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A View from Amsterdam: Continuing Renewal of Dutch Corporate Law

Cross Border Migration

As part of a continuing effort of the Dutch government to modify the existing corporate legislation in the Netherlands to address today’s needs, a legislative proposal has been published that facilitates the cross-border migration of Dutch BVs and NVs to another EU member state.

The underlying proposal on cross-border migration aims to codify the possibility for BVs and NVs – Dutch companies with limited liability most commonly used in international structures involving the Netherlands – to migrate their statutory seat to another EU member state, changing the applicable law of such company without the company ceasing to exist.

Because the company does not cease to exist, a cross-border migration is different from a cross-border merger. A cross-border merger, codified in Dutch corporate law in 2008, allows a national company to merge, resulting in the transfer of all its assets under a universal transfer of title to a foreign company (or vice versa). Whether or not the transferring company ceases to exist under a cross-border merger may have substantial tax consequences and should be thoroughly analyzed in advance.

Cross-border migrations are not entirely new to the Dutch legal system. Currently, a cross-border migration is possible under codified Dutch law in exceptional circumstances such as war or revolution. Furthermore, cross-border migration is possible for entities of European origin, such as the SE (Societas Europaea) and the SCE (Societas Cooperative Europaea), for which the possibility of a cross-border migration is set out in the respective European directives.

Despite the lack of codification, cross-border migrations of Dutch BVs and NVs have already been taking place for quite some time. Based on decisions of the European Court of Justice in the Sevic case, the Cartesio case and the Vale case, it has become increasingly common since 2009 for the Dutch legal practice to facilitate cross-border migrations, even without a codified legal basis. Such migrations include both inbound migrations (to the Netherlands from abroad) and outbound migrations (from the Netherlands to abroad).

The legislative proposal that was published refers only to BVs and NVs. Although these are the most commonly used entities in the Netherlands, legal scholars have already taken the position on the basis of existing case law that cross-border migration should also be available to other Dutch legal entities, such as the association (vereniging), cooperation (coöperatie), mutual insurance company (onderlinge waarborgmaatschappij), and foundation (stichting).

The process of a cross-border migration under Dutch corporate law can be briefly summarized as follows. In short, the process requires the involvement of a Dutch civil law notary, like many corporate structuring actions. The civil law notary is commonly involved in the drafting of a migration proposal. The migration proposal must be filed at the Dutch trade register as well as at the office of the migrating company. Furthermore, the legislative proposal provides for certain measures of protection of the rights of shareholders, employees, and creditors:

  • Shareholders who vote against the migration have a right to have their shares purchased by the migrating entity; this measure aims to protect minority shareholders that may find a shareholding in a foreign entity (in a foreign country) burdensome. The migration proposal must set a price for which the company will purchase such shares and the Dutch enterprise court has jurisdiction over disputes;
  • Employees of a company whose articles of association provide employees the right to appoint one out of three supervisory board directors are granted protection.
  • Creditors are granted a two month period during which they can oppose (verzet instellen) a migration at the district court of the corporate seat of the migrating company. In such a court proceeding the creditor can request surety or bail to ensure that its claim will be paid.

Most cross-border migrations that currently take place involve companies from Luxembourg and Spain. This can likely be explained by the freedom granted by Luxembourg and Spanish law to facilitate cross- border migrations to and from countries outside the European Economic Area.

The date that the proposal will be codified into Dutch corporate law is not yet determined, but this legislative proposal is just one of many measures proposed by the Dutch government to continuously work on an updated, flexible, yet reliable system of corporate law.