NETHERLANDS Law and Practice Contributed by: Eduard Scheenstra, Etiënne Courbois and Jenny Noordermeer, CMS
5.3 Downstream, Upstream and Cross- Stream Guarantees Whether or not restrictions apply to the provision of related company guarantees depends on the type of company providing the guarantee. Private companies with limited liability (BVs) are, in principle, not restrict- ed in providing guarantees to related companies, as long as the granting of a guarantee is in the corporate interest of the grantor. Public companies limited by shares (NVs) are subject to Dutch regulations on finan- cial assistance. Therefore, an NV and its subsidiaries may not grant security or guarantee the obligations of a related company if such security or guarantee is granted to subscribe for or acquire shares in its capital or depositary receipts for those shares. Under Dutch law, there are no limitations on the ability of non-Dutch, related companies to provide guaran- tees. 5.4 Restrictions on the Target Under Dutch law, strict financial assistance rules apply to NVs and their subsidiaries. NVs are prohibited from providing security, guarantees, or otherwise binding themselves (jointly or otherwise) to support the sub- scription or acquisition of their own shares or deposi- tary receipts. Additionally, NVs and their subsidiaries face restrictions on granting loans to related compa- nies for such purposes. These loans are only permit- ted if a board resolution is adopted and pre-approved by the general meeting of shareholders. Further condi- tions include: the loan must be on arm’s length terms; the company’s net assets, after the loan, must not fall below the statutory minimum; the creditworthiness of the borrower must be carefully assessed; and, if the loan is for acquiring shares, the acquisition price must be fair. Transactions in breach of these rules, especial- ly if deemed fraudulent conveyances, can be nullified. In contrast, BVs are not subject to specific financial assistance prohibitions. However, BV directors must ensure that any such transaction is in the company’s corporate interest, that the company can continue to meet its obligations, and that all potential conflicts of interest are disclosed. The works council and supervi- sory board, if present, should also be informed.
thereafter registered with the Dutch tax authori- ties. A pledge over shares is registered in the sharehold- er’s register of the company whose shares are being pledged. Such registration is not a requirement for perfection of the right of pledge. The shareholder’s register is a hard copy of the register, which is kept by the company. The creation of these security interests does not lead to liability for Dutch stamp duty or similar documen- tary charges. 5.2 Floating Charges and/or Similar Security Interests Dutch law does not recognise the concepts of float- ing and fixed charges as known in common law juris- dictions. Instead, security interests are categorised as either collateral security (such as mortgages and pledges) or personal security (including joint and sev- eral debtorship, suretyship, and guarantees). Collater- al security is established through a right of mortgage – applicable to registered property like real estate, land, aircraft, or ships – or a right of pledge, which covers all other types of collateral. Pledges can be created in advance over future movable assets and receivables. When the pledgor acquires such assets or when receivables arise, these are automatically encumbered. However, for undis- closed pledges over future receivables, only those arising from existing legal relationships at the time of the pledge are covered; new relationships require new pledges. To streamline the process, Dutch banks use a collec- tive deed of pledge, allowing them to register undis- closed pledges over all (future) receivables without the debtor’s ongoing involvement. This system, which involves frequent registration with the Dutch tax authorities, is somewhat similar to an English floating charge but differs in that it requires repeated registra- tions and cannot cover registered property or shares, which must be pledged by separate notarial deeds. Other assets can be pledged through omnibus agree- ments, subject to certain limitations.
415 CHAMBERS.COM
Powered by FlippingBook