We are pleased to share our contribution to The Legal 500 – Country Comparative Guides on Investing in the Netherlands, authored by Thom Schölvinck and Bart Dreef from our M&A team.

This country-specific Q&A provides an overview of the laws and regulations applicable to investing in the Netherlands. It offers a practical insight into the Dutch investment landscape, covering key topics such as foreign direct investment trends, preferred corporate structures, acquisition routes, FDI screening under the Dutch Vifo Act, dispute resolution, and exit strategies. With its stable legal framework, open investment climate and strong international position, the Netherlands continues to be a leading jurisdiction for cross-border investments.

De M&A-praktijk in Nederland staat voor een belangrijke verandering. Door een recente wijziging van de Mededingingswet kan de ACM voortaan ook niet-meldingsplichtige fusies en overnames achteraf toetsen op misbruik van een economische machtspositie. Dit betekent dat transacties die onder de omzetdrempels blijven, alsnog kunnen worden onderzocht en mogelijk gesanctioneerd wanneer de koper een economische machtspositie heeft. De sancties kunnen voor partijen ingrijpend zijn: reputatieschade, boetes en zelfs het terugdraaien van de transactie.

As proud partners of Capital Waters, we are pleased to welcome the updated version of their Convertible Loan Agreement, as a meaningful contribution to the Dutch startup ecosystem. The CLA is available in two formats: a clean version for transactions and a detailed Notes Version offering practical guidance and legal context. You can find the full announcement here[1].

Imagine: you have a brilliant idea, you start a company, and it runs smoothly, but you realize you haven’t yet thought about the next step. How do you structure your business to minimize risks and protect valuable assets? This is where setting up a smart holding structure comes into play.

A holding structure generally consists of at least two layers:

• The Holding (HoldCo or parent company)
  This is the company that carries out little or no operational activities itself, but manages the assets and usually holds the intellectual property. The shareholders of the HoldCo are the founder(s), often through a personal holding company. In [insert link: this] blog, we explain the advantages of a personal holding company for founders. Later on, investors often join at this level, although they may also participate at the OpCo level if they do not wish or are not permitted to be involved in all activities of the group.

• The Operating Company (OpCo)
  This is where the actual work happens: serving customers, selling products, managing staff, etc. This is the entity where revenue is generated, but where risks also arise.

Many founders start out as a sole proprietorship (eenmanszaak) or as general partnership (VOF). It’s fast and easy – no notary needed, and you can start operating as soon as you’re registered at the Dutch Chamber of Commerce (KvK). But as your business grows, the limits of a sole proprietorship or VOF become clear. No liability protection, no legal separation between you and your business, and no scalable structure for attracting investment. See [this link] for more information on the sole proprietorship or VOF. That’s when many entrepreneurs start considering converting their sole proprietorship into a private limited liability company (besloten vennootschap or BV).

As a rule of thumb, use a B.V. if your startup wants to start doing business and wants to raise funds. It generally shields you from liability and investors are willing to invest in it.

A BV (Besloten vennootschap) is a private limited company. This means that it is a legal entity with shares, one or more shareholders and one or more directors (which may be the same person(s)). Shareholders provide the funds, directors manage the company on behalf of the shareholders and other stakeholders (think of employees, or suppliers and clients). The company is a legal entity, that has its own property and debts, and its own rights and obligations. So, all assets acquired by the company, such as the business itself, are owned by the BV, and not the shareholders and directors. And the company is liable for the debts, so when the company obtains a bank loan, the bank by default does not have a claim against the shareholders or directors.

That is the very purpose of a BV: to limit liability of its shareholders and directors (‘limited’ company). And it does, except for exceptional circumstances. This enables the entrepreneur to take business risks, with the worst-case scenario that the company may go bankrupt, but that there is no more liability or loss to the shareholders and directors than the loss of investments.

From a legal perspective, when entrepreneurs start taking risks that they cannot afford or insure, then it is recommendable to incorporate a BV. Sometimes that is from day one, sometimes this comes later. Accountants generally would advise you to wait, as BV’s lack tax benefits that partnerships (maatschap, VOF or CV, see below) or sole proprietorships (eenmanszaak) may have. Another reason to incorporate a BV. is to attract investors by offering them shares.

The shares of the company offer the shareholders control rights and economic rights, although it may be organized differently. Control by voting in the general meeting of shareholders, setting the agenda, obtaining information from the board of directors in that meeting, and even by starting corporate litigation if needed. Economic rights include the right to dividend (if the general meeting decides to pay dividend and the company can afford it) and the return on sale of the shares.

Incorporating a B.V. is done by a civil law notary (although legislation is being prepared to incorporate online). The company is governed by its articles of association, which are part of the incorporation package. It contains the rules that govern the relationship between the company and its shareholders (the basic control and economic rights) and organizational rules, such as the type of shares, how to transfer shares, who may represent the company, how to decide in board meeting and general meetings and how to dissolve the company. It follows the general lines of the law.

