NETHERLANDS Law and Practice Contributed by: Eduard Scheenstra, Etiënne Courbois and Jenny Noordermeer, CMS
3.10 Usury Laws Dutch law does not impose statutory usury limits or specific caps on the amount of interest that can be charged. However, the enforceability of interest pro- visions in finance documents is subject to the over- arching principles of reasonableness and fairness, which may restrict enforcement if terms are deemed unacceptable. Courts may also consider the parties’ original intent when interpreting agreements, and con- tracts can be annulled if entered into under duress, fraud, undue influence, mistake, or if contrary to public morals or public order. While there are no legal limits on debt financing, Dutch corporate income tax rules effectively constrain inter- est deductibility. From 2024, the general earnings stripping rule limits deductible interest to the higher of EUR1 million or 20% of EBITDA for tax purposes. Excessive debt may also trigger scrutiny regarding the arm’s length nature of loans, potentially resulting in further limitations on interest deductibility. 3.11 Disclosure Requirements Disclosure of financial contracts is regulated by national and European laws, depending on the type of contract and the parties involved. Financial institu- tions and public companies are subject to strict dis- closure requirements under the Financial Supervision Act ( Wet op het financieel toezicht ), which is overseen by the Dutch Central Bank ( De Nederlandsche Bank ) and the Authority for the Financial Markets ( Autoriteit Financiële Markten ). Examples of European regula- tions include the EMIR and the Prospectus Regula- tion. In addition, companies are required to disclose certain financial obligations in their annual accounts under accounting and reporting standards. In private contracts, disclosure is largely governed by contractual freedom and duty of good faith ( goede trouw ). However, in certain cases (eg, involvement of consumers), information duties are imposed.
or its equity sponsor will not disrupt voting arrange- ments among the lending group by purchasing debt. That said, a buyback of loans is not as common in the Dutch market as buybacks of notes or equity securi- ties. 3.8 Public Acquisition Finance Under Dutch public takeover regulations, a bidder must demonstrate – at the time the offer memorandum is submitted for approval to the competent authority – that it has sufficient funds available or has taken all necessary steps to ensure such funds will be available to meet the obligations under the offer. Once the funds are secured or the required arrangements are in place, the bidder must make a public announcement con- firming this. If any portion of the offer consideration is financed through debt, the bidder can only satisfy this funding requirement if the debt is provided on a “certain funds” basis. The “certain funds” rule is not generally applied in other transactions where not required, although it is not unusual for bidders to indicate in the term sheet how they intend to finance the transaction. While there is no legal obligation to have fully negoti- ated or signed financing documents in place, public acquisition financing is typically documented through comprehensive (long-form) agreements. There is also no requirement for such documentation to be made publicly available. 3.9 Recent Legal and Commercial Developments Recent case law of the Court of Justice of the Euro- pean Union has confirmed that an asymmetric juris- diction clause, under which the parties agree to con- fer jurisdiction to a specific court for disputes arising between them while reserving for only one party the right to initiate proceedings before one or more alter- native courts, is considered sufficiently precise and therefore valid provided that the asymmetric jurisdic- tion clause is limited to EU member states and states that are party to the Lugano Convention. The choice of jurisdiction provision in Dutch legal documentation has been amended accordingly.
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