Mergers and acquisitions in the Netherlands operate within a sophisticated legal system that demands careful planning and strict compliance.
Whether you’re buying a Dutch company or merging with one, you’ll need to navigate corporate law, competition regulations, and stakeholder protections that differ from other jurisdictions.
A single misstep in documentation or regulatory approval can delay your deal by months or sink it entirely.
The Dutch M&A process requires precise attention to legal frameworks, from notifying the Authority for Consumers and Markets to protecting employee rights under co-determination rules.
Most failed transactions trace back to inadequate due diligence, poor structure choices, or overlooked regulatory requirements.
Understanding these legal touchpoints before you start negotiations will save you time, money, and frustration.
You’ll learn what documentation you need, which approvals are mandatory, how different deal structures affect your obligations, and what pitfalls to avoid during each phase of the transaction.
Key Legal Framework for Mergers and Acquisitions in the Netherlands
The Netherlands operates under a comprehensive legal system that governs M&A transactions through multiple laws and regulatory bodies.
Dutch law requires companies to navigate specific regulations depending on their structure, listing status, and the nature of the transaction.
Major Regulatory Authorities and Their Roles
The Authority for the Financial Markets (AFM) supervises public bids for securities listed on regulated markets in the Netherlands, particularly Euronext Amsterdam.
You must obtain AFM approval for your offer memorandum before launching any public bid.
The AFM focuses on procedural compliance and can impose fines for violations, but it does not act as an arbiter during takeover battles.
The Authority for Consumers and Markets (ACM) reviews mergers and acquisitions for competition concerns.
Large companies planning to merge must notify the ACM if specific turnover thresholds are met.
The ACM can block transactions or impose conditions to prevent market dominance.
The Enterprise Chamber at the Amsterdam Court of Appeal holds exclusive jurisdiction to rule on mandatory bid requirements.
This specialised division also handles mismanagement proceedings and can take temporary actions to maintain the status quo during disputes.
Shareholders, special interest foundations, or the target company itself can request rulings from this chamber.
Overview of Applicable Dutch Laws and Regulations
The Financial Supervision Act (Wet op het financieel toezicht) and the Dutch Civil Code (Burgerlijk Wetboek) form the foundation of M&A regulation.
These laws establish the core principles that govern transactions.
The Public Bid Decree (Besluit openbare biedingen) provides detailed rules for public offers, including bid timetables, required announcements, and offer memorandum contents.
You must follow these procedures precisely when making a public bid.
The Works Councils Act (Wet op de ondernemingsraden) may require you to consult with employee representatives.
This requirement applies when your transaction affects workers’ interests.
Additional regulations include the EU Market Abuse Regulation, which prevents insider trading and market manipulation.
The Competition Act (Mededingingswet) and EU Merger Regulation may also apply depending on your transaction’s size and market impact.
Dutch Company Structures Relevant to M&A
Two primary company structures exist under Dutch company law: the NV (public limited company) and the BV (private limited company).
Both structures feature in M&A transactions, though each has distinct characteristics.
BV structures are the most common form for private companies.
These entities offer flexibility in their articles of association and can impose various transfer restrictions on shares.
You’ll find that most private acquisitions involve BV targets.
NV structures are typically used for publicly traded companies listed on regulated markets.
These entities face stricter governance requirements under corporate law.
A statutory merger between NV companies or between BVs follows specific Civil Code procedures, including shareholder approval and creditor protection measures.
Your target’s articles of association will dictate many transaction requirements.
These documents may include pre-emption rights, transfer restrictions, or board approval requirements that affect your acquisition strategy.
Pre-Transaction Planning and Documentation
Proper documentation and stakeholder management before signing any agreements can prevent costly disputes and streamline the transaction process.
Your approach to confidentiality, preliminary agreements, and stakeholder coordination will directly impact the success of your Dutch M&A deal.
Non-Disclosure Agreements and Confidentiality
You must implement a non-disclosure agreement before sharing any sensitive information about your company or the target.
Dutch law allows parties significant freedom in structuring confidentiality terms, but your agreement should clearly define what constitutes confidential information and establish specific exclusions.
Your non-disclosure agreement should address the treatment of information after the transaction fails or completes.
Include provisions for the return or destruction of materials and restrict the use of information solely to evaluating the proposed transaction.
Key elements to include:
- Duration of confidentiality obligations (typically 2-5 years)
- Permitted disclosures to advisers and financiers
- Standstill provisions preventing unsolicited approaches
- Consequences of breach under Dutch law
You should require all parties with access to confidential information, including advisers and potential financiers, to sign separate non-disclosure agreements or acknowledgments.
