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    Managing a joint venture: still a joint responsibility

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  • When setting up a joint venture company, the governance thereof is one of the key aspects to be negotiated between the joint venture partners. Typically, each of the joint venture partners wishes to have its own representatives on the management board and the supervisory board.

    Since the introduction of the Flex BV Act in October 2012, the manner to implement such joint representation structure has been simplified for BVs. Instead of having a binding nomination mechanism in the articles of association of the joint venture company, combined with a voting agreement in the joint venture agreement, it is now possible to simply authorize the holder of certain shares to appoint, suspend and dismiss board members. For instance, such authority could in respect of certain board members be attributed to joint venture partner A, as holder of shares of a specific class, and in respect of the remainder of the board members to joint venture partner B, as the holder of another class of shares. 

    It should be noted that the introduction of this simplified mechanism does not imply that having 'own' representatives on the management or supervisory board, makes that these representatives are permitted to act in the interest of the joint venture partner they represent only. The management board, as well as the supervisory board, has the responsibility to act in the interest of the company and its business as a whole, taking into account the interests of all stakeholders. This principle of Dutch corporate law has not been set aside by introducing the ability to appoint 'own' representatives.

    Furthermore, having 'own' representatives on a board does not imply that the general principle of joint responsibility is abolished. Tasks and duties can be divided between the representatives of the joint venture partners and powers can be delegated amongst them, but not on an exclusive basis. In other words, the board as a whole remains responsible for the performance of its duties and each of the members can be held liable for improper performance, even if the liability does not relate to its tasks and duties. The latter may only be different if the representative proves that the improper performance is not attributable to him and that he was not negligent in acting to prevent the consequences thereof.

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