Can you move the statutory seat of a foreign company to the Netherlands?
A lot of the entrepreneurs we do business with are starting an entirely new company, often from abroad. But in some cases you might already own a company, which you would like to move to a more stable and economically thriving location. Is this possible? And, more importantly; is it possible to move your company to the Netherlands in particular? According to current EU regulations, as well as Dutch national law, this is entirely possible. And we would like to help your with this, if you need assistance. In this article we will outline exactly how you can achieve this, which information you will definitely need and how Intercompany Solutions can assist you during the process, if necessary.
What does it mean to move your entire company to a new country and/or continent?
Often entrepreneurs start a business locally, to find out during a later stage that their direct environment doesn’t provide the best basis for their specific product, service or idea. Next to that, some countries on this planet simply offer more entrepreneurial possibilities than other(s). In such cases, it might be desirable to consider moving your company abroad. For example, if you would like to own a company that deals with resources such as water, it helps if your company is actually situated near water. This is just a crude example, but the fact of the matter is that a lot of companies would benefit from a registration in a foreign country, due to a much larger market potential.
If you want to consider the step of moving your company abroad, this entails some administrative as well as practical decisions and actions. In the long run, it will definitely provide you with enough business opportunities to earn back the investment of moving your company. The choice to decide where your company is situated is entirely yours; in this new day and age, we don’t need to have an office building anymore, nor a permanent residence in a certain country in order to establish a business there. Business is profitable for the entire world, and you as a (potential) business owner should be free to establish yourself in any desired location.
Why would you choose the Netherlands as your company’s home base of operations?
Once you decide to move your company abroad, the very first question you should ask yourself is: where am I going? This is a very valid question, one that deserves the proper time to think about, since you will need to connect your personal business goals with a certain type of inviting national climate. Even though the world is internationalizing at a high rate, all countries still have the benefit of keeping their unique traditions and national customs. This, in the end, is what makes us all unique. Hence, your business can definitely flourish in one of the 193 countries on this planet.
So why is the Netherlands a good decision? One of the main reasons mentioned by both media and reputable business platforms, is the fact that the Netherlands has always been excellent in (international) trade. This tiny country, with currently around 18 million citizens, has achieved a worldwide status as one of the most entrepreneurial countries in the world. The Dutch are famous for their innovative spirit, cross-border cooperation and ability to link multiple interesting yet also contradicting disciplines. If you decide to do business in the Netherlands, you will have plenty of opportunities to elevate your business to your desired status.
Next to the trading history, the Netherlands is also very welcoming towards foreigners and actively stimulates diversity in every way. The Dutch have learned from hundreds of years of travel all over the world, that every single nation has something valuable to offer. This, in turn, provides for a very colorful and lively business climate, with the potential to attract customers from all over the world. You are sure to find a broad clientele for your product or service, provided that it’s good. If you want to know more about the Dutch, you can read some of our blogs about special sectors and characteristics of the Netherlands as a business haven.
Is it legally possible to move your company oversees?
In order to understand how you can move your already existing foreign company, it is crucial to know what the Dutch law says about this. Due to increasing internationalization, there is a larger demand for company relocation. There have been many developments within this area in Europe during recent years. Pursuant to Section 2:18 of the Dutch Civil Code (Burgerlijk Wetboek), a Dutch legal entity can convert into another legal form subject to certain requirements. However, Book 2 of the Dutch Civil Code does not yet contain any rules for the cross-border conversion of companies. There is also no legal regulation at European level at this moment in time. Nonetheless, it is still entirely possible. We will now explain in detail how you can achieve this.
Cross-border conversion of companies
Cross-border conversion means that the legal form and nationality (applicable law) of the company change, but the company continues to exist and retain legal personality. The conversion of a Dutch legal entity into a foreign legal entity is also called an outbound conversion, and the reversed variant (when a foreign company moves to the Netherlands) is named an inbound conversion. The EU/EEA Member States apply different doctrines, when determining the law applicable to a company. Some Member States apply the incorporation doctrine, whilst others apply the real seat doctrine.
The incorporation doctrine means, that a legal entity is always subject to the law of the Member State in which it is incorporated and has its registered office. The Netherlands applies this doctrine; a Dutch legal entity must have its registered office in the Netherlands and must be incorporated in the Netherlands. According to the doctrine of the real seat, a legal entity is subject to the law of the State in which it has its central administration or real seat. As a result of these theories, there may be a lack of clarity as to whether a transfer of seat is possible.