Letter of Intent and Term Sheet Preparation
Your letter of intent establishes the framework for negotiations and signals serious commitment whilst preserving flexibility.
Under Dutch law, parties enjoy substantial freedom to determine which provisions are legally binding versus merely expressions of intent.
You must clearly distinguish between binding and non-binding clauses in your letter of intent.
Typically, exclusivity periods, confidentiality obligations, and cost allocation provisions are binding, whilst commercial terms remain subject to further negotiation and due diligence.
Binding provisions typically include:
- Exclusivity period (usually 4-12 weeks)
- Cost-bearing arrangements
- Confidentiality requirements
- Governing law and dispute resolution
Your term sheet should outline the purchase price structure, payment terms, conditions precedent, and the anticipated timeline.
Dutch transactions often include earn-out provisions or price adjustment mechanisms that require precise drafting to avoid disputes.
You should specify whether the transaction requires approval from the Authority Consumer and Market (ACM) for competition clearance.
Stakeholder Identification and Involvement
You need to identify all relevant stakeholders early in the planning phase to avoid complications during execution.
In Dutch companies, this includes shareholders, the management board, the supervisory board (if applicable), works councils, and any minority shareholders with special rights.
Your management board carries primary responsibility for the transaction, but major decisions require approval from your shareholders through an extraordinary general meeting.
If your company has a supervisory board, you must secure their approval before proceeding with significant transactions.
Minority shareholders may hold protective rights under your articles of association or shareholders’ agreement that grant them veto power over M&A transactions.
You should review all corporate documents and agreements to identify these rights before commencing negotiations.
Critical stakeholders to assess:
- Shareholders with blocking minorities or special rights
- Directors requiring contractual change-of-control provisions
- Works councils entitled to consultation under Dutch law
- Key employees whose retention is essential
Your communication strategy should balance transparency with confidentiality requirements.
Premature disclosure can unsettle employees and customers, whilst delayed communication may breach legal obligations or damage trust.
Due Diligence Process in Dutch M&A
Due diligence in the Netherlands requires buyers to examine a target company’s legal standing, financial health, and regulatory compliance before closing any deal.
Dutch law allows sellers to provide vendor reports, but buyers typically conduct their own investigations through virtual data rooms to uncover risks and verify claims.
Legal Due Diligence Essentials
Legal due diligence forms the backbone of any Dutch M&A transaction.
You need to review all corporate documents, including articles of association, shareholder agreements, and board resolutions to confirm the target company’s legal structure is sound.
Your legal team should examine all material contracts with customers, suppliers, and partners.
Look for change of control clauses that might trigger renegotiation rights after the acquisition.
You also need to check intellectual property registrations, employment contracts, and any ongoing or threatened litigation.
Property rights deserve special attention.
Verify ownership of real estate, check for mortgages or liens, and review lease agreements.
In the Netherlands, it’s common for sellers to provide a legal fact book, but you should always conduct your own independent review rather than relying solely on vendor materials.
Financial and Tax Considerations
Your financial due diligence must verify the target’s reported earnings and identify any hidden liabilities.
Review at least three years of audited financial statements, tax returns, and management accounts to spot trends or irregularities.
Tax considerations are crucial in Dutch M&A.
You need to examine the target’s VAT position, including any outstanding assessments or disputes with the Dutch Tax Authority.
Check if the company has applied for binding tax rulings (BTI) that might affect post-acquisition tax planning.
Look at the target’s transfer pricing documentation if it operates internationally.
The Netherlands has strict substance requirements, so verify that any holding or financing structures meet Dutch tax law standards.
Hidden tax liabilities can destroy deal value quickly.
Compliance and Regulatory Review
Regulatory approvals can make or break your timeline.
If the transaction meets certain turnover thresholds, you must notify the Dutch Authority for Consumers and Markets (ACM) before closing.
The ACM has 25 business days to review the filing, which can extend to four months if they launch a deeper investigation.
For larger deals affecting EU-wide competition, you may need clearance from the European Commission instead of or in addition to the ACM.
The Ministry of Economic Affairs also screens foreign investments in sensitive sectors under national security rules.
Your compliance review should cover industry-specific licences and permits.
Check environmental permits, data protection compliance under GDPR, and any sector regulations that apply to the target’s business.
Missing regulatory approvals can delay closing or even unwind a completed transaction.
