Lease of retail business premises in the Netherlands is governed by mandatory rules of law, that serve to protect the interests of the tenant and used to serve the stable development of the Dutch economy after the second world war. Although the justification for the strict rules and regulations no longer plays any role whatsoever, the rules still are in force today. This is a particularity of Dutch law landlords and tenants are confronted with on a day-to-day basis.

Under these mandatory rules a lease term should either be a maximum of two years, or a minimum total of ten years. If the parties fail to observe mandatory law, this can result in surprises. Where the lessor and the lesse agree to a fixed seven year term, the lessee can successfully force an extension of the lease term with three years (so in this example the total lease term will be ten years). After ten years, the contract will continue for an indefinite period of time; either party may then give notice of termination with a notice period of one year.

What is retail lease?

The court will have to establish whether a lease falls within the scope of the mandatory law on retail lease. From case law, it is known that retail lease includes the lease of shops, restaurants (including take-outs / take-aways), bars / cafés, and hotels, insofar as these businesses are established inside immovable property (real estate) and insofar as (part of) the premises of these businesses are accessible to the public. As this description is rather vague, there is a lot of case law about whether or not a certain agreement is a retail lease agreement. It has been decided, for instance, that the lease of petrol stations is retail lease in the sense of the law. The lease of cinema’s on the other hand, was not regarded as retail lease.

Lease term

The law provides for it, that the term for retail lease is either a maximum of two years, or a total of ten years (normally divided into two five year periods, but other combinations such as seven plus three years are also possible). With permission of the Cantonal Court, it is possible to deviate from these standard terms. If permission of the Cantonal Court is not obtained and the contract contains a non-standard term (for instance a total term of six years without prolongation), either party may invoke prolongation of the lease term up to a total of ten years.

Termination of a lease contract

In general, lease of business premises may only be terminated before the agreed end date in specific circumstances. This is considerably easier for the tenant than for the landlord. If the lessee does not agree with a termination initiated by the lessor, the lessor will always have to bring proceedings before the Cantonal Court in order to have the agreement terminated.

The lessee may terminate the agreement at the end of the first five year term or at the end of the ten year term by giving notice of termination at least one year before the end of the term.

The possibilities for the lessor are more restricted. First of all, a notice of termination without mentioning a specific ground for termination is to be held null and void. According to the law, possible grounds for termination by the lessor during the first five years of the agreed term are:

• business operations of the lessee are not "as benefits a good lessee"
• the lessor urgently needs the premises for his own use.

Most important example of the first ground for termination is non-payment of rent due; however, other examples do of course exist. From case law comes the example of a petrol station operator who frequently worked while under the influence of alcohol; this proved to be sufficient grounds for termination.

After the second five year term, the lessor may also ask for termination of the agreement on the grounds that his interest to end the agreement is more compelling than the interest of the lessee to continue the agreement. The interests of both parties will be weighed by the Cantonal Court.

Flexibility

The demands of the market are often more flexible than this relatively rigid system. For example, parties might want to agree to lease for no longer than seven years, without an automatic extension to ten years in total. And, especially in case of so-called "shop-in-shop" lease, the location of the premises might have to be (relatively) flexible as well.

Especially for these matters, the dutch legislature has introduced the facility of the so-called "derogational clauses" ("afwijkende bedingen"). When parties wish to agree to enter into a non-standard lease contract, they will have to ask the Cantonal Court for prior permission to enter into this agreement.

Certain clauses will never be allowed by the Cantonal Court. To give an example. Clauses that extend the possibilities of the lessor to terminate the agreement are not permitted under Dutch law.

The legal system in Holland seems ridgid at first sight. However, if one makes good use of the legal possibilities, it is no problem to get the desired result. Modern concepts, like the "shop-in-shop"-concept florish in The Netherlands.

Further information

For additional information please feel free to contact our Real Estate contact person. Your comments and questions are always welcome.

The attorneys of Kernkamp Advocaten are all admitted to the Rotterdam Bar and a member of The Netherlands Bar Association (the Dutch Bar), the public-law professional body for all attorneys in the Netherlands.

Netherlands attorneys may represent clients before all Courts of The Netherlands, before the European Courts of Justice and the Belenux Court of Justice, and are admitted to plea before all Courts of the Memberstates of the European Union (EC).