Official EU/EC court rulings explain how cross-border conversion is possible
Questions about this have been put to the Court of Justice of the EC/EU several times during recent years. The EC/EU Court of Justice has issued two important rulings on cross-border conversion of companies. The freedom of establishment as laid down in Articles 49 and 54 of the Treaty on the Functioning of the European Union (TFEU) played a role in this. On December 16, 2008, the Court of Justice of the EC ruled in the Cartesio case (Case C-210/06) that Member States are not in themselves obliged to allow the cross-border transfer of a registered office of a company incorporated under their own law. However, it was noted that the transfer of a registered office must be recognized, if the company can be converted into a local legal form after transfer of its registered office in the new Member State of residence. Provided there are no compelling reasons of public interest to impede this, such as the interests of creditors, minority shareholders, employees or the tax authorities.
Subsequently, on 12 July 2012, the Court of Justice of the EU ruled in the Vale judgment (case C-378/10), that a Member State of the EU/EEA cannot hinder a cross-border inbound conversion. According to the Court, Articles 49 and 54 TFEU mean, that if a Member State has a regulation for internal conversions, this regulation also applies to cross-border situations. A cross-border conversion may therefore not be treated differently from a domestic conversion. Keep in mind that in this case, as with the Cartesio ruling, an exception applies if there are compelling reasons of public interest.
In practice, there may be a need for the possibility of converting a company into a legal entity governed by the law of another country, without it ceasing to exist. Without such a conversion, a company that has transferred its activities to another country may be governed by several legal systems. An example of this is a company incorporated under Dutch law that (completely) transfers its activities to a country that follows the actual seat doctrine. Under this law, the company is governed by the law of the country it is residing in. Seen from a Dutch perspective, however, this company (also) remains governed by Dutch law (incorporation doctrine).
Although the company is in fact no longer active in the Netherlands, Dutch obligations with regard to the preparation and filing of annual accounts, for example, remain in force. If these kinds of company law obligations are overlooked, this can have unpleasant consequences, for example, in the field of directors' liability. Because Dutch law does not provide for cross-border conversion of legal entities, the route of cross-border merger was often chosen in the past. This legal concept is in fact regulated in Dutch law, exclusively for mergers between capital companies established under the law of a member state of the European Union or the European Economic Area.
A new European Union Directive has been adopted
Following these historical rulings, an EU Directive on cross-border conversions, mergers and divisions was adopted by the European Parliament and the Council (Directive (EU) 2019/2121) (Directive). This new Directive, amongst other things, appears to clarify the currently existing rules on cross-border conversions and mergers in the EU. Next to that, it also introduces rules specifically applicable to cross-border conversion and divisions, that are intended for all Member States. A country such as the Netherlands might benefit from this Directive, since we already stated before that the Dutch currently doesn’t have any proper legislation regarding this subject. This would allow for international harmonization, making it much more easy to move your company throughout the EU.
This Directive already went into effect on the 1st of January 2020, and all Member States have until the 31st of January to implement the Directive as national law. However, this is not mandatory, since Members States can choose for themselves whether they implement the Directive. Due to the fact that this is the first time, ever, that there is a legal framework in the European Union for cross-border conversions and divisions, it makes it directly relevant for limited liability companies such as the Dutch BV. This also complements both the Vale and Cartesio rulings, since both have shown that these legal operations were already entirely possible, based on the right of freedom of establishment.
A cross-border conversion is defined in the Directive as "an operation whereby a company, without being dissolved or wound up or going into liquidation, converts the legal form under which it is registered in a departure Member State into a legal form in a destination Member State, as listed in Annex II, and transfers at least its registered office to the destination Member State, while retaining its legal personality." One of the main advantages of this approach, is that the company will remain its legal personality, assets and liabilities in the newly converted company. This Directive is aimed at limited liability companies, but for cross-border conversion of other legal entities such as cooperatives, you can still invoke the freedom of establishment.