Principal Deal Structures and Legal Instruments
Dutch M&A transactions typically employ three main structures: share purchases (acquiring equity in a target entity), asset purchases (buying selected assets and liabilities), or legal mergers (statutory combinations of entities).
Each structure carries distinct legal requirements, tax implications, and liability considerations that directly affect transaction execution and post-closing obligations.
Share Purchase Versus Asset Purchase
A share purchase involves acquiring shares in Dutch entities, transferring ownership without dissolving the target company.
You execute a share purchase agreement (SPA) that governs the transfer of shares, representations, warranties, and indemnities.
The target company continues its legal existence with all existing contracts, licences, and obligations intact.
Dutch law requires notarial deeds for transfers of shares in private limited companies (BVs) unless the articles of association permit written transfers.
Share purchases mean you inherit all liabilities, including hidden or contingent obligations, making thorough due diligence essential.
Asset purchases involve acquiring specific assets and assuming selected liabilities through an asset purchase agreement (APA).
You gain greater control over which liabilities you assume, avoiding unwanted obligations.
However, asset deals require individual transfer of each asset type—real estate needs notarial deeds, employees transfer under Dutch employment protection rules, and contracts may need counterparty consent.
Key differences:
- Liability exposure: Share purchases transfer all liabilities; asset purchases allow selective assumption
- Transfer requirements: Share deals need notarial deeds for BVs; asset deals require individual asset transfers
- Third-party consents: Share purchases rarely need contract consents; asset purchases often do
- Tax treatment: Different capital gains and VAT implications apply to each structure
Legal Mergers and Statutory Procedures
A legal merger combines two or more Dutch entities into one surviving entity through statutory procedures governed by the Dutch Civil Code. The disappearing entity ceases to exist, with all assets, liabilities, and obligations automatically transferring to the surviving company by operation of law.
Dutch statutory mergers require strict compliance with formal procedures. You must prepare a merger proposal signed by all merging entities’ boards, draft explanatory memoranda, and obtain accountant reports on the exchange ratio.
The merger proposal requires notarial execution and filing with the Dutch Trade Register at least one month before shareholder approval. Shareholders of each merging entity must approve the merger, typically requiring at least two-thirds majority unless articles specify otherwise.
Creditors can object within one month after Trade Register filing if the merger jeopardises their claims. The merger becomes effective upon filing the deed of merger, executed after satisfying all procedural requirements.
Statutory mergers avoid individual asset transfers and automatically preserve all contracts, licences, and permits. However, the rigid procedural timeline—typically three to four months minimum—makes mergers slower than share or asset purchases.
Cross-Border Mergers and EU Considerations
Cross-border mergers between Dutch entities and companies in other EU member states follow harmonised procedures under Directive (EU) 2019/2121, implemented in Dutch law. These mergers enable entities from different European Economic Area jurisdictions to combine whilst maintaining operational continuity across borders.
You must comply with both Dutch requirements and the target jurisdiction’s statutory procedures, including preparing merger proposals in each country and satisfying multiple regulatory filings. Each merging company needs a pre-merger certificate from its home authority confirming compliance with national requirements before proceeding.
Dutch courts or notaries issue certificates verifying proper completion of Dutch procedural steps. The merger becomes effective when you register the final deed in the jurisdiction of the surviving entity.
Cross-border mergers face additional complexity from differing national laws on employee participation rights, creditor protection, and minority shareholder protections.
Cross-border merger considerations:
- Compliance with multiple jurisdictions’ statutory requirements simultaneously
- Longer timelines due to dual regulatory approval processes
- Employee consultation requirements under both Dutch and foreign law
- Potential tax complications from different national tax regimes
Regulatory Notifications, Approvals and Competition Law
Dutch M&A transactions require careful attention to competition law thresholds under the Mededingingswet. Sector-specific approvals apply to regulated industries, and the EU Foreign Subsidies Regulation introduces new screening requirements for foreign support.
Competition Law and Notification Thresholds
The Mededingingswet (Dutch Competition Act) requires you to notify the Authority for Consumers and Markets (ACM) when specific turnover thresholds are met. You must file when the combined worldwide turnover exceeds €150 million and at least two parties each have turnover exceeding €30 million in the Netherlands.
The ACM assesses whether your transaction would restrict competition or create market dominance. Market share analysis plays a central role in this evaluation.
If your combined market share exceeds 20-30% in relevant product or geographic markets, expect heightened scrutiny.
