In recent years many foreign (listed) companies have become Dutch B.V.’s (private company) or N.V.’s (public company). Vivid examples are Mylan, Fiat Chrysler, Ferrari and Altice.
With Brexit having become fact, companies from the United Kingdom are expected to look for possibilities to migrate to the Netherlands and other EU countries.
Brexit is not the only reason for corporate migration into the Netherlands, there are many reasons for companies from inside and outside the European Union to become a Dutch N.V. or B.V., in random order:
The U.S. government has adopted rules to make it more difficult for parties to take advantage of jurisdictions with a more favorable tax regime by means of acquisitions to move U.S. company headquarters abroad (so called tax inversion transactions). The Dutch tax-friendly environment offers benefits that provides sufficient incentives to move to the Netherlands nonetheless. The rules from the U.S. Treasury Department make it more difficult, not (yet) impossible. For non-US international companies tax inversion may be a reason to come and enjoy the Dutch tax rates while still being considered an ‘onshore’ company.
Brexit and other political MACs
Large international companies favor safe and predictable business environments. A sudden change in the political climate with an uncertain outcome often results in large companies fleeing the country to a safe haven. It happened during the Euro crisis in Cyprus, it happened when Grexit became a real possibility and is expected to get a big further boost with the Brexit. We also see an influx from companies in politically unstable areas, such as the Middle East.
Dutch corporate governance – anti-takeover protection mechanisms
The Dutch corporate legal landscape has become more flexible in recent years, while Dutch corporate governance possibilities, such as sound anti-takeover protection mechanisms, have remained in place, triggering companies to convert into a Dutch company.
The use of Dutch foundations (‘Stichting’) and preferred shares have been ‘discovered’ as an effective anti-takeover mechanism. For instance a structure based on these features successfully jeopardized Teva’s hostile takeover of Mylan, The Wall Street Journal even headlined “The Rise of the ‘Stichting,’ an Obscure Takeover Defense”. The good thing is: there is nothing obscure about a Dutch Stichting; it is a solid legal structure, tested in court many times and used and accepted for many other purposes as well.
Possibilities within the European Union
Within the European Union there are many regulated possibilities for corporate migration into (and out of) the Netherlands – the fact that the Brexit referendum has taken place, does not mean that from the one day to the next all current EU procedures and regulations are no longer enforceable and the existing procedures may still be followed. To name a few:
Cross border merger
Dutch corporate law provides for the statutory merger of a company with share capital existing under the laws of another member country of the European Union or the European Economic Area (EU member countries and Iceland, Liechtenstein, and Norway) into a Dutch B.V. or N.V. and is implemented on the basis of EU Directive 2009/56/EU. Cross border demergers are currently not (yet) possible.
Cross border conversion
Based on case law of the European Court of Justice of 2012 it is possible to convert a company with share capital existing under the laws of another member country of the European Union into a Dutch B.V. or N.V. (or vice versa). Conversion means changing the legal form of a company into another legal form in accordance with the laws of the country of arrival, without dissolution or re-incorporation of the original company.
European Company or Societas Europaea or SE
A public company incorporated in accordance with the requirements of a country of the European Union which has its corporate seat and management within the EU may be converted into a European Company if it has had a subsidiary for at least 2 years in another EU member country.
The corporate seat of a European Company can then be transferred to the Netherlands and, as a result, the company can become a Dutch law governed European Company.
An alternative to cross border mergers and cross border conversions may be to incorporate a Dutch entity and have the Dutch entity acquire all assets and liabilities from the foreign entity. Following the asset deal, the foreign entity can then be liquidated. Asset deals, however, do not provide a transfer under universal title and transfer requirements for each of the assets and liabilities need to be fulfilled. In addition, matters like tax effects, the triggering of change of control provisions in important agreements and non transferrable permits and rights need to be assessed carefully.
Possibilities from outside the European Union
In the Netherlands the incorporation doctrine applies, which means that the company is subject to the laws of the country of its incorporation. Under Dutch law it is not possible to directly transfer the corporate seat of a company to the Netherlands which is not incorporated within a EU country. Having said that, there are of course ways to transfer companies from outside the EU to the Netherlands. Two examples:
Transferring a corporate seat into an EU country
Where in the Netherlands the incorporation doctrine, there are member countries may apply the real seat doctrine. Under the real seat doctrine a company is connected to the country in which it has its centre of administration (its real seat). Countries applying the real seat doctrine may allow direct inbound migration, with Luxembourg appearing often to be the preferred choice. The transfer of a company’s central administration (and consequently its domicile) in addition to its registered office to such country will result in the relevant nationality and corporate law applying to the company and the company has then successfully migrated to the European Union.
Following the company’s migration into the European Union, the company can:
- Merge cross border into a newly incorporated Dutch B.V. or N.V.
- Convert cross border into a Dutch B.V. or N.V.
- Change into a European Company and transfer to the Netherlands and become a Dutch law governed European Company.
- Or sell its assets and liabilities to a newly incorporated Dutch B.V. or N.V.
Holding company reorganization and acquisition – the Holdco Structure
In countries allowing mergers of indirect subsidiaries with and into predecessor companies, with the predecessor company acting as surviving entity, the HoldCo Structure may be a solution. This is subject to an assessment of the requirements existing in the relevant non-EU country.
In the Holdco Structure, the non-EU predecessor company (Predecessor Company) incorporates a wholly-owned Dutch subsidiary (Dutch HoldCo), which subsidiary in turn incorporates a wholly-owned subsidiary governed by the same laws of the non-EU predecessor company (MergerCo). The MergerCo will merge with and into the Predecessor Company, with the Predecessor Company acting as the surviving entity in the merger. As a result, the Predecessor Company has become a wholly-owned subsidiary of Dutch Holdco. At the closing of the merger, each then outstanding share of the Predecessor Company will be cancelled and converted into and become the right to receive one share in Dutch Holdco.
It is clear that a change into a Dutch B.V. or N.V. is not done overnight and requires solid preparations from legal, tax and financial perspectives in all jurisdictions involved. But, then again, who does not want to have its company based in a stable and tax friendly environment?