NETHERLANDS Law and Practice Contributed by: Herald Jongen, Maarten de Boorder, Samuel Garcia Nelen and Jelmer Kalisvaart, Greenberg Traurig, LLP
ers and venture capital investors in respect of the residual liability. It is fairly uncommon in the Dutch market today for the management team to provide warranties separately, regardless of whether this occurs via a separate management warranty deed, which can also be covered by a W&I policy.
driven by a need to develop emerging tech- nologies, such as fintech, cybersecurity or machine learning, in a more agile way. • Regulatory or market pressure: Increasing regulatory scrutiny, especially concerning anti-competitive behaviour by big tech, can also be a driver. Companies might spin off divisions to comply with regulations, such as in cases where there is pressure from Euro- pean regulators to break up monopolistic structures. • Private equity and M&A strategies: Spin-offs are also often used as part of larger M&A strategies, particularly when private equity is involved. A spin-off can prepare a business unit for eventual sale or public listing, attract- ing investment in a more focused entity that operates independently from the parent. 5.2 Tax Consequences Spin-offs in the Netherlands can be structured as tax-free transactions at both the corporate level and the shareholders’ level. For a tax-free spin-off at the corporate level in the form of a demerger, the following key require- ments need to be met: • the demerging and acquiring entity are tax residents of the Netherlands, the EU or the European Economic Area (EEA); • the spin-off is not predominantly aimed at avoiding or deferring taxation (ie, there must be sound business reasons) – unless counter- evidence is provided, sound business rea- sons are deemed not to be present if shares in the demerging or acquiring entity are transferred to a third party within three years after the demerger; • the demerging and acquiring entity must be subject to the same tax regime; and
5. Spin-Offs 5.1 Trends: Spin-Offs
Spin-offs are customary in the Netherlands, especially within the technology sector. They are a strategic tool used by both large corpora- tions and tech start-ups to enhance focus, drive innovation and unlock value. The key drivers for considering a spin-off in the Dutch tech industry include the following. • Focus on core competencies: Companies often spin off non-core or underperform- ing divisions to concentrate on their primary business. This is particularly common in tech firms, where innovation and specialisation are crucial for staying competitive. Spin-offs allow management to focus on the core tech- nologies or services that drive their competi- tive edge. • Unlocking value for shareholders: Spin- offs can help unlock shareholder value by separating high-growth potential assets from mature or slower-growing parts of the busi- ness. This restructuring makes the spun-off entity more attractive to investors, particularly in sectors like software, cloud services or AI, where growth prospects are strong. • Fostering innovation and agility: In fast-paced tech environments, spin-offs enable the crea- tion of smaller, more agile companies that can innovate without the bureaucratic constraints of a larger parent organisation. This is often
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