The team of attorneys at Kernkamp Advocaten a multi-talented and multi-faceted group. All of our attorneys speak several modern languages and deal with clients from abroad at a day-by-day basis. They combine local knowledge with experience in dealing with international cases. Since 1978 our attorneys have taken the lead in complex, high-profile cases that have lead to several landmark decisions of the Dutch Supreme Court and have been broadly discussed in the professional legal literature in The Netherlands.

If you need the expertise of one of our attorneys or have a question about our law firm, spend some time looking around this site, then call or e-mail us. Our team is ready to give your legal problems the attention they deserve.

Further information

For additional information please feel free to contact our contact person.

This article outlines the personal liability of directors of limited companies (B.V.’s) and public limited companies (N.V.’s) in the Netherlands.

Civil liability

If a director acts in a manner that may later turn out to be detrimental to the company, this does not automatically lead to personal liability. Taking calculated risks is, after all, part of running a business and being an entrepreneur, so the law allows directors a certain amount of discretion in fulfilling their responsibilities as a director.

Article 2:9 of the Dutch Civil Code requires directors to fulfil their duties towards the legal entity with due care and attention. Should they fail this duty of care, then the directors are personally liable for any damage caused to the company as a result thereof. The Dutch supreme court has ruled that such is the case if the directors have acted in a manner that constitutes serious misconduct. The Supreme Court holds that if the actions of the directors held liable would not have been taken by any other reasonably acting and experienced director in their stead, then this constitutes serious misconduct.

Examples of circumstances wherein directors have been held liable by their company are:

• Diverting the company’s funds for personal use;
• Fraudulent or illegal practices;
• Taking large and unsecured financial risks.

Article 2:9 only covers the directors’ personal liability towards the company itself. In certain circumstances, however, creditors of the company can also hold the directors separately liable for damage resulting form actions taken during their directorship, such as providing incorrect information or making promises on behalf of the company that they knew the company could not fulfil.

Liability during bankruptcy

Should a company be declared bankrupt, then the Ditch Civil Code provides the trustee in bankruptcy with the means to hold the company directors personally liable on the following grounds.

The law states that on the bankruptcy of a company limited by shares, each director shall be jointly and severally liable to the bankruptcy estate for the amount of the company’s debts that cannot be satisfied out of the liquidation of its assets if the management has manifestly performed its duties improperly and it may be assumed that these actions constituted an important cause of the bankruptcy.

The law automatically holds that the directors have performed their duties improperly in the following circumstances:

• The management has not filed the company’s accounts within 13 months of the end of the financial year;
• The books and accounts of the company have not been kept in accordance with good accounting practices and do not provide a true insight into the financial position of the company.

In such cases the burden of proof is shifted to the directors, who must then prove that their failure to file the accounts or administrate properly did not constitute an important cause of the bankruptcy. In such cases it is extremely difficult for the directors to avoid liability.

If the trustee is of the opinion that there are other grounds for personal liability the trustee can also hold the directors liable, though it is then up to the trustee to prove that there has been serious misconduct leading to bankruptcy. Should the trustee believe that persons who are not officially directors, but can be deemed to have run the company, are largely responsible for the bankruptcy, Dutch law provides that the trustee may hold these persons liable in the same manner as the actual company directors.

Fiscal liability

Directors of a Dutch company, such as a B.V. or an N.V., can also be held personally liable for unpaid tax debts of the company, in such cases where the directors have not reported the inability of the company to pay to the tax authorities. This form of liability regards taxes such as wage withholding tax and VAT ("BTW"), owed by the company to the Dutch Treasury. Once the tax authorities have made a director liable for overdue taxes imposed on company, it is up to the director to prove that the tax debt was left unpaid for reasons not attributable to him. Fiscal liability often occurs after bankruptcy, as the company is then no longer able to pay its own tax debts.

Further information

In most cases liability of legal entities appointed as directors also leads to liability of the persons behind that legal entity, even if both are foreign companies or persons living outside of The Netherlands. Should you be confronted with claims by third parties or a trustee in bankruptcy relating to the directorship of a company, it is important to seek legal advise at an early stage. Should you be considering liquidating a company in the Netherlands, it is of the utmost importance to identify any possible grounds for liability and to act accordingly before actual liquidation

Our firm has many years of experience in advising on matters regarding bankruptcies and civil liability of directors. We have also have inside expertise as court appointed liquidators at the court of Rotterdam, and can give you an immediate insight into the possible actions of your creditors or a trustee in case of bankruptcy.

