NETHERLANDS Law and Practice Contributed by: Mandeep Lotay and Dámaris Engelschman, Freshfields LLP
SPV, the SPV will secure its obligations to such secured creditors by pledging all of its assets to the security trustee/agent. 1.3 Applicable Laws and Regulations The structures referred to in 1.2 Structures Relating to Financial Assets are regulated by the requirements for a valid and enforceable transfer of property under the Dutch Civil Code ( Burgerlijk Wetboek , or DCC). In addition, mat - ters in relation to the efficacy of the bankruptcy remoteness of a Dutch SPV are regulated by the Dutch Bankruptcy Act ( Faillissementswet ). Depending on their characteristics, Dutch secu - ritisations may also be governed by Regulation EU 2017/2402 of the European Parliament and of the Council of 12 December 2017 laying down a general framework for securitisation and creat - ing a specific framework for simple, transparent and standardised securitisation, and amend - ing Directives 2009/65/EC, 2009/138/EC and 2011/61/EU and Regulations (EC) No 1060/2009 and (EU) No 648/2012 (“EU Securitisation Regu - lation”). If applicable, they will need to comply with the requirements of the EU Securitisation Regulation, which include risk retention and transparency requirements. Investors will also need to comply with the due diligence require - ments specified by the EU Securitisation Regu - lation. 1.4 Special Purpose Entity (SPE) Jurisdiction As mentioned above, for Dutch securitisation transactions, orphan SPVs are established both in the Netherlands and offshore. The favourable corporate law environment, the tax regime and the relatively low set-up and maintenance costs are often mentioned as reasons to choose the Netherlands as the SPV jurisdiction. Frequently used alternatives to the Netherlands are Luxem -
bourg and Ireland. In the Netherlands, the most common form of corporate vehicle for an SPV is a limited liability company ( besloten vennootsc - hap met beperkte aansprakelijkheid ), which is 100% owned by a Dutch foundation, by nature an orphan vehicle, in each case with limited objects and powers to preserve the integrity of
the securitisation transaction. 1.5 Material Forms of Credit Enhancement
Although the list of credit enhancement tech - niques is not fixed and is often dependent on the nature of the transaction and the parties involved, several credit-enhancement tech - niques commonly found in securitisations are more generally used in Dutch deals, as follows. • Subordination of interests . The SPV/purchas - er issues secured debt instruments (or bor - rows the equivalent in secured loan format) to investors with different levels of seniority in terms of payment and security. In the case of any non-performance of the securitised assets that lead to a reduction on or non-pay - ment of interest and/or repayment of principal on the debt instruments, the most subordinat- ed debt instruments will be subject to losses first, thereby functioning as loss-absorbing instruments for the more senior-ranking debt instruments in reverse sequential order. The more senior debt instruments are not affected by the non-performance of the securitised assets if and to the extent that such losses do not exceed the SPV’s payment obligations under the junior (or more junior) debt instru - ments. • Cash reserves. The SPV is required to have a cash reserve to fund principal losses on the asset portfolio and/or shortfall in senior rankings costs, fees and/or expenses of the securitisation transaction. The reserve fund
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