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Written by Thédoor Melchers and Bart Dreef
Dutch FDI Regime[1]
The Dutch Investments, Mergers and Acquisitions Act (Dutch FDI regime) has been in effect since June 1, 2023 and introduces a national security screening for investments, mergers, and acquisitions that may pose a risk to national security. The Dutch FDI regime applies to (i) vital providers, (ii) companies active in the field of sensitive technology, and (iii) managers of corporate campuses.
Whether the target qualifies as (iii) a manager of a corporate campus is usually relatively easy to determine. However, whether the target qualifies as (i) a vital provider or is active in (ii) sensitive technology is much more complex to determine with certainty.
Notification Obligation
A key element of the Dutch FDI regime is the obligation to notify the Bureau for Investment Screening (BTI). This obligation rests on both the target company and the acquirer and must be fulfilled before the actual transfer of control or significant influence[2] takes place. The transfer of shares (or assets) of the target company cannot occur until the notification has been submitted and assessed by the BTI.
The formal assessment by the BTI has a standard period of 8 weeks to determine whether a screening decision is required. If a screening decision is required, a second 8 week period applies from the date of the request, during which the BTI assesses the proposed transaction for potential risks to national security. Both periods may be extended by an additional 6 months if the BTI deems further investigation necessary.
Risk of Fines
If parties fail to notify a transaction, they may be subject to a fine of up to €900,000 or 10% of the annual turnover (whichever is higher) of the target company or the acquirer. As both parties are subject to the notification obligation, the BTI may impose a fine on either or both, depending on the circumstances.
The risk of fines already arises at the notification stage. The target and the acquirer can be fined for failing to notify a transaction under the Dutch FDI regime, even if it later turns out that the transaction would have been approved. Furthermore, any voting rights acquired by the acquirer may be suspended until the notification has been submitted and approved by the BTI.
Analysis
In contrast to merger control notifications under competition law, which are based on (more objectively measurable) turnover thresholds, it is much harder to determine whether notification is required under the Dutch FDI regime. The potential risk of fines combined with the absence of objective criteria can lead to a decision to submit a notification at a late stage of the deal process just to be safe. This not only delays the transaction but may also result in additional costs and uncertainties, reducing the desired deal certainty.
Timely Notification
Based on the above analysis, it is advisable to notify at an early stage. This can already be done as soon as there is an ‘intended transaction’. One could argue that this is the case as soon as a NDA or letter of intent (or similar document) is signed[3].
Types of Notifications
In addition to the formal notification, the Dutch FDI regime also provides the possibility of requesting an informal opinion with the BTI. This is a non-binding advisory request submitted by the target company regarding the applicability of the Dutch FDI regime. In practice, such opinions often provide insufficient legal certainty and tend to cause unnecessary delays. We therefore recommend submitting a formal screening notification in case of any doubt about the notification obligation, so that the BTI can start its assessment and the statutory timelines begin to run.
Corporate Finance Advisors
Corporate finance advisors are well advised to inform clients who wish to sell their business or seek investors of the Dutch FDI regime requirements in a timely manner. Given the transactional importance of ensuring a sale or investment proceeds efficiently and without unnecessary complications, we recommend submitting a formal screening notification as early as possible. This can often be done when signing the NDA, and in any case at the stage of a (non-binding) term sheet or letter of intent.
Do not wait until the SPA is signed!
Wintertaling handles Dutch FDI regime notifications for a fixed fee of €1.000. For any questions, please contact Thédoor Melchers (Thedoor.Melchers@Wintertaling.com) or Bart Dreef (Bart.Dreef@Wintertaling.com).
[1] In Dutch: Wet veiligheidstoets investeringen, fusies en overnames (Wet Vifo)
[2] Acquiring a minority interest may also trigger a notification requirement if it results in significant influence, for example through veto rights or the right to appoint board members.
[3] Upon request, we will gladly provide you with a free standard clause for a ‘FDI Notification Clause’ to include in your NDA or Letter of Intent (LoI).
