Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55The House of Representatives of the Netherlands has asked the government to work out a new legal form: the stewardship company. This legal form should encourage corporate social responsibility by shifting control of the company from shareholders to so-called stewards. What characterises a stewardship company?
In a traditional company, the board determines day-to-day business strategy and policy. However, the ultimate control lies with the shareholders. They make the decisions, such as changing the articles of association or the allocation of profits, and can appoint and dismiss directors.
A stewardship company differs from a traditional company because here it is not the shareholders who have the voting rights, but the stewards. Thus, shareholders cannot change a company’s mission and values. This is exactly what can make this model attractive to certain companies. Companies with a social purpose or family businesses could make good use of the stewardship model.
The core of the model is to safeguard a company’s mission and values in the longer term. This is done by the stewards, who must ensure that a company’s mission and values are not subordinated to the short-term interests of shareholders. To raise equity, the stewardship company can issue shares but limit dividends to a reasonable return on the capital provided. Profits accrue to the company and the stewards decide on its allocation. In doing so, the stewardship company is in line with the trend towards more socially responsible and sustainable business.
The stewardship model is ideally suited for companies with goals other than profit maximisation. Take US outdoor brand Patagonia. Patagonia’s founder sold the company to two not-for-profit foundations in 2022, with the aim of using the profits entirely to fight climate change. Dutch construction group TBI also uses a stewardship model and has a foundation as a shareholder that distributes part of its profits to charities. In addition, family businesses could use the model to ensure that the identity of the company is not lost in the long term.
Currently, it is only possible to set up a stewardship model through roundabout ways. Entrepreneurs have to use structures with different private limited companies and foundations. This creates relatively high costs. Not only for setting up the legal entities, but also the tax system does not fit well with these structures. This is because the structures require the transfer of shares between the legal entities, but this is subject to tax. The introduction of the stewardship company can remove this time-consuming process and the additional costs. The threshold for a company to pursue other purposes besides profit can thus be removed.
What the stewardship company will look like is still unclear. This is because the government must develop the model into a bill. This bill will have to regulate, among other things: the conditions for setting up a stewardship company, the method of appointment of the stewards and the requirements they must meet. We can also imagine that the law will require the articles of association to include a provision on the appropriation of profits for the benefit of the company. The latter is important because the stewardship company should ensure the very continuity of the company’s objective. Our specialists will keep you updated on developments regarding this new company form.
Would you like to know more about the stewardship company and other forms of corporate social responsibility? Or do you have other questions about corporate law and corporate litigation? Our specialists will be happy to assist you. Please contact us:
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