NETHERLANDS Law and Practice Contributed by: Folko de Vries, Ilse van Gasteren, Robert Smits and Stern Flik, Clifford Chance
5. Guarantees and Security 5.1 Assets and Forms of Security
Corporate Benefit Corporate benefit is a general requirement to be established for any act of a company. Eve - ry director of a company has a duty to act in the best interests of the company. This means that every act of the company should provide a direct or indirect “benefit” to the company and should not jeopardise the company’s exist - ence. Corporate benefit is relevant in particular when a company grants guarantees or security either upstream or cross-stream and the benefit is more likely to be indirect. If directors are in breach of their duty, the act of the company may be unenforceable where enforcement under the circumstances would be unacceptable pursuant to the standard of reasonableness and fairness. 5.4 Restrictions on the Target Financial Assistance Financial assistance (for any public company (NV) and its subsidiaries) and corporate ben - efit (especially for upstream and cross-stream guarantees) issues have to be addressed. Finan - cial assistance issues should be considered if a company guarantees or gives security for a loan that is used to acquire the company or to the refinancing of such a loan. There is no white wash procedure in the Netherlands. In practice, an NV will often be converted into a BV after its acquisition and, assuming certain other require - ments are met, financial assistance restrictions do not apply following such conversion. Prior to a conversion, a debt push down is commonly effected to mitigate financial assistance limita - tions. Corporate Benefit See 5.3 Downstream, Upstream and Cross- Stream Guarantees in relation to corporate benefit.
Security is available over all assets (save for very limited exceptions). Although very much dependent on the transaction, typical security consists of security over shares (taken by way of a notarial deed if the relevant company is a pri - vate company (BV)), security over various types of receivables, security over moveable assets and security over intellectual property rights. Security over real estate assets is typically excluded. Other than security over shares and real estate, which both require a notarial deed, there are limited formalities that apply to taking security in the Netherlands and any applicable formalities are not particularly time-consuming. Security is typically created to limit operational intrusiveness and unnecessary administrative burden. 5.2 Floating Charges and/or Similar Security Interests It is not possible under Dutch law to take a float - ing charge over the assets of a company. For cer - tain financings in the Netherlands it is customary to create security over various types of assets in a single document, as a close equivalent of a floating charge. For certain types of assets, Dutch law distinguishes between disclosed ver - sus undisclosed security and possessory versus non-possessory security. There is no difference between banks and private credit providers in respect of the terms of the security they require. 5.3 Downstream, Upstream and Cross- Stream Guarantees Financial Assistance See 5.4 Restrictions on the Target in relation to financial assistance.
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