NETHERLANDS Law and Practice Contributed by: Gianluca Kreuze, Ruben den Hollander, Anne van Geen and Sanne van Esterik, Loyens & Loeff
7. Lender Liability 7.1 Equitable Subordination Rules No Equitable Subordination The Netherlands does not acknowledge the concept of equitable subordination. More spe- cifically, there is no statutory provision under Dutch law pursuant to which shareholder loans are subordinated to the claims of other creditors. This means that claims of shareholders shall in principle not be subordinated and shall rank pari passu with other unsecured debt unless there is a contractual subordination of such claims. There have been a limited number of court cases in which the court ruled that a shareholder loan should be subordinated, even though there was no contractual basis to this effect. The circum- stances in this case law were rather exceptional (eg, a parent company provided a loan to its subsidiary which was considered to be “informal capital” , provided in circumstances and under conditions that a third party would not accept) and will likely not be relevant or applicable in the context where the lender is a professional party and not a controlling shareholder. There are no general hardening periods in the Netherlands. However, in an indirect way, there is a hardening period of one year in relation to fraudulent conveyance claims. Creditors and the bankruptcy trustee have the right to challenge the validity of certain transactions entered into by a company prior to bankruptcy which have been prejudicial to creditors (fraudulent convey- ance or actio pauliana). The challenge generally requires that both the company and (if the trans- action was entered into for consideration) the counterparty, knew or should have known that the other creditors would be prejudiced. For cer- 7.2 Claw-Back Risk Fraudulent Conveyance
tain transactions (eg, with related parties, where there is a significant imbalance in consideration, where the debtor pays or provides security for a debt that is not yet due), required knowledge is presumed if the transaction occurred less than one year prior to the bankruptcy or suspension of payments. This presumption does not apply if there was an existing obligation to create the security (predating the bankruptcy by more than one year), which is why often (in smaller or mid- market deals) the loan agreement will contain an undertaking to create (additional) security (posi- tive pledge). No Dutch registration tax, stamp duty or other similar documentary tax or duty is due in respect of or in connection with debt financing involving Dutch borrowers, except for Dutch real property transfer tax, which may be due upon a (deemed) acquisition of (an interest in) an asset that quali- fies as or a right over) real property situated in the Netherlands. Interest or other payments by a Dutch borrower for the granting of credit under the debt financ- ing should not attract Dutch VAT. 8.2 Withholding Tax/Qualifying Lender Concepts Withholding Tax Interest payments by a Dutch borrower under a loan provided by a third-party lender can in prin- ciple be made free from withholding or deduc- tion of or for Dutch taxation, except that: 8. Tax Issues 8.1 Stamp Taxes Stamp and Other Taxes • 25.8% Dutch conditional withholding tax may be applicable in respect of interest payments
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