Please feel free to contact Maria Bowmer, our Company and Corporate Law contact person, with any questions you may have.

When getting divorced, it is inevitable that parties consider the future of any children. But what are your legal rights and obligations as parents after a divorce?

Parental responsibility
In the Netherlands both parents have joint parental responsibility ("gezag") both during marriage or civil partnership and after a divorce or legal separation. Both parents have an equal say in matters regarding the upbringing and education of the children. Only in cases where a parent is deemed wholly unfit to fulfil their parental responsibilities, can the be legally joint legal custody by the courts.

Access to the children
Dutch law has recently introduced a new statute establishing that both parents have equal rights to access and the law now obliges the parent that the children reside with to promote contact between the children and the other parentafter the divorce. The child also now has its own right to access to their parents.

Access between a parent and a child can only be denied when that parent is deemed unfit to have access. Cases where access is totally denied by the courts are much rarer since the introduction of this legislation, which has been hailed as an inmprovement of (mainly) fathers rights.

Information disclosure
Parents are legally obliged to disclose relevant information and consult each other regarding the upbringing and education of the children. Even if the courts have temporarily denied access, the legal obligation to inform the other parent on the well being of the children remains in force, unless leave has been given by court order to withhold information.

Child maintenance
Child maintenance provides a financial contribution towards the upbringing and education of the children and is owed to the parent predominately taking care of the children. Child maintenance is mandatory until the child turns 18 years of age. After the child has reached their majority a further contribution may be owed if the child is still studying or cannot financially provide for itself. In such cases maintenance is owed until the child turns 21 years of age. What amount of child maintenance a parent is actually able to pay, is determined on the basis of their income.

If the parents have a joint custody agreement whereby the children spend roughly half their time with both parents, separate financial arrangements can be made to split the costs of living between both parents rather than setting a fixed amount of child maintenance.

Parenting plan
If minor children are involved when getting a divorce, Dutch law now requires that parties agree on a parenting plan, setting out the future roles of the parents after the divorce. The plan must at least include arrangements regarding parental access and financial provisions for the children. This plan must be filed at the same time as the divorce petition, so parents are now forced to consult with each other on future arrangements for the children at an early stage. If no parenting plan is filed, then the courts may refuse to hear the divorce petition. In some cases a court may also precribe mediation to see if parties can come to an agreed solution under the guidance of an impartial professional.

Our lawyers can help you to draft a parenting plan and can advise you with regards to your legal rights as a parent. We always bear in mind what is in the best interest of the children and will not litigate needlessly, but we will take all necessary legal measures if the other party will not see reason. We can also start injunction proceedings to obtain immediate access to the children, should access be denied in the course of the divorce proceedings.

For additional information please feel free to contact our Family Law Practice Group contact person. Your comments and questions are always welcome.

The following article answers some of the most frequently asked questions about maintenance (alimony) obligations in the Netherlands.

• What forms of maintenance obligations are there in The Netherlands?
• When is child maintenance owed?
• How is child maintenance determined?
• How is spousal maintenance determined?
• When does the obligation to pay spousal maintenance end?
• Is the payment obligation for spousal maintenance always limited to 12 years?
• My ex-partner is in arrears with their maintenance payments. What can I do?
• When are maintenance payments indexed?
• Can a court order for maintenance be revised at a later date?
• Is there any maintenance obligation when dissolving a registered partnership?
• Can I get any tax rebates on maintenance payments?

What forms of maintenance obligations are there in The Netherlands?

In The Netherlands there are two main maintenance obligations: child maintenance and spousal or partner maintenance. Child maintenance provides a financial contribution towards the upbringing and education of your children and is owed as soon as a legal bond is established between the parent and child. Spousal maintenance is a financial contribution owed to the spouse left financially less well off after a divorce or legal separation by the other spouse.

When is child maintenance owed?

The parent without custody of a child is legally obliged to pay a contribution towards the upbringing and education to the parent taking care of that child. Child maintenance is mandatory until the child turns 18 years of age. After the child has reached their majority a further contribution may be owed if the child is still studying or cannot financially provide for itself. In such cases maintenance is owed until the child turns 21 years of age. What amount of child maintenance a parent is actually able to pay is determined on the basis of their income.

How is child maintenance determined?

