited, and the partnership can make you liable for the actions of the other partner(s). Wouldn’t it be nice if there would be the best of both worlds?
May I present: the Dutch cooperative
We also know the cooperative. Mostly associated with farmers who jointly brought there crop or milk to the market. It is common in many countries, but there are practically always limitations: e.g. in Indonesia you will have to get permission from the government first to set up your cooperative, and that can be a lengthy procedure.
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, only the board member needs to reside in the Netherlands. But this can also be a non-member, hired by the cooperative.
The cooperative is a separate legal entity, just as a Limited Company or the Dutch ‘BV‘, in case it goes bankrupt the members will only loose the capital they brought in. At least, if you use the variety ‘Coöperatie U.A.’, the one with excluded liability for the member, with most people do.
Applications of the Dutch cooperative
For any type of international collaboration
Regardless of the purpose of the cooperative, the fact that member from different nationalities can join makes it an easy form for international collaborations. Only if you want to incorporate the cooperative from abroad there may be some legalisations to do, but that is only once. The deed of incorporation needs to be in Dutch, but is in general only 6 pages and can easily be translated. Other documents can be in English.
Also important: the cooperative pays no withholding tax, which is useful for those who reside in countries with a lower tax burden than the Netherlands. There is one restriction: holding cooperatives without any real activities are excluded from this arrangement.
For jointly buying or selling goods or services
This is the original purpose of the cooperative, to get a better sales price by grouping the products of the members, or getting discounts by jointly buying products or services. In general no value is being accumulated in the cooperative, profits are paid out yearly on basis of the sales of purchasing volume of each of the members.
For investment purposes
The alternative is to create a cooperative with a transferable membership. It is also possible to create ‘member accounts’ to keep track of the investments of each of the partners. The higher the value of the member accounts, the more voting rights and the bigger share of the profits each member gets. The cooperative is then comparable with a limited company.
This is a very flexible way to build your company. No need to go to the public notary every time to exchange shares. You can just add capital when you want (even in kind if you agree on the value) and slowly build your company. If new partners join as a member, they also can slowly build their share, without the need of buying themselves in. We have created a special version for start-ups, based on the principles in the book Slicing Pie.
How to get started?
If you want to know more about the possibilities of a cooperative in the Netherlands, please contact Alfred Griffioen, who is not only involved in Alliance experts, but who is also the founding partner of de Coöperatie expert. This is a Dutch expert group that works with its own public notary and has set up over 1000 cooperatives so far.