NETHERLANDS Law and Practice Contributed by: Coco van Zuiden, Marijn Bodelier, Sabine Schoute and Simone Wijngaard, Greenberg Traurig, LLP
3.5 Legal Requirements Before an Entity Can Give Valid Security Under Dutch law, prior to the granting of secu - rity, certain considerations need to be taken into account. • Financial assistance – the DCC includes a prohibition on Dutch public limited liability companies providing financial assistance in connection with the acquisition of their shares. Such prohibition has been abolished for Dutch private limited liability companies. • Corporate interest – any legal act performed by a Dutch legal entity must be in the cor - porate interest of such entity. If this is not the case, the act may exceed the entity’s corporate power and therefore be nullified by the Dutch legal entity if the counterparty knew, or should have known, that such legal act was not in the entity’s corporate inter - est. The statutory object clause, although an important element, is not in itself decisive. In case law, the Dutch Supreme Court has ruled that a Dutch court should consider, when objectively determining whether a specific legal act should be regarded as exceeding a company’s corporate objects, not only the description of the objects in the articles of association is decisive, but all relevant cir - cumstances (eg, the company’s commercial interest, group relations, etc). This includes, in particular, whether the interests of the legal entity were served by entering into the trans - actions. The board of directors of the Dutch legal entity must carefully make (and, ideally, document) the relevant analyses. • Conflict of interest – it is not permitted for a director of a Dutch company to participate in deliberations and decision-making if they have a direct or indirect personal conflict of interest with the company in respect of the contemplated transaction.
ally assumed that a Dutch law right of mortgage or pledge cannot be validly created in favour of a person who is not the creditor of the secured liabilities. There is no statutory law or case law available on the parallel debt. However, in the general view of leading authors in Dutch legal literature, a parallel debt creates a claim of the mortgagee or pledgee which can be validly secured by a right of mortgage or right of pledge. 3.3 Restrictions on Granting Security Over Real Estate to Foreign Lenders There are no specific restrictions on granting security in favour of a foreign lender. The same goes for making repayments to a foreign lender under any finance document. Generally speak - ing, in both cases, the Money Laundering and Terrorist Financing Prevention Act will apply. Banks, civil law notaries and lawyers involved will have to perform a client due diligence on both national and foreign clients and report to the Netherlands Financial Intelligence Unit any suspicious transaction; that is, transactions that could involve money laundering or terrorist financing. 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security No stamp duties or documentary taxes are pay - able in the case of creation or enforcement of a right of mortgage over real estate. For the creation of the right of mortgage, a deed of mortgage will need to be executed by a Dutch civil law notary and registered with the Dutch Land Registry. Notarial fees and registration fees will need to be paid. A right of mortgage is usually enforced by way of a public auction (see 3.6 Formalities when a Borrower Is in Default ). Execution costs will be deducted from the sales proceeds.
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