An informal group practice contradicts — bank financing

When a group's day-to-day practice runs ahead of what the articles of association actually permit, you are standing at a fork: ratify what has already been done, bring the articles into line with practice going forward, or tell the lender before a review finds it first. Waiting does not remove any of the three branches, it only removes your choice of timing.

This is a corporate law and governance question the moment bank financing sits alongside it, because the mismatch no longer stays internal. A facility agreement typically restates, at signing and often again at each drawdown, that the borrower or guarantor acted within its constitutional documents. An informal practice that departs from the articles puts that restatement at risk every time it repeats.

What happens if you do nothing

Left alone, the gap surfaces at a point you do not control: the next accounts approval, an auditor's management letter, a shareholder query, or a bank review ahead of a repeat drawdown. This is the same mechanism by which a late filing of the annual accounts becomes visible only once someone checks the register. Once a third party finds the mismatch, you are answering to their timetable, not setting your own.

Directors who acted under the informal practice also carry personal exposure if the departure caused loss to the company or to a creditor. That exposure sits alongside the governance question, not instead of it, and it does not disappear once the articles are corrected.

The routes

Route	What it takes	Time	Cost driver	What it gives you
Ratify internally	A resolution by the body the articles reserve for the act, adopted now, covering what was already done	Typically weeks, driven by convening the meeting	Drafting and, where formalities require it, a notarial step	Internal validity from the moment of ratification; does not by itself cure a representation already given to the bank
Align the articles	An extraordinary general meeting, an amendment, execution before a Dutch civil-law notary, registration at the trade register	Weeks to a couple of months, notary-dependent	The notarial deed and the registration	The articles now describe how the group actually operates; removes the recurring mismatch for future acts, not past ones
Engage the lender	Notification under the facility's information covenant, a request for a waiver or an amendment to the representation	Depends on the lender's own process	Negotiation time and any waiver fee the facility sets	The facility stays in good standing; the gap is disclosed rather than discovered

None of the three is exclusive. Most groups in this position ratify internally and notify the lender in the same week, and treat the articles amendment as the slower, separate step.

What decides between them

The first question is whether a third party has already relied on the act in question. If the bank advanced funds on the strength of a representation that the informal practice contradicts, internal ratification alone will not put that representation right; the lender needs its own answer.

The second is whether the shareholders agree on what happened. If they do not, ratification is not available, because the body that would ratify cannot reach the resolution. That disagreement moves the matter toward a formal governance procedure rather than a quiet internal fix, in the same way that a dispute can arise in situations where a restructuring expert is appointed and the board disagrees with the appointment. If the group is already under formal financial distress, that expert sits alongside the board, and the ratification route runs through the expert, not around it.

The third is what the facility agreement actually says about when the representation repeats. A representation given once at signing behaves differently from one repeated at every utilisation request. Read the clause before you decide the order of the three routes above.

The deadline that runs

No statutory clock starts merely because the articles and the actual practice diverge. Under Dutch law, the deadline that matters here is contractual, not procedural: the facility agreement's own cure period for a breach of representation, if it states one, and the date of your next scheduled utilisation or covenant test if it does not. Treat that date as the working deadline until you have confirmed the contractual one.

Evidence to secure now

The full current text of the articles of association, not a summary of them.
The trade register extract showing the registered directors and any registered restriction on their authority.
The minute book: the resolutions actually taken, or not taken, for the acts now in question.
The facility agreement's representations and covenants clause, and whether the representation repeats at each utilisation.
Internal correspondence describing how the informal practice actually operates, dated where possible.

Cost drivers

A notarial deed and trade register registration apply only if you amend the articles; ratification alone does not require either. Negotiation time with the lender is the main variable in the third route, and it moves with how the facility agreement is drafted rather than with the size of the facility. No court fee is ordinarily involved unless the disagreement between shareholders reaches a Dutch court or the Enterprise Chamber.

What we would do in the first week

Pull the current trade register extract and the full text of the articles, and set them side by side with the actual practice.
Identify the specific provision the practice departs from, not the general area of governance it touches.
Pull the facility agreement's representations and covenants clause and check whether it repeats.
Draft the ratification resolution as a fallback step, before deciding whether the articles also need amending.
Decide with the board, within the same week, whether to notify the lender proactively or wait for the next scheduled contact point.

What this does not cover

Perfecting or releasing security interests tied to the facility.
The lender's own regulatory duties under its licence.
Cross-border recognition of a Dutch ratification resolution outside the Netherlands.
The tax treatment of any restated intercompany arrangement.
A shareholder dispute that has already reached the Enterprise Chamber; that runs its own procedure.

Questions

Does ratifying the act after the fact cure a breach of the articles for the bank?

It cures the internal governance point from the date of ratification. It does not automatically cure a representation the borrower already gave the bank at signing or at an earlier drawdown; that needs separate disclosure or a waiver under the facility agreement itself.

Can the articles simply be brought into line with what the group actually does?

Yes, in principle, through an amendment adopted at an extraordinary general meeting and executed before a notary. The amendment works forward from its date. It does not rewrite what happened before it, so past acts still need ratification if they are to stand as valid.

Does the bank have to know before we fix this internally?

That depends on whether the facility agreement's representation on due authorisation repeats at each drawdown or was given once at signing, and on whether the relevant clause is drafted as an event of default. Read the wording before assuming that silence carries no risk.

An informal group practice contradicts the articles with bank financing already in place