NETHERLANDS Law and Practice Contributed by: Gianluca Kreuze, Ruben den Hollander, Anne van Geen and Sanne van Esterik, Loyens & Loeff
Moveable assets These are created by way of a right of pledge and can take two forms: • possessory right of pledge – created by bringing the moveable assets under the effec- tive and exclusive control of the secured party (or a third party acting on its behalf). As this might raise practical difficulties in the ordinary course of business of a security provider, it is more common to create a non-possessory right of pledge. • non-possessory right of pledge – does not require the secured party taking control over the assets. Instead, it is created by entering into a private deed which is registered with the Dutch tax authorities (no public register; date stamp only). Upon the occurrence of a certain trigger event, the non-possessory pledge can be converted to a possessory pledge. Receivables These are created by way of a right of pledge and can take two forms: • disclosed right of pledge – created by enter- ing into a private deed and notification to the debtor of the right of pledge. A disclosed right of pledge can cover all existing and future receivables and allows the secured party to collect the receivables. In practice, the secured party authorises the security provider to keep on collecting receivables until the occurrence of a certain trigger event. • undisclosed right of pledge – does not require debtors to be notified but merely requires a private deed which is registered with the Dutch tax authorities. An undisclosed right of pledge covers all receivables existing on the day of the registration and future receivables that directly result from existing legal relation-
Creation of Security For a valid security right, collateral needs to be capable of being pledged (ie, no transfer/assign- ment restrictions apply – see 10.1 Other Acquisi- tion Finance Issues – and sufficiently identifiable (a generic description often suffices). In addition, the following conditions need to be met: • the security provider must have the authority to dispose of and encumber the collateral; • there need to be an agreement to create a security right; and • the formalities for creating security as pre- scribed by law are complied with. Formalities and Perfection Requirements Unlike other jurisdictions, the Netherlands does not provide for the concept of “floating charge” . The formalities and perfection requirements for creating security vary per type of asset: Shares These are created pursuant to a notarial deed of pledge, executed in front of a civil law notary. The security provider typically remains entitled to collect dividends and exercise voting rights until a certain trigger event occurs. Security over shares needs to be registered in the sharehold- er’s register to have third-party effect. Real estate This is created by way of a notarial deed of mortgage, executed in front of a civil law notary. The deed of mortgage must be registered with the Land Register upon execution. In addition, the mortgage usually provides for a maximum secured amount, which typically amounts to the principal loan amount increased by 40% to cover interest and costs.
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