There are two ways in which child maintenance is determined. The first is that both parents, after consultation with their divorce lawyer, agree upon an amount and then include this in the divorce agreement. This constitutes a binding agreement and can, if necessary, be enforced should any default occur.

If the parents cannot agree upon an amount, the courts will determine an equitable maintenance obligation. The Dutch Courts follow the so-called TREMA guidelines when determining the amount of maintenance. Under these guidelines the total income of both parents during the marriage is determined and a percentage of this income is identified as the average cost for the upbringing of the children in that particular family. This percentage is deemed to be the amount necessary to house, feed, clothe and educate the children in a manner to which they are accustomed. When this amount has been determined, the courts determine which costs should be attributed to the non-custodial parent according to their means.

If the parents have a joint custody agreement whereby the children spend roughly half their time with both parents, separate financial arrangements can be made to split the costs of living between both parents rather than setting a fixed amount of child maintenance. These arrangements must be included in a divorce agreement or a written parenting plan.

How is spousal maintenance determined?

Spousal maintenance can be agreed between parties in the same manner as child maintenance (see above). Parties can also agree to waive their right to future maintenance, for example because both parties have enough income to support themselves.

If parties cannot agree on an amount, the courts will determine an equitable amount of spousal maintenance. Spousal maintenance is determined according to the so-called TREMA guidelines by comparing the financial needs of the spouse requesting maintenance and the financial capacity of the defending party to contribute to these needs. The financial needs of the spouse with less income is derived from the total income enjoyed by parties during the marriage. The guidelines assume that both parties must be able to continue this standard of living after the divorce. If the defending spouse does not have the financial means to support the other spouse in this standard of living, the maintenance obligation is adjusted accordingly, sometimes resulting in no maintenance being owed at all. The final amount determined by the courts is always a fine balance between the needs of one spouse and the means of the other.

When does the obligation to pay spousal maintenance end?

If the marriage has lasted less than five years and has remained childless, then the maximum maintenace obligation is equal to the amount of time parties were married. For example, if parties were maried for three years and six months and remained childless, then the maintenance obligation ends three years and six months after the divorce is finalised.
For marriages that have lasted longer than five years or shorter marriages from which children are born, the obligation remains in force for a maximum of 12 years.

Should the spouse receiving maintenance remarry or start co-habiting in a stable relationship, then any maintenance obligation ceases immediately from the moment of co-habitation or re-marriage. The obligation to pay maintenance may also cease prematurely if the spouse receiving maintenance starts earning enough income to support themselves and equal their standard of living during the marital period.

Is the payment obligation for spousal maintenance always limited to 12 years?

No. There are three exceptions to this rule:

• Parties can agree upon a longer period of maintenance.
• The law limiting the maintenance period to 12 years was first introduced on the 1st of July 1994. If parties were divorced before this date, then there is no limitation to the maintenance period. Maintenance is therefore owed indefinitely until a court order is obtained releasing the party paying maintenance from their obligation. If you have been paying maintenance to an ex-partner living in the Netherlands for over 15 years, then it is advisable to consult with one of our lawyers about the possibilities of legal action to annul any further maintenance obligation.
• The Dutch Civil Code contains a single exception to the rule in certain cases. Under certain circumstances, the spouse receiving maintenance can request an extension on the basis that they would encounter serious financial problems should maintenance cease. This could, for example, be the case if the spouse receiving maintenance has a serious disability and is therefore not able to support themselves financially in the future. A request for an extension of the maintenance period must be submitted to a competent court within three months after the maintenance period has expired. If no request is filed within this period, then no further claim for maintenance can be made.

My ex-partner is in arrears with their maintenance payments. What can I do?

The international recovery of maintenance is governed by International treaties. If the spouse owing maintenance lives in one of the member states, then you can take steps to recover the arrears via a government agency. In The Netherlands the LBIO is the competent authority and will recover maintenance within The Netherlands. If the spouse receiving (child or spousal) maintenance lives in the Netherlands and the other party lives in another treaty country, then the LBIO will recover the maintenance owed via one of its sister organisations.

To enlist the services of the LBIO, maintenance must first have been awarded by court order. If a maintenance agreement has not been ratified by the competent courts, then the LBIO cannot help with the recovery until you have obtained a court order. Recovery by the LBIO is free of charge for the party to whom maintenance is owing. For more information on this subject, please consult the LBIO website.

When are maintenance payments indexed?