Key notification requirements include:
- Pre-merger notification before closing the transaction
- Filing complete documentation with the ACM within specified timeframes
- Waiting for clearance before implementing the merger
- Public disclosure of the transaction through the ACM’s public register
Failure to notify when thresholds are met results in fines up to €900,000 or 10% of turnover. The ACM typically conducts its review within 4-13 weeks, depending on complexity.
Sector-Specific Approvals and National Security Screening
Regulated sectors demand additional approvals beyond competition clearance. If you operate in financial services, you need approval from the Dutch Central Bank (DNB) and possibly the AFM for securities-related activities.
The Healthcare Authority (NZa) reviews healthcare transactions to protect patient interests.
Sectors requiring specific approvals:
| Sector | Regulatory Authority | Focus Area |
|---|---|---|
| Banking and insurance | DNB | Financial stability |
| Securities and markets | AFM | Market integrity |
| Healthcare | NZa | Quality of care |
| Energy and utilities | ACM | Supply security |
The Netherlands Investment Screening Act enables government review of acquisitions that may threaten national security or public order. This applies particularly to critical infrastructure, sensitive technology, and defence-related businesses.
You must also consult works councils when required under Dutch law, though this is a consultation requirement rather than a formal approval process.
EU and International Requirements
The EU Foreign Subsidies Regulation (FSR), effective from 12 October 2023, requires notification when your transaction involves financial contributions from non-EU governments exceeding €50 million in the three years before signing. This applies when the EU-generated turnover of at least one merging party exceeds €500 million.
EU Merger Regulation applies when:
- Combined worldwide turnover exceeds €5 billion
- EU-wide turnover of at least two parties exceeds €250 million each
When EU thresholds are met, you file with the European Commission rather than the ACM. The Commission coordinates with member states and provides one-stop-shop clearance for qualifying transactions.
International dimensions require attention to foreign merger control regimes. If your target operates in multiple jurisdictions, you may face parallel notifications in Germany, France, or other markets where thresholds are met.
Competition law requirements vary significantly between jurisdictions. Coordinate your regulatory strategy early.
Regulatory authorities increasingly share information and align their reviews, particularly regarding market definition and competitive effects.
Shareholder, Employee and Stakeholder Rights
Dutch M&A transactions require careful attention to various stakeholder rights, particularly regarding shareholder approval mechanisms, protections for minority investors, and mandatory employee consultation processes.
Shareholder Approval and Voting Rights
Most significant M&A transactions require shareholder approval through an extraordinary general meeting. Your articles of association will specify the exact voting thresholds needed, though Dutch law typically requires a simple majority for merger resolutions unless your articles demand higher percentages.
Shareholders must receive proper notice of the meeting, usually at least 15 days in advance. The notice should include comprehensive information about the proposed transaction, financial statements, and the merger proposal itself.
Key voting requirements include:
- Share transfers: Generally approved by the board unless articles of association require shareholder consent
- Mergers and divisions: Require approval at an extraordinary general meeting
- Asset sales: May need shareholder approval if considered material under your articles
Each share typically carries one vote, though your articles of association may provide for different voting rights across share classes. Preference shareholders may have special voting rights on matters affecting their preferential position.
Minority Shareholder Protections
Minority shareholders in Dutch companies enjoy several legal protections during M&A transactions. The Dutch Civil Code provides safeguards against oppressive conduct and unfair treatment during mergers and acquisitions.
Minority shareholders holding at least 10% of issued capital can request a special investigation into company affairs if they suspect mismanagement. They may also petition the Enterprise Chamber to block transactions that harm their interests or violate proper corporate governance.
During squeeze-out procedures following an acquisition, minority shareholders have the right to fair compensation based on independent valuation. If you disagree with the offered price, you can challenge it through court proceedings within specified timeframes.
Your protections include:
- Right to attend and vote at the extraordinary general meeting
- Access to merger documentation and financial statements
- Ability to challenge unfair squeeze-out prices
- Protection against discriminatory treatment compared to majority shareholders
Employee Consultation and Works Council Procedures
Dutch law mandates employee consultation for companies with a works council before completing M&A transactions. If your company employs at least 50 people, you likely have a works council that must receive timely notification about proposed transactions.
The works council holds advisory rights on decisions significantly affecting employees, including mergers, acquisitions, and substantial operational changes. You must provide the works council with all relevant information at least one month before implementing the transaction, allowing adequate time for advice.
The works council can request additional information, engage external advisers, and provide formal advice. Whilst their advice is not binding, you must demonstrate serious consideration of their input.
