NETHERLANDS Law and Practice Contributed by: Marc Habermehl, Jeroen Smits, David de Groot and Max de Heer, Stibbe
Parties Involved and the Decision-Making Process Regardless of the VC fund’s legal form, organisa - tion and governance will generally look similar in each VC fund. The investors in the fund will be the limited partners, members or shareholders of the fund, and the fund will be managed by the managers who organise themselves through a separate vehicle (that is, the manager of the fund). There is also the management company, which consists of the employees responsible for the allocation of capital and for managing invest - ments. The fund manager controls the VC fund, makes investment decisions and represents the fund, provided that detailed arrangements are includ - ed in the fund documentation to also give a cer - tain level of control and oversight to the limited partners (eg, through reserved matters, though also by pre-agreeing to detailed investment guidelines). Legal Documentation Needed for Setting Up the Fund The documentation needed for the establish - ment of a VC fund typically consists of the fol - lowing. Fund agreement, members’ agreement or limited partnership agreement (LPA) This is the key agreement, setting out the terms and conditions of the VC fund. Subscription agreement The agreement pursuant to which the investors subscribe to the fund and oblige themselves to contribute capital. Management or services agreement The agreement between the fund manager/fund and the management company in relation to the
fund, pursuant to which the managers commit to provide management services to the fund against the payment of a management fee (see also 2.2 Fund Economics regarding the man - agement fee). Side letters Larger investors in funds, in particular, may require additional investor rights, which are typi - cally set out in “side letters” . Such rights may include additional approval rights, co-invest - ment rights and “most favoured nation” clause. Deed of incorporation The notarial deed of incorporation, together with its articles of association, is required for a co- operative and for a private limited liability com - pany, but not for a limited partnership, which can be established without the involvement of For managing the fund, the management com - pany receives a management fee pursuant to a management or services agreement (see 2.1 Fund Structure ), which is used to pay certain costs incurred on its behalf (eg, personnel). During the investment period (ie, the stage in the life of a VC fund where the fund manager invests the investors’ capital), the management fee typi - cally amounts to 1.5% to 2% of the committed capital per year. Following the investment period (ie, when the VC aims to exit its investments), the management fee generally amounts to such percentage of the unrealised investments (pos - sibly subject to a step down). Carried Interest The fund managers participate in the fund’s eco - nomics through so-called carried interest. Car - a Dutch civil law notary. 2.2 Fund Economics The Management Fee
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