Unless parties have expressly agreed otherwise, by law Dutch maintenance obligations are indexed for inflation on the 1st of January of each year. For more information on the current index percentages, please consult the LBIO website.

Can a court order for maintenance be revised at a later date?

Yes. Both written agreements and court orders regarding maintenance can be revised by the courts at a later date. The courts can revise previous maintenance obligations on the grounds of a significant change in the financial circumstances of one or both of the parties. An example would be unemployment of the party obliged to pay maintenance. Revision can also be sought if the original decision was based on incorrect financial information and is therefore unsound.

Is there any maintenance obligation when dissolving a registered partnership?

Yes. In the Netherlands, the law is the same for both marriages and registered civil partnerships.

Can I get any tax rebates on maintenance payments?

If you pay tax in the Netherlands, you can obtain a small fixed rebate for child maintenance if you pay more than a certain amount per quarter. Maintenance payments to an ex-partner are fully deductable from your Income Tax. For more information, please consult the Dutch Tax Authorities website.

If your questions have not been answered or you wish for additional information on the above, please feel free to contact our Family Law Practice Group contact person.

The Netherlands is currently one of the few countries in the world that has an absolute community of property regime upon marriage. Unless parties have expressly agreed otherwise, all property, whether acquired  before or after marriage, automatically becomes communally owned by both spouses. Upon divorce both parties are entitled to 50% of the marital property. Parties may deviate from this principle when agreeing a divorce settlement. However, if the divorce is contested, a court will hold fast to the equal division of property.

One of the main arguments in favour of this system is that (in theory at least) it is easy to divide the marital property upon divorce and both parties always receive an equal share. The system is transparent, but in some cases can lead to unequitable results. For example, if one of the spouses contracts certain debts without the knowledge of the other spouse, the other is a still liable for
50 % of the debt after divorce even though they may never have benefitted from the original debts.

The only way to avoid marrying in community of property in The Netherlands is to conclude a prenuptial agreement before a notary public. If, for example, one of the spouses owns their own business, this will protect the other spouse from automatically becoming liable for any debts incurred through the business. Postnuptial agreements can also be concluded after marriage, but must be first approved by the courts before coming into force. A postnuptial agreement must not prejudice the rights of the already existing communal creditors.

The most common form of prenuptial agreement involves creating only a partial community of property for certain goods, such as the marital home and contents thereof. All other property is deemed to be privately owned by the spouse that acquired said property. Some prenuptial agreements exclude any communal property, but may or may not contain certain clauses to mitigate the effects of this for the spouse with the lesser income or property. The agreement may either contain an annual setoff clause,  requiring the spouses to compensate each other at the end of each year, or there may be a setoff clause requiring the spouses to compensate each other upon divorce. In both cases, conflicts can arise during the divorce proceedings regarding which income or property must be involved in the annual or final settlement.

Advising both national and foreign clients concerning the impact of divorce forms part of our daily practice. We can advise you on the consequences of your marital regime and the status of any prenuptial agreement. We specalise in advising business owners, entrepreneurs and professionals about the  consequences of a divorce and minimising the effects of such on their business.

For additional information please feel free to contact our Family Law Practice Group contact person.

Filing for a divorce is a stressful business, but getting divorced in a foreign country can be even more confusing and can lead to some unforeseen problems. Learn more about what is and isn’t possible when getting divorced in the Netherlands.

If you are a foreign national, you can file for a divorce in The Netherlands in any the following circumstances, irrespective of your  nationality or the country where you were married:

• If both parties reside in The Netherlands;
• If The Netherlands was the last place that parties had a marital home and one of you still resides in the Netherlands;
• If the defending party resides in The Netherlands;
• If the person filing for a divorce has been residing in The Netherlands for at least one year prior to their request.

The Dutch courts do not have jurisdiction in the following cases:

• You were married in the Netherlands, but neither party now resides here;
• One of the parties involved  is  a Dutch national but neither party now resides here.

Divorce can be either petitioned jointly by both spouses or individually by one of the spouses. In both cases a lawyer is mandatory for filing the divorce petition. The only ground for divorce in The Netherlands is that the marriage has irretrievably broken down. The Dutch courts no longer actually demand proof of such. If one of the parties claims that the marriage has irretrievably broken down, the courts assume that such is the case and will hear the divorce.

