Enterprise Chamber inquiry proceedings explored, issue 2: Who is authorised to submit an inquiry request on behalf of a foundation?

Introduction

Since 1994, the Enterprise Chamber has also been handling inquiry requests relating to foundations. However, this does not apply to all foundations, but only to foundations that maintain a business for which a works council is required by law.

In the case of a private limited company or public limited company, there are often several bodies and stakeholders involved that may be authorised to submit an inquiry request. In the case of foundations, this circle is usually much more limited. After all, a foundation often consists solely of a board of directors.

In this blog, we will address the question: who is authorised to submit an inquiry request to the Enterprise Chamber in the case of a foundation?

1. Conflicts within a foundation

Although a foundation usually has a limited governance structure, internal conflicts can certainly arise. In practice, disputes often arise within the board or, if present, the supervisory board. In addition, these bodies may disagree on policy or the course of events.

But that is not all. Consider, for example, conflicts between the board and the works council, or between the board and stakeholder representatives, as is the case with foundations active in the healthcare sector.

A complicating factor is that a foundation does not have a general meeting or shareholders' meeting that can intervene quickly in internal disputes, for example by suspending or dismissing officers and appointing new ones. In the event of conflicts, the foundation and its bodies are therefore largely dependent on themselves to find a solution – and that is often easier said than done. Proceedings before the Enterprise Chamber may offer a solution, but a foundation must meet a number of requirements.

2. Requirements: (i) the joint maintenance of a business and (ii) a mandatory works council

First of all, it must be determined whether the foundation maintains a business. Please note: the law explicitly refers to 'co-maintaining'. This means that a foundation can also meet this requirement in conjunction with another legal entity. An example is the Meavita ruling, in which the group consisted of several legal entities, including foundations.[1]

To determine when an entity is considered an 'enterprise', the legislator has adopted the definition from the Wet op de ondernemingsraden (WOR): 'an organisation operating as an independent entity in society in which work is performed under an employment contract'. Profit-making is therefore not a requirement. Non-profit institutions, such as healthcare or educational institutions, can also (co-)maintain a business, provided that they employ staff and operate as independent organisations.

It must then be determined whether the foundation maintains a business for which a works council is mandatory. The legislator deliberately chose to limit the scope of the inquiry procedure. A general extension to all foundations was considered too far-reaching and impractical, given the large number of organisations that are not commercial in nature. Furthermore, the legislator wanted to prevent frivolous inquiry requests and legal uncertainty.

By aligning with the WOR criterion – an undertaking that generally employs at least fifty people – it is ensured that only organisations of a certain size and commercial structure are subject to the inquiry right. See Article 2(1) of the WOR. The legislator considered this appropriate because the interests of employees and the need for continuity in such organisations are comparable to those in commercial business. Assessment against the principles of good corporate governance is therefore justified.

3. Who can submit an inquiry request on behalf of a foundation?

At first glance, the closed structure of a foundation seems to suggest that only a very limited group is authorised to submit an inquiry request. In reality, this group is larger than is often thought.

First of all, the foundation itself can submit a request (Section 2:346(1)(e) of the Dutch Civil Code). This may be the case, for example, in the event of a deadlock between the board and the supervisory board, (impossible) decision-making or because officials within the board or the supervisory board are unable to get along with each other.

Important to know: even a part of the board can represent the foundation in submitting a request for an inquiry, even without a legally valid board decision.[2] The condition is that this part of the board has the power of representation. A director who is only allowed to represent the foundation jointly with another director is therefore inadmissible if he submits the request independently.[3] This is because submitting a request is considered an act of representation.

A board decision is therefore not required. Even if the articles of association prescribe a decision, this does not, in principle, affect the power of representation. This also applies to other internal requirements. Approval requirements of, for example, the supervisory board do not prevent such a request (see Section 2:292(3) of the Dutch Civil Code).

It is interesting to note that other directors who disagree with the request may also be authorised to withdraw the request on behalf of the foundation. However, the Enterprise Chamber may choose to consider the request anyway, precisely because such contradictory actions may be illustrative of the situation within the legal entity. See, for example, the Machinefabriek Heerlen decision.[4]

The Supervisory Board may also submit a request for an inquiry (Section 2:346(2) of the Dutch Civil Code). The main difference with the management board is that a majority of the Supervisory Board must agree to a decision to submit the request.[5] This is because, unlike directors, Supervisory Board members are not independently authorised to represent the foundation.

It is important to note that paragraph 2 of Article 2:346 of the Dutch Civil Code must be interpreted broadly. It concerns any supervisory body established by or pursuant to the articles of association. A body that does not explicitly bear the label 'Supervisory Board' may therefore also fall under this provision and be authorised to submit a request. Examples include the advisory board.

In addition, the foundation may extend the power to submit a request for an inquiry to other persons or entities in its articles of association. This may also be laid down contractually between the foundation and third parties (Section 2:346(1)(f) of the Dutch Civil Code). This often happens in the case of founders who are no longer directors, or in the case of foundations that are heavily dependent on large donors or subsidies. For these parties, it can be an important guarantee that they can intervene if funds are not used correctly or if the foundation's operations come to a standstill. This can also be in the interest of the foundation: in the event of a complete deadlock within the organisation, an external party can intervene.

Furthermore, a standard list of authorised parties applies, similar to private limited companies and public limited companies:

• the trustee, if the foundation is in bankruptcy (Section 2:346(3) of the Civil Code).
• an employees' organisation (Section 2:347 of the Dutch Civil Code); and
• the Advocate General at the Amsterdam Court of Appeal (Section 2:345(2) of the Dutch Civil Code), if there are reasons of public interest.

In addition, there is specific legislation for foundations in certain sectors, such as pension funds. In those cases, the relevant law, for example Section 219 of the Pensioenwet, regulates who is authorised to submit a request for an inquiry.

And what about other stakeholders? For the time being, they are left out in the cold. The works council also has no authority to submit a request for an inquiry (unless that right is explicitly granted in the articles of association). However, this does not mean that no other means are available, such as the dismissal of a director or supervisory board member on the basis of Section 2:298 of the Dutch Civil Code.

4. Conclusion

In a foundation, various bodies and individuals can submit a request for an inquiry, especially if the group of persons entitled to an inquiry has been expanded by the articles of association or contract. Nevertheless, the number of requests remains low compared to, for example, private limited companies and public limited companies. This is partly due to (i) the absence of shareholders and (ii) the limited group of foundations that actually fall within the scope of the right of inquiry. Certainly, even without the statutory or contractual extension, many of those involved will have no choice but to watch from the sidelines when internal problems arise, except for a few other legal options. 

[1] OK 14 april 2010, JOR 2010/185, r.o. 3.4 (Meavita). 

[2] Kamerstukken II 2010/11, 32887, 3, p. 16 en 29; OK 10 oktober 2019, ECLI:NL:GHAMS:2019:3730, r.o. 3.8 (Charterhaven Oosterdok).

[3] OK 17 december 2024, ECLI:NL:GHAMS:2024:3438, r.o. 3.2 e.v.

[4] OK 4 april 2018, ECLI:NL:GHAMS:2018:1088, r.o. 3.3 (Machinefabriek Heerlen). 

[5] Handelingen II 2011/12, 32887, 71, p. 48.