Failure to follow proper consultation procedures can result in legal challenges that delay or invalidate the transaction. For European-scale transactions, additional consultation requirements may apply under European Works Council regulations.
You should identify early whether cross-border consultation obligations exist based on your company structure and the scope of the transaction.
Common Pitfalls and Best Practices in Dutch M&A
Dutch M&A transactions require careful attention to deal protection mechanisms, public disclosure obligations, and post-merger integration challenges.
Typical Deal Protection and Exclusivity Measures
Deal protection in Dutch M&A transactions often includes break fees, no-shop clauses, and matching rights. Break fees typically range from 1% to 3% of the transaction value, though the Enterprise Chamber may scrutinise arrangements that appear to unfairly limit the target board’s fiduciary duties.
Your exclusivity period should be reasonable—usually 30 to 90 days—to allow proper due diligence whilst maintaining board flexibility. Dutch law permits various protection measures, but you must balance these against the board’s duty to act in the company’s interest.
For instance, partial bids like América Móvil’s KPN offer in 2012 demonstrated how deal structures can protect strategic interests whilst meeting regulatory requirements. Private equity transactions often employ more robust protection mechanisms given the longer negotiation timelines.
You should document all deal protection terms clearly in your share purchase agreement. Include specific triggers for break fee payments and define what constitutes a superior proposal.
Dutch courts will examine whether these provisions unreasonably prevent the board from considering alternative offers that might better serve shareholders.
Public Disclosure and Transparency Requirements
Public disclosure requirements under the Financial Supervision Act demand strict timing and content compliance. You must announce your bid intentions immediately when market-moving information exists, typically before market opening.
The AFM supervises these disclosures and can impose fines for violations. Your offer memorandum requires AFM approval before publication.
This document must include detailed financial information, deal rationale, and any conditions precedent. You should prepare for an eight-week review period, though the AFM often provides feedback within four weeks for straightforward transactions.
Public companies face additional disclosure obligations under the EU Market Abuse Regulation. You must carefully manage inside information and announce material developments promptly.
PPG’s approach to public M&A transactions in the Netherlands demonstrates the importance of coordinated disclosure strategies. Private M&A transactions have fewer disclosure requirements, but you still need to consider Works Councils Act obligations.
Employee consultation may be required, which affects your transaction timeline and confidentiality arrangements.
Post-Merger Integration and Compliance Challenges
Post-merger integration often fails due to insufficient planning for Dutch business culture differences and compliance requirements. You should address share capital restructuring, governance changes, and regulatory notifications within your first 100 days.
Dutch business culture emphasises consensus-building and stakeholder engagement. Your integration plan must account for works council consultation requirements and employee co-determination rights.
Failing to engage properly with employee representatives can delay critical business decisions and damage morale. Compliance challenges include ongoing AFM supervision for public companies, merger control clearances, and sector-specific regulations.
The Vifo Act requires post-completion notifications for investments in sensitive technologies, even if no pre-closing approval was needed. You must monitor changes in shareholding thresholds that trigger additional reporting obligations.
Your integration team should establish clear governance structures early. This includes board composition, management reporting lines, and decision-making authorities.
Many buyers underestimate the complexity of harmonising IT systems, contracts, and operational processes under Dutch legal requirements.
Frequently Asked Questions
Dutch M&A transactions require careful attention to due diligence processes, regulatory approvals from the ACM, employment protections under works council rules, and strategic tax planning around participation exemptions and transfer taxes.
What are the essential due diligence requirements in Dutch M&A transactions?
You need to conduct a thorough investigation across financial, legal, operational, and commercial areas. This process confirms the seller’s claims and uncovers potential risks before you commit to the deal.
Financial due diligence examines the target company’s accounts, cash flow statements, and tax filings. You should verify revenue figures, profit margins, and any outstanding debts or liabilities.
Your accountants will look for irregularities or inconsistencies that could affect the purchase price. Legal due diligence covers corporate structure, contracts, intellectual property, and litigation risks.
You must review all material agreements with customers, suppliers, and partners to identify change of control clauses that could be triggered by the transaction. Check whether the target owns or licences its intellectual property and verify that all registrations are current.
Operational due diligence assesses the target’s day-to-day business functions. You should examine supply chain relationships, IT systems, and production capabilities.
This helps you understand how smoothly the company will integrate into your existing operations. You must also investigate compliance with environmental regulations and health and safety standards.
Dutch authorities take these matters seriously, and any violations could lead to fines or remediation costs after closing.