If you are both in agreement about the divorce and its consequences a joint petition is the easiest and quickest option. It is usual that parties draft a divorce agreement before filing the divorce petition, in which they arrange matters such as the division of the marital property, spousal or child maintenance and future childcare. The courts will typically grant the divorce as a formality within six to eight weeks of submission of the joint petition for divorce.

If you cannot agree on the consequences of the divorce, it may be necessary to file a petition individually. If one or both parties are foreign nationals, there may, however, be certain complications. For example, if you were married in another country, a different legal system may apply to the division of the marital property. The Dutch courts may then have to apply foreign law when deciding how to divide any property. Also, if you do not reside in the Netherlands, the Dutch courts may not have jurisdiction to hear certain aspects of the case, such as child maintenance.

Advising both national and foreign clients concerning the impact of divorce forms part of our daily practice. We can advise you which aspects of your divorce should or shouldn’t be brought before the Dutch courts and we can take action quickly should injunction proceedings be necessary to secure your rights.

For additional information please contact us. Your comments and questions are always welcome. Please feel free to contact our Family Law Practice Group contact person.

Dutch Commercial property leases are regulated by statute law. Different regimes apply to each category of property lease. As a general rule, the primary use of the premises determines the applicable legal regime.

Retail Business Premises

This category of premises mainly consists of shops, hotels, bars and restaurants. The rule of thumb being that the premises is open to the public. Rental agreements for this category must either be concluded for less than two years, or for at least five years. For lease agreements of less than two years duration no further mandatory rules apply. For agreements of longer duration, the lessee has the option to prolong the agreement to at least ten years. These Retail Business rental agreements do not terminate automatically upon lapse of their duration, but must be terminated by giving notice. Notice is subject to strict formalities:

• at least one year's notice by registered letter or bailiff's writ
• if given by lessor, the grounds for the notice must be specified in the notice.

If notice is given by the lessor, and the lessee does not agree with the termination, the lessor must apply to the court for a termination order. Notice by lessor after the first five year term is only legally possible in case of misconduct of the lessee or an urgent need, on the part of lessor, to use the premises himself for retail business purposes. In case of notice by the lessor after the ten year term (or at a later moment), the court must balance the parties' interests, but must allow action for termination if one or more of a limited number of grounds is present. When the matter is brought before the court, the agreement only ends after the court has given its final judgment.

The law provides that the lessee who transfers his business to another party, may ask the court to substitute the new owner in his place as a lessee. The lessor is not able to prevent this from happening, as long as the new lessee is financially capable of fulfilling their obligations under the lease.

Termination of Retail Business leases

Retail Business leases can be terminated either by agreement, judicial dissolution (in cases of default), the lessee's decision to give notice, or a court decision after the lessor's notice based on one of the (limited) grounds listed in the Dutch Civil Code.

Offices and other Business Premises

In case of offices, factories and other buildings not covered by specific rules, the parties are free to agree on the terms of the contract. For termination of the lease by the lessor, it is necessary that the lessor summons the lessee to vacate the premises, by registered letter with receipt, or by bailiff's writ. Thereafter, the lessee enjoys a two-month protection period during which it may decide to submit a request for prolongation of the lease to the cantonal court. The court will base its decision on an assessment of the interests of both parties. In accordance with the legislation the court can grant the request for prolongation for a maximum of three one-year periods.

Termination of Office leases

Office leases end automatically. If the lessee does not use the described protective prolongation period to extend the lease, the lessor may commence eviction proceedings.

General

The Dutch Civil Code contains a number of provisions generally applicable to rental agreements, of which the most important are:

• The Lessor is responsible for damage resulting from visible or hidden defects in property.
• The lessee may sublet in whole or in part, if reasonable objections of the lessor are not anticipated.
• Major maintenance and repairs are for the account of the lessor.
• Minor repairs and day-to-day maintenance are for the account of the lessee.

The general provisions mentioned above do not form part of compulsory law, and are frequently set aside in individual contracts. Lessors often make use of general conditions, which deviate from the Dutch Civil Code. It is therefore advisable to seek advice on the contract and the applicable general conditions from one of our lawyers before taking action.

Further information
For additional information please feel free to contact our Real Estate contact person. Your comments and questions are always welcome.

In the absence of mutual agreement or just cause the employer may generally not terminate the contract of employment without a permit, to be obtained from the Dutch Dismissal Authority. An alternative is to ask the competent Court to dissolve the employment contract. The Court may order the employer to pay compensation for the redundancy. The standard calculation of redundancy packages as used by the Dutch courts also often forms the basis of voluntary redundancy payment schemes.

