How a commanditaire vennootschap (limited partnership, CV) works

What is a commanditaire vennootschap?

A commanditaire vennootschap consists of at least 2 people. The owners of a CV are called vennoten in Dutch. 

In a CV, there are 2 types of vennoot:

• Beherend vennoten (managing partners) run the business on a day-to-day basis. These partners are liable for debts and obligations the CV incurs with their private assets.
• Commanditaire or stille vennoten (silent or limited partners) are the investors in the company. They are not actively involved in running the business and only run the risk of losing any money they have invested in the company. They receive a share of the profits.

 

Setting up a commanditaire vennootschap

The managing partner sets up the CV and registers the company in the KVK Business Register. You do not have to register who the silent partners are. You only have to state how many limited partners are taking part in the CV and the amount of equity or goods (equipment, for example) they bring to the company.

Ultimate Beneficial Owner (UBO)

When you set up a CV, you must report your company's UBOs to KVK for inclusion in the Dutch UBO register. UBO’s are the ultimate beneficial owners of an organisation. Or someone who takes the decisions in the organisation. A CV can have one or more UBOs. For example, persons who own 25% or more of the CV. 

Liability and debts

Sometimes, business is not as good as expected. The question then arises who is liable. In a commanditaire vennootschap, the managing partners are liable for the debts of the cv. Which of the partners entered into that debt does not matter.

Personally liable

If a debt is called in, you must pay it from the CV's assets. If this is not enough, each partner can also be held liable for the entire amount privately. This means you run the risk of losing your private possessions, such as your savings, car, or house. Did a partner fail to comply with the agreements in the CV contract or act irresponsibly? This is not relevant to a creditor. You must resolve any such issues with your co-partner after paying the debt.

Liability when joining later

A managing partner who joins the CV later is automatically liable for debts incurred before they entered the partnership. Are you joining an existing limited partnership? Then check the financial situation first by reading all the accounts and financial reports. Managing partners who join later can also agree on the distribution of any existing debts of the limited partnership. If a claim then arises, the other partners will reimburse the difference to the new partner.

If you leave as managing partner, you remain liable for debts incurred while you were a partner in the CV. The partners can make agreements on the division and compensation of the debts.

Silent partner

A limited partner is not liable for debts of the CV. They only run a risk with money they invest. A silent partner may act as a managing partner. If they do, they then also become liable.

Private debts

As a managing partner, you are liable with your private assets for the CV's debts. If the limited partnership goes bankrupt, you go bankrupt too. The silent partner only loses their investment. Unless they behave as a managing partner, for example by signing contracts or negotiating on behalf of the CV. In that case, the silent partner is also privately liable.

Does a managing partner have private debts? Their creditors cannot claim the business assets of the limited partnership or the private assets of the other partners. However, a partner with private debts may face debt restructuring or personal bankruptcy. This has consequences for the CV, as the partner is then no longer allowed to make decisions on certain business activities.  

Drawing up a CV contract

All partners may act on behalf of the limited partnership. All managing partners can be held liable for the consequences of any activities, such as signing a contract. You can set out other agreements on liability in a CV contract. You can draw up such a contract yourself or have it done by a lawyer or advisor. It is not mandatory to draft a contract when setting up a limited partnership, but putting your agreements in writing can be useful.

For example, a CV contract might include arrangements about:

• Collaboration: who contributes which equity? And how will you divide the profits?
• Life insurance: if you take out mutual life insurance, the CV can continue in the event of the death of one of the partners.
• Client portfolio: what happens when the CV is ended?
• How much money will the silent partner invest?

Signing authority of the vennoten

If you are authorised to sign, you may sign contracts or perform certain legal acts on behalf of the CV. Reporting a change in the KVK Business Register, for example. If there is no contract, then all partners are fully authorised to sign. With a CV contract, you can limit signing authority. For instance, partners must sign together above a certain amount. You can even agree that one or more of the partners is not authorised to sign, while still remaining liable.

Agreements on signing authority can be recorded in the Business Register. This means they are public so your clients will also know who is allowed to act on behalf of the company.

Power of attorney

Sometimes it is convenient to have someone who can sign on behalf of the partners, for example, a staff member. You arrange this with a power of attorney. In the power of attorney, you can also specify what the authorised representative may or may not do. Register the authorised representative in the KVK Business Register. This is not mandatory, but it gives your clients clarity about who is allowed to sign.

Staff

A limited partnership can hire staff. The CV is the employer and must pay social contributions and payroll taxes for the employees. Are you hiring staff for the first time? If so, you must register as an employer with the Netherlands Tax Administration (Belastingdienst). 

Changing or ending a CV

You can change the legal form of your company. For example, you can convert a CV into a BV (private limited company) or continue as an eenmanszaak (sole proprietorship).

You might even want to end the business altogether at some point. When you end a CV, you must first dissolve it and then deregister from the KVK Business Register. You must also settle with the Tax Administration. Are there things on your balance sheet worth more than the book value? Or do you sell the business for a higher value than is shown in the books? Then you have to pay tax on the discontinuation profit. Read more about what you need to do when you out when you end your.

A CV or a BV?

Are you unsure about choosing between a CV and a BV? Then list the differences and decide what is important to you and your potential business partner(s). This comparison between an eenmanszaak and a BV is a useful tool. When choosing between a CV and a BV, the structure in which you pay the least tax is usually the deciding factor. A CV is more attractive if you expect your profits to be low. A BV is often only favourable when profits are circa €100,000 or more per managing partner.

See also the decision tool for choosing a legal structure that suits your company.