NETHERLANDS Law and Practice Contributed by: Marc Habermehl, Jeroen Smits, David de Groot and Max de Heer, Stibbe
in principle, not taxed at fund level. Instead, the investment in the underlying portfolio company – and any income and/or gains arising there - from – are, for Dutch tax purposes, attributed to the investors on a pro rata basis, and are taxed accordingly. In this respect, it should be noted that, in principle, a foreign investor that invests in a Dutch-based, tax-transparent VC fund would – from a Dutch domestic perspective – be regard - ed as having a deemed Dutch taxable presence, to which the investments in the underlying port - folio companies are attributed. 4.3 Government Endorsement See the Dutch Trends and Developments chap - ter in this guide. A customary feature in start-ups and growth companies is an employee incentive plan. In short, this is a plan under which employees can participate in the company and profit from its future growth. This is an important feature for incentivising employees to grow the business, and is equally important for attracting talented people (especially since not all start-ups and growth companies are able to offer salaries simi - lar to those with whom they compete for com - petent personnel). 5. Employment Incentives 5.1 General It should be noted that there may be regulatory constraints to granting employee incentives. A 20% bonus cap applies to Dutch financial insti - tutions, for example, which significantly limits the room for granting employee incentives. Vesting To ensure that employees are also inclined to stay at the company and to actually contribute
to its success, it is customary for an employee’s entitlement to participation to be subject to vest - ing. An annual vesting of 20% is not uncommon, until 100% is vested at the fifth anniversary of the start of the employment. However, this varies per company. Leaver Arrangements To further ensure that employees remain involved with the company and do not leave the com - pany after their package has fully vested, leaver arrangements typically apply. Depending on the reason for leaving the company, the employee may qualify as “good leaver” or “bad leaver” (sometimes there is also a third category, the “neutral leaver” or “intermediate leaver” ). The consequences of each qualification vary per plan, but “good leaver” typically remains enti - tled to its vested participation rights, and “bad leaver” forfeits all its participation rights. “neutral leaver” may, for instance, forfeit only a certain percentage of its vested participation rights. In order to protect and stabilise the control and ownership structure of the company, leaver arrangements generally provide for a call option that grants investors or the company the right to purchase the vested participation rights upon a leaver event for the leaver price. Commonly Used Incentive Plan Structures The following structures for incentive plans are commonly used in the Netherlands. Equity plans Actual shares may be issued in relation to the management incentive plan. To ensure that the employees have the benefit of the economic rights but not of the voting and other rights, these shares are typically issued to a STAK (see also 3.3 Investment Structure ), which in its turn issues depositary receipts for the shares it holds to the participating employees. The board of the
390 CHAMBERS.COM
Powered by FlippingBook