Company Formations: A jurisdictional guide to setting up a business

QUESTION ONE – What are the most common structures used when international clients want to form a company in your jurisdiction? Any examples?

The Netherlands is popular with international clients who wish to set up new businesses. In the last few years, a large number of newcomers have arrived in the Dutch market. Many of them are innovative start-ups. There are good opportunities for newcomers, with active support from the government and good access to venture capitalists. The economy is healthy and shows stable growth. Relatively strong sectors in the Netherlands are agro & food, horticulture, chemicals, logistics, maritime and water, creative industry, life sciences and high-tech materials and systems.

As a vehicle for both operational and holding activities, the use of a private limited liability company (BV) is most common. In the past, the use of a cooperative was beneficial for distributions of profits, though this advantage no longer exists. 

For dividend withholding purposes, it is usually advised that shares of a Dutch operational company are not directly held by individuals residing outside the Netherlands. A foreign company on top of the Dutch company is a good remedy for that.

Holding BV

The Dutch holding structure is continuously popular. As the Netherlands has an open economy with many multinationals, the conditions for holding companies are, and will remain, favourable. Dutch holding companies are attractive for a number of reasons. These include favourable holding regimes, the level of asset protection when investing in risky countries, flexible law for complex cooperation, international flight connections, proven structure, English speaking staff, a good legal and financial infrastructure and efficient dispute resolution.

Trading BV

Dutch trading company enjoy increased popularity for import from outside the EU, due to Brexit. Dutch trading companies with local clients can benefit from a favourable VAT regime and good logistical infrastructure.

Foundation/STAK

For various applications, the Dutch foundation is popular. For international clients, the STAK, a type of foundation, can be used for estate planning, which enables families to efficiently shift beneficial ownership to heirs whereby the control over the assets, often shares in a company, shall be with the board of the STAK. The board can consist of one or more family members or trusted persons. This enables a (gradual) transfer of beneficial ownership of a company to a large number of family members, whereby only a limited amount of family members or trusted persons will be in charge over the business. It also allows the transfer of beneficial ownership of a company from a parent to its children whereby the parent stays in charge over the business.

The STAK is also used to keep control over family businesses listed on the stock exchange. The STAK enables the issuance of depository receipts instead of shares at public offerings. Well-known companies that apply the STAK for control are Heineken and Anheuser-Bush InBev. In these examples, shares have been contributed to a STAK which issued depositary receipts. The depository receipts holders have the dividend rights of the shares. The voting rights are with the board of the STAK, and the members of the STAK are appointed by the family members. As a result, the family, as advisors of the board of the STAK, can indirectly control the shareholder meeting.

Further the Dutch foundation is used by international clients for (i) charity, (ii) as family fund whereby the contributed funds shall be invested and distributed in line with the objectives of the articles and list of wishes (this creates an orphan structure with many characteristics of a trust), (iii) securitization, which uses the orphan property of the foundation to create a floating structure to offload certain assets from a balance sheet of for example a bank.

The Dutch collective investment fund (FGR) can be an interesting vehicle for an investment fund (often portfolio investments). It exists of a dipartite agreement between an investor and asset manager (sometimes expanded to a tripartite agreement with a custodian). Also here the Dutch foundation can be applied. One or more of the parties to the agreement can have a foundation as its legal form, which mitigates the risk of bankruptcy.

QUESTION TWO – Please detail some of the favourable and unfavourable legislation that businesses considering establishing a presence in your jurisdiction should be aware of? How can you help them to streamline the process?

For a foreign party, it is easy to get access to the Dutch market. ABiLiTieS Trust can coordinate the full formation and registration process. An advantage of the Netherlands is that Dutch corporate law is very flexible. If required, the articles of association and shareholders agreement can be tailor-made, which is a large advantage in the case of complex cooperation. Under Dutch regulations, it is also possible to hire staff from outside the EU. In the case of a company with employees, please keep in mind that Dutch workers are well protected in case of sickness and that there are limited reasons for dismissal in case of a permanent contract. In particular for trading and holding activities, it is important to meet the tax substance requirements. ABiLiTieS Trust is specialised in providing support to meet the substance criteria.

QUESTION THREE – What due diligence is required to be undertaken by company formations agents under anti-money laundering laws in your jurisdiction?

The due diligence that is required to be undertaken by company formations agents in the Netherlands in respect of anti-money laundering laws is risk-based. The higher the risk, the more compliance efforts shall be made. People with more than 25 per cent of beneficiary rights shall be identified, and a structure chart provided. A PEP statement shall be signed and/or PEP status checked in compliance databases. In case the anti-money laundering risk is being considered high, a request to substantiate the source of wealth of the beneficiaries and funds in the structure will be made, on the basis of independent information.