DEFINITION of 'N.V. (NV or Naamloze Vennootschap)'
NV is an acronym for the Dutch phrase Naamloze Vennootschap, a public company. The N.V. or NV suffix is used in the Netherlands, Belgium, Suriname, the Dutch West Indies, Indonesia, Curacao, St. Maarten and Aruba. Literally, "naamloze vennootschap" means "nameless venture," since the shareholders in a public company can remain anonymous.
BREAKING DOWN 'N.V. (NV or Naamloze Vennootschap)'
In an NV, two or more shareholders invest capital. Two spouses may incorporate an NV, provided the memorandum of association does not conflict with the matrimonial regime. The company cannot be named after any of its partners.
Three or more directors are required when setting up an NV. However, if the company is incorporated by two founders or has only two shareholders, the board may have two members. Because the NV is a full legal entity, a financial plan is drawn up. If cash contributions are made, a special account is opened in the company’s name during the set-up phase. In the case of contributions in kind, an auditor’s report is necessary.
Setting Up an NV
An official deed is drawn up before a notary. Within 15 days of creation, a copy of the articles of incorporation is filed at the registry. The registrar arranges publication in the Belgian Official Gazette. The company enrolls in the register of legal entities kept at the commercial court registry. The registry assigns the company an enterprise number. If the company wants to engage in commercial activities, it registers as a trader at the Crossroads Bank for Enterprises via a business counter.
Pros and Cons of an NV
An NV is often used in protecting the identity of its investors. Because partner/shareholder liability is limited to individual contributions, personal assets are not at risk. However, the decision-making process is more complicated and accounting obligations more substantial than with other business structures. Because shares are registered until fully paid up, no outlay of cash is required. However, a high amount of starting capital must be fully invested from the time the company is incorporated. Furthermore, each share corresponding to a cash contribution must be at least one-fourth paid up.
Conversion of registered securities to bearer securities is authorized by the articles of association. Although bearer shares are transferrable, registered shares are transferrable but may be limited. For example, an approval clause in the articles of incorporation requires approval of share transfers by a company body, typically management. A preemption clause requires shareholders giving other shareholders first rights to purchase shares. An alienability clause means share transfers are limited in time and must be justified by the company’s interests.