How should one efficiently navigate antitrust regulations within the Netherlands in the context of a merger or acquisition?
You must notify the Dutch Authority for Consumers and Markets (ACM) if your transaction meets specific turnover thresholds. The notification requirement applies when the combined Dutch turnover of all parties exceeds €150 million and at least two parties each have Dutch turnover exceeding €30 million.
The ACM will assess whether your deal significantly impedes effective competition in the Dutch market. They have an initial review period of four weeks to decide if the merger raises concerns.
If they identify potential issues, they can launch an extended investigation lasting up to 13 weeks. You cannot complete your transaction until you receive clearance from the ACM.
This is called a standstill obligation, and violating it can result in substantial fines. You should build this waiting period into your transaction timeline from the start.
European Union merger control may also apply to larger deals. If your transaction meets the EU thresholds, you must notify the European Commission instead of the ACM.
The EU has exclusive jurisdiction over these cases, which means you don’t need to notify national authorities in individual member states. You should consider filing a voluntary notification even if your deal falls below the thresholds.
This provides legal certainty and protects you from challenges later. The ACM can investigate unnotified transactions that raise competition concerns for up to five years after closing.
What specific employment law considerations must be taken into account during a Dutch M&A deal?
You must comply with strict employee protection rules that automatically transfer employment contracts to the new owner. Under Dutch law, when you acquire a business as a going concern, all existing employment relationships transfer by operation of law.
This is known as automatic transfer of undertaking. The terms and conditions of employment remain unchanged after the transfer.
You cannot dismiss employees or alter their contracts solely because of the transaction. Any dismissals must be justified by independent business or operational reasons.
Works councils play a crucial role in Dutch M&A transactions. If the target company has a works council, you must inform and consult with them before completing the deal.
The works council has the right to request information about the transaction’s consequences for employees. You need to provide the works council with details about your plans for the business, including any restructuring or redundancies.
The works council can issue an advice on the transaction. Whilst this advice is not binding, ignoring it without good reason can lead to legal challenges.
Notification timing is critical. You must inform the works council as soon as the decision to pursue the transaction has been made but before it becomes definite.
Getting this timing wrong can delay your deal or even allow the works council to seek a court order blocking completion. Pension arrangements require special attention in Dutch M&A deals.
You must determine whether employees participate in a company pension scheme or an industry-wide scheme. The transfer of pension obligations can be complex and may require negotiations with pension providers.
Can you outline the key tax implications for M&A activities under Dutch law?
You should structure your transaction to take advantage of the participation exemption, which eliminates taxation on dividends and capital gains from qualifying shareholdings. This exemption applies when you hold at least 5% of the shares in a company and meet certain conditions regarding the nature of the subsidiary’s activities.
The choice between a share deal and an asset deal has significant tax consequences. In a share deal, you acquire the shares of the target company, and the company’s tax position remains unchanged.
In an asset deal, you purchase specific assets and liabilities, which may trigger transfer taxes and VAT. Transfer tax applies to the acquisition of Dutch real estate at a rate of 10.4% for commercial property.
This applies whether you buy real estate directly or acquire shares in a company whose assets consist primarily of Dutch real estate. You cannot avoid this tax through clever structuring, as Dutch law has robust anti-avoidance rules.
You may need to pay stamp duty on certain documents related to the transaction, though the rates are generally low. VAT can apply to asset deals, particularly when you acquire business assets that are not covered by the business transfer exemption.
Losses carried forward by the target company may be restricted after the transaction. If there is a change of ownership combined with a significant change in business activities, the target may lose the ability to offset historic losses against future profits.
You should factor this into your valuation. Interest deduction limitations can affect your financing structure.
The Dutch earnings stripping rule limits the deduction of interest costs to 20% of EBITDA for amounts exceeding €1 million. This particularly impacts highly leveraged acquisitions.
What are the typical representations and warranties expected in Dutch M&A agreements?
You can expect the seller to provide representations about the target’s corporate organisation, financial statements, and legal compliance. These statements form the foundation of your purchase agreement and protect you against inaccuracies in the information provided during due diligence.
Standard representations cover the target’s incorporation and share capital. The seller typically confirms that all shares are validly issued, fully paid up, and free from encumbrances.
They also represent that there are no restrictions on transferring the shares to you. Financial representations address the accuracy of accounts and the absence of undisclosed liabilities.
You should insist on confirmation that the accounts were prepared in accordance with Dutch accounting standards. The accounts should give a true and fair view of the company’s financial position.
