Representation of the legal person

Legal persons can only participate in social intercourse if there are natural persons who 'represent' the legal person externally. The (limitation of) representation of legal persons is seen as a difficult doctrine; Below is a brief overview.

General

Representing involves the allocation of legal acts to the legal person, which have consequences with regard to external legal relationships.
The main rule is that the association and the foundation are represented by the board, to the extent that the law does not provide otherwise (Article 2: 45/292 paragraph 1 of the Dutch Civil Code). "The board" can be understood as:
  • The joint directors: in order to be able to act on behalf of a legal person, they will have to act jointly.
  • Board as a college: here the board can perform legal acts on behalf of the legal person without being dependent on the cooperation of each of the directors.
  • Directors: the articles of association may also stipulate that the authority to represent is granted to one or more directors. They can determine that a director may only represent the association / foundation with the cooperation of one or more others (Article 2: 45/292 paragraph 2 of the Dutch Civil Code).

Scope of the representative authority

Art. 2: 45/292, paragraph 3 of the Dutch Civil Code provides: 'the authority to represent the board or a director is unlimited and unconditional, to the extent that law does not follow otherwise ... "
Unlimited: jurisdiction cannot be limited to the performance of certain legal acts or that do not exceed a certain amount (eg no higher than the amount of Ђ10,000).
Unconditional: authority cannot be made dependent on a prior valid decision (eg approval from another body).

Limitation of the representative authority

Only limitations arising from the law can be invoked against third parties. These limitations have so-called external operation. Restrictions other than those legally recognized cannot in principle be enforced against third parties, even if they are included in the articles of association. These have limitations internal operation.
Legally permitted restrictions:
  • A legally permitted restriction is that the articles of association may determine that the director is only jointly authorized to represent. In principle, the legal person is not bound if a director acts alone. This is only different if:
o The legal person has given the appearance that that director was authorized;
o Or if that director was registered in the trade register as independently authorized
  • If the purpose of the legal act is exceeded (Section 2: 7 of the Dutch Civil Code). This includes all circumstances of the case (judgment Playland (HR 20-9-1996, NJ 1997, 149)).
  • Restrictions with regard to the legal acts mentioned in art. 2:44 paragraph 2 of the Dutch Civil Code. In this the statutory authority to limit representation is limited by law: only if the articles of association provide for this, is the authority authorized to decide to perform the legal acts referred to in this provision. Restrictions may be imposed on the performance of these legal acts. These have limitations external operation. NB: art. 2:16 of the Dutch Civil Code, namely when a decision of the general meeting is made a condition for authority to represent. Such a decision is then a decision with indirect external effect.

  • Statutory financial restrictions and prior approval from another body are not legally permitted or prescribed restrictions and can therefore not be invoked (see explanation 'unlimited / unconditional' above). So they only have internal operation

Decisions and representation

A valid (administrative) decision on a specific matter is in principle not a condition for authority to represent. In principle, decisions only have internal effect. 2 exceptions:
  1. In some cases, a decision itself can be regarded as an act of representation: decisions with direct external effect are decisions that can establish a link between the legal person and a third party without requiring a separate act of representation = the decision is directly addressed to the other party legal act: eg an offer / acceptance / granting of a proxy
  2. Is a valid decision a condition for legally binding the legal person = decision with indirect external effect. The decision then applies as a condition for the authority to represent: art. 2:44 paragraph 2 of the Dutch Civil Code (see above).

Example

Suppose the board concludes an agreement to purchase registered property without the statutory approval of the general meeting. Then the board is not authorized (see article 45, paragraph 1 in conjunction with 44, paragraph 2 of the Dutch Civil Code). If the publication requirements are met, that restriction can be invoked against the other party (Section 2: 6 of the Dutch Civil Code). So the association is not be bound to.
If there has been an approval decision, the board has acted in principle as competent. But suppose the decision of the general meeting is void: according to art. 2:16 paragraph 2 of the Dutch Civil Code, the nullity of this (indirect external) decision cannot be invoked against a third party if it is in good faith. It is unclear whether the resolution is invalid from the statutes. Normally the third party will not know why the decision of the general meeting was void and is in good faith. The association is then well bound to the agreement.

Video: Legal Representation (February 2020).

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