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Beyond Borders: Eversheds Sutherland's ICR insights series. EU Mobility Directive – Legal Update – The Netherlands

  • Europe
  • Netherlands
  • Corporate
  • Labor law and trade union issues

21-12-2022

Country specific - The Netherlands

This country specific outline contains further information regarding the implementation of the provisions of the EU Mobility Directive into Dutch law and provides further local insight.

For further information and to access any of our other country-specific briefings that we have prepared, please refer to the bottom section of our general briefings page here.

Status of implementation

The Dutch draft proposal (the “Proposal”) implementing Directive (EU) 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive (EU) 2017/1132 with regard to cross-border conversions, mergers and divisions (the “Directive”) has been submitted to the House of Representatives (Tweede Kamer) on 5 December 2022. The discussion of the Proposal is set to take place in the last weeks of December 2022. Following this review by the House of Representatives (Tweede Kamer), the Proposal will have to pass both the House of Representatives (Tweede Kamer) and the Senate (Eerste Kamer). Pursuant to the legislative planning for 2023 of the Ministry of Security and Justice, the implementation act regarding implementation of the Proposal into law will be submitted to the House of Representatives in the first quarter of 2023. This implies that it is highly unlikely that the implementation deadline of 31 January 2023 will be met. There is currently also no clarity regarding any transitional provisions to regulate transactions that have commenced prior to, but implemented after, the law takes effect. If not timely implemented certain provisions of the Directive – i.e. only those that are unconditional, sufficiently clear and precise – shall have direct legal effect.

Cross-border mergers, divisions and conversions

Summary of Dutch current and future legal landscape

Apart from cross-border mergers, the Netherlands currently lacks a clear unified framework for conversions (redomiciliations) and divisions across borders. To date, only domestic divisions and conversions are regulated under Dutch law. In the absence of a cross-border legal framework (apart from the European company or SE), however, we do regularly see cross-border conversions being implemented, both inbound and outbound, by applying EU case law regarding freedom of establishment and movement (notably, Luxembourg Court of Justice in Cartesio, Vale and Polbud). The Directive (and the Proposal) currently provide guidance on the formalities for implementation of such cross-border conversions. However, to date, cross-border divisions are largely non-existent. With the implementation of the Directive, the Netherlands will have a unified legal framework for mergers, divisions and conversions across border within the EU/EEA, safeguarding rights of creditors, employees and (minority) shareholders. We expect these important structuring tools will further facilitate cross-border transactions.

Permitted companies and geographic scope

In the Dutch context, the cross-border transaction can take place between Dutch limited liability companies (the Dutch B.V. (besloten vennootschap) and Dutch N.V. (naamloze vennootschap)) and limited liability companies from the other EU/EEA Member States. Other entities, such as foundations, may need to rely on the freedom of establishment and relevant EU case law as a basis or, alternatively, convert into a limited liability company. Under the Directive, these cross-border transactions are principally limited to EU/EEA Member States and the Netherlands does currently not permit those transactions with limited liability companies outside of the EU/EEA.

Timings

With implementation of the Directive, generally speaking, the Dutch side of a simplified, non-complex cross-border transaction (i.e. a transaction involving companies which each only one shareholder, no employees and no secured assets) takes approximately four months to complete at minimum, given the prescribed three month creditor opposition period. More complex cross-border transactions could take up to 6-12 months for actual implementation, particularly, as formalities in the EU/EEA Member State of exit and entry will both need to be complied with.

The Directive provides for an extensive legal framework and (largely) harmonised legal process for these cross-border transactions and introduces specific safeguards for creditors, employees and (minority) shareholders. For any further guidance and advice on these matters, please do reach out your local Eversheds Sutherland contact.

Competent authority, pre-transaction certificate and anti-abuse checks

As with any domestic Dutch conversion, merger or division, in the Netherlands, the civil-law notary is the designated competent authority that supervises and executes the Dutch realisation of the cross-border transaction. In that capacity, the civil-law notary must attest, by means of the issuance of a so-called pre-transaction certificate, that all the Dutch requirements for the cross-border transaction have been complied with and that the cross-border transaction has successfully been executed so far. This is a material formality at the end stage of the Dutch part of the cross-border transaction. As part of its pre-transaction certificate due diligence, the civil-law notary will have to conduct an anti-abuse check. The notary will not issue the pre-transaction certificate and will not authorise the cross-border transaction if it determines that the transaction has been set up for unlawful or fraudulent purposes aimed at evading European or national law.

In the case of an outbound cross-border transaction, meaning a transaction whereby a Dutch company converts to or transfers (assets) (in)to a company based in another EU/EEA Member State, the cross-border transaction shall subsequently be finalised in the other Member State involved. Based on the pre-transaction certificate issued by the Dutch civil-law notary, the designated competent authority of the other Member State is able to proceed and legally complete and effect the procedure locally.

In the case of an inbound cross-border transaction, meaning a transaction whereby a company (or companies) based in another EU/EEA Member State transfers (assets) (in)to or is converted into a Dutch company, the cross-border transaction shall subsequently be finalised in the Netherlands. To be able to legally complete and effect the procedure in the Netherlands (please refer to the next paragraph), the Dutch civil-law notary will require a pre-transaction certificate from the designated competent authority of the other Member State(s) involved.

The Dutch notary plays a central role in any Dutch cross-border transaction. Not only do notaries execute the requisite notarial deeds, but they also render advice on all related legal aspects and prepare all relevant/ancillary documents. In the Netherlands, notaries can operate in and form part of the same firm as attorneys and tax advisors, which is quite unique and facilitates integration with other practices. We offer these in-house notarial services at Eversheds Sutherland in the Netherlands.

Effective date, method and manner of inbound cross-border transactions

Inbound cross-border transactions (i.e. inbound conversions, mergers and divisions) become effective in the form, manner and on the date as prescribed by Dutch law. Inbound cross-border transactions must be executed in the form of a notarial deed before a Dutch civil-law notary. Upon execution of the notarial deed by operation of Dutch law, the conversion, merger or division will become legally effective (at 00:00 hours) on the date following the date of the notarial deed. The Dutch pre-transaction certificate and notarial deed have to be filed with the Dutch Trade Register. Following completion of the cross-border transaction, the Dutch and other local trade or court registers will update their records accordingly. This registration will, from a Dutch perspective, not have legal constitutive effect.

Key local contacts

Should you have any questions or if you require any assistance in this regard, please do not hesitate to contact us.

Other country specific

Please find other country-specific information we prepared as part of this Insight Series here.