When is a redundancy payment due?

There is no legally binding statutory redundancy payment scheme in The Netherlands. The employer must, however, make a redundancy payment if:

• The employer has filed a petition to dissolve the employment contract.
• The Court grants the peitition and orders the employer to pay compensation.
• The employer decides not to withdraw the petition and therefore accepts the award made by the Court on dissolution of the employment contract.

What compensation can be expected?

Statute provides that it is up to the Court to determine the amount of a fair and adequate redundancy payment. The judge will have to weigh all circumstances of the case. In the past this has lead to various approaches by different local courts, which sometimes had negative effects, such as surprise decisions and a tendency by clever lawyers towards forum shopping, for better results. To avoid that and to have better guidance the joint Cantonal Courts of the Netherlands created the so called Cantonal Court Formula as a guideline, which since then is most usually applied to determine the level of compensation an employer must pay to an employee that is laid off. Although this is non-binding quasi legislation, the Cantonal Court Formula is now broadly used by all Courts, and also by employers and employees to negotiate a termination agreement with severance payment.

The Dutch Cantonal Court Formula

The Cantonal Court Formula fixes the redundancy payment at a number of months salary. The exact severance payment is determined by multiplying three factors: A, B and C, where:

• The A-factor is the adjusted number of years of service of the employee. The years of service up to age 35 will count as 0.5, the years of service between 35 and 45 years of age will count as 1, the years of service between ages 45 and 55 will count as 1.5 and the years of service above age 55 will count as 2.
• The B-factor is the corrected monthly gross salary, which includes fixed components like holiday allowance.
• The C-factor is a correction factor that is usually 1.0 (neutral dissolution), but may be fixed at a higher or lower level by the Court in order to come to a fair and adequate severance payment. Behaviour of employer and eployee, the job market position of the employee and the financial position of the employer may all play a role, which makes the C-factor the least certain factor of the formula.

What if I need to down size my company?

As no statutory provisions exist regarding the calculation of redundancy payments in case of dismissals, it is up to the parties involved to negotiate a redundancy scheme. This can be done at an individual level in case of small companies and incidental dismissals. Dependent on the circumstances this can be arranged within weeks, especially where a fair and balanced offer is made to the employees involved. If the company is in serious financial trouble, it may be advisable to obtain a permit to dismiss the employees involved, rather than following dissolution proceedings in court. We can advise you on the best course of action in your individual circumstances

Collective dismissals

Redundancy schemes should be negotiated with trade unions where required by the applicable rules and regulations, usually in case of collective dismissals. The Cantonal Court Formula often serves as a basis for negotiations, but results can vary significantly as other factors like the available budget play a role too. In case of collective dismissals the parties usually negotiate a “Social Plan” containing a redundancy scheme. A social plan specifies the agreed redundancy regulations that should be followed in case of dismissals and procedures that will assist redundant employees in finding new jobs.

Further information

It is advisable to consult us before taking any major decision with regard to terminating employment contracts for Dutch employees. For further information regarding Dutch Employment Law, please contact our contact person of the Labour and Employment Law Practice Group.

Kernkamp Advocaten is a mid-size Netherlands Law Firm established in 1978. The firms attorneys may represent clients before all Dutch Courts, before the European Courts of Justice and the Belenux Court of Justice, and are admitted to plea before all Courts of the Memberstates of the Common Market (EEC).

Kernkamp Advocaten offers a range of legal services tuned to the economic activities in The Netherlands. Our office is located in Rotterdam, one of the largest ports of the world. The firm specialises in transport, commercial and company law. The practice includes collision, salvage, law on road transport, corporate finance, international trade contracts, real estate, employment, finance, security arrangements and insurance law. Also, the specific issues of European law are part of our daily work.

Our philosophy

Fundamental to the firm is a commitment to provide a high quality of personalised service with an excellent standard of professionalism. Our lawyers bring a wealth of local knowledge and practical experience to all matters on which they advise. The short lines of communication are beneficial to the working environment and the performance of our professionals. On the basis of sound experience, know-how and permanent professional education of all its legal professionals, the firm is able to assist its clients efficiently. The firm has longstanding working relationships with other professional advisors for tax, notarial, accounting, trustee and company management services with top qualifications in the Netherlands and abroad.