Startups do well to also conclude a shareholders agreement, to agree on additional rules that apply between themselves and sometimes also the company: think of matters for which increased approval is required, a conflict resolution mechanism, and the possibility for investors to arrange an exit.

Playing around with the articles of association and the shareholders agreement makes the organization flexible: to a certain extent, parties may tailor the company to individual wishes, for example to make it look (and work) pretty much like a UK or US style limited company. Of course, the Dutch legal framework will still apply, but its nice for foreign investors to feel at home to a certain extent.

The BV is recognizable and usable for investors, Dutch or foreign, and therefore the standard form for startups that seek financing. Both for equity (shares) financing since the shares look and work as expected, and for debt financing as the company may provide security. Share transfer is done by the notary, which is less familiar to investors from common-law countries, which comes with some additional costs and red tape, but at the same time that process provides some benefits to all parties involved (foremost: certainty that monies are received and shares are transferred with correct application of the law) and in practice does not cause an issue.

The B.V. comes with incorporation costs and upkeep costs, the latter foremost being the costs of your accountant as you have to file annual accounts. Running a business in another legal form will however also require you to keep your accounting in order for which you may need an accountant too, so the additional costs of drawing up the accounts may be limited in the beginning.

Other legal forms to run a business offer less certainty against liability, are less familiar or are more restricted.

Partnerships, such as the maatschap, the vennootschap onder firma (V.O.F.) and the commanditaire vennootschap (C.V.) do not shield its partners from liability, and lack the simplicity of ‘ownership through shares’. They are often used in the beginning of running as business, often to save costs or because the founders do not want to think of the way of structuring the organization yet. However converting the partnership to a limited company often costs money too and may make it more complicated that starting from day one.

The public limited company (naamloze vennootschap, or N.V.) is similar to the BV, but less flexible and requires a starting capital of EUR 45.000. It is the prime legal form for listing your shares to the public market (initial public offering, or IPO; although the BV may sometimes be used as well), and often B.V.’s are converted into N.V. at a later stage.

The Dutch foundation (stichting) is often used alongside a B.V., for special purposes such as employee participation, protecting certain material assets as escrow entity, or for idealistic purposes where profit is not a goal of the company. It is not very flexible, has no shares (or owners for that matter) and does not allow profit distribution, which make is unsuitable for most startups as their prime vehicle.

The cooperation (cooperatie) is in fact an association with members. It is a legal person, that can shield liability of its members, and is quite flexible to organize. It does not have shares, which makes it less attractive for investors in general, although the membership may resemble shares to a certain extent. The tax treatment of cooperations is different than for B.V., primarily regarding the tax neutral pay out of distributions. The cooperation is less known and therefore not often used, but may be an interesting legal form if distributable financial profit is less important that non-financial gains (e.g. environmental benefits, or costs saving by collective purchasing power).

Preferred rights often play a significant role when attracting investments. Investors negotiate these rights for various reasons, such as protection against dilution, optimizing returns, and safeguarding their investment. However, stacking preferred rights by investors in subsequent rounds such as anti-dilution protection and liquidation preference are not always reasonable and economically sound. In some cases it even causes founders to be left without an outlook of returns within a reasonable future, and thus a negative incentive to grow the business.  

One of the most challenging tasks when starting your startup is the legal structuring. To address, here are some key do’s and don’ts for structuring your business, focusing on the sole proprietorships (eenmanszaken) and the general partnership (VOFs). A separate blog will be focussing on the limited liability company (Besloten Vennootschap, or BV), since in practice, nearly all startups that aim for growth will soon need a BV structure in the long run for reasons like limiting liability, attracting investors, or setting up a proper holding structure.

But before reaching that stage, every startup with a single founder will, by default, start out as a sole proprietorship. Legally and financially, a sole proprietorship does not exist: there is no distinction between the founder and its business, it offers no liability protection and is not suitable for attracting investors. The only difference is that you can get a registration as the trade register (KvK) and a VAT number. Then again, with that you can start right away with minimal red tape. Sole proprietorship generally also has some financial benefits over limited companies if revenues are not so high yet (~EUR 150k or less).

Startups with multiple founders will start out as a VOF (Vennootschap Onder Firma). Contrary to a sole proprietorship, the VOF is recognised by law. Up- and downsides are similar to the sole proprietorship: it offers a simple, cost-effective and flexible structure that works well in the early phase of a startup, especially when two or more people start working together before there’s enough revenue or investment to justify forming a BV, similar financial benefits apply when revenue levels are still relatively low, but on the other hand each founder is jointly and severally liable (hoofdelijk aansprakelijk) for the VOF’s debts, including those which have arisen under the management of prior partners – all creditors may address each partner individually for collection of the full amount of the VOF’s debt.

Being a partnership, the legally defined VOF can come into existence automatically even without a written agreement, just because of the fact that two or more people start working together with the intention to make a profit. Although there is a legal framework for VOFs in place, that framework leaves enough uncertainty to rely on. It is therefore highly recommended to put the terms of your collaboration in a written VOF agreement to prevent discussions.