The amount of cross-border conversions keeps rising
Based on these rulings, both outbound and inbound conversions within the Member States of the EU/EEA are therefore possible. Dutch notaries are increasingly confronted with requests for cross-border conversion, due to the fact that more people are considering moving their company to a more economically friendly atmosphere. There is no Dutch statutory regulation regarding this, but that does not have to be an obstacle to notarial execution of the conversion. In the absence of harmonized legal regulations, the procedures that must be followed in the inbound and outbound Member State must be carefully examined. These procedures may differ per Member State, which can make the process a bit complicated if you are not backed by a professional. Of course, Intercompany Solutions can assist you through the entire process of cross-border conversion.
What are the steps involved to move the registered office of your company to the Netherlands?
Starting a company in the Netherlands involves a few less steps than moving an entire company to the Netherlands. Nonetheless, it’s very much possible. If you want to move the seat of your company, you need to take into consideration that there are multiple legal as well as administrative actions involved in this process. We will outline all these actions in detail below, providing you with enough information to consider your move abroad. Of course, you can always contact Intercompany Solutions if you feel like you need more in-depth information, we are always happy to assist you in any way we can.
1. Registration of a branch office and company director(s) in the Netherlands
The first thing you will need to do, is register a branch office in the Netherlands. This entails multiple administrative steps that need to be followed, in order for the process to go smoothly. On our website, you can find plenty of articles that describe the entire procedure, such as this one. If you want to settle your company in the Netherlands, you will need to think about some basic decisions such as the location of your company and the legal entity you prefer. If you already have a limited liability company, you can convert it to a Dutch BV or NV, depending on whether you want your company to be private or public.
We will need information from you, such as valid means of identification, details about your current business and market and the necessary paperwork. We also need to know who the current directors of your company are, and whether all directors want to participate in the new company in the Netherlands. This is necessary in order to register the directors in the Dutch Chamber of Commerce. After we receive this information, we can register your new Dutch company in just a few working days. You will then receive a Dutch Chamber of Commerce number, as well as a VAT number from the Dutch Tax Authorities.
2. Adjusting the foreign notarial deed of incorporation
Once you have registered a company in the Netherlands, you will need to contact a notary public in your own country, in order to adjust the original notarial deed of your company. This means you will have to change all the information that is relevant to your current local company, into the data that you received when you registered a company in the Netherlands. In essence, you are replacing old information with new information, whilst the substantive information explaining your company in detail remains the same. If you don’t know how to do this, you can always contact us for more information and advice. We can also possibly assist you with finding a good notary in your country of residence, and keep in touch with your notary so the cross-border conversion process can be executed smoothly.
3. Validating your new company via a Dutch notary
Once you have adjusted the foreign notarial deed, you will need to contact a Dutch notary to validate and set up your company in the Netherlands officially. This will entail communication between the foreign and Dutch notary, so all company specifics are adopted correctly. Once this has been initiated, the branch office you registered will be transformed into the new headquarters of your company. Regularly, branch offices are registered for companies and multinationals that want to have an extra location in a different country. Since you will want to completely move your company, the branch office will be the new location of your main company. Hence the necessary extra steps, in comparison to solely opening a branch office in the Netherlands.
4. Dissolution of your foreign company
Once you have moved your entire company to the Netherlands, you can basically close down the business in your home country. This means you will have to dissolve the company. Dissolution means you completely disband your foreign company, and it will continue existing in the Netherlands instead. Before you dissolve your company, you should ask yourself some questions:
- Is there any equity?
- Is there a positive share capital?
- Has the final sales tax return been made?
- Are there still bank accounts or insurances?
- Is everything checked by an accountant or lawyer?
- Is there a shareholders' resolution to dissolve?
- Has the form been filed with the Chamber of Commerce?
Overall, dissolving a company generally consists of a few steps, but these can vary a lot per country. If you want to know more about dissolving your company in your native country, we suggest you hire a specialist who will take care of all important matters for you. All assets and liabilities your company has, will then be transferred to your new Dutch company, including shares. If you would like more information on this subject, don’t hesitate to contact us directly.
Intercompany Solutions can help cross borders with your company!
Always wanted to do business oversees? Now is your chance! With ever-increasing internationalization within the business sector, chances are great your company might flourish in a new country. Sometimes, the climate of a certain country can simply suit your business needs better, than your native country. This doesn’t have to be a problem anymore, with the possibility of cross-border conversion. Intercompany Solutions has helped thousands of foreign entrepreneurs to settle their business(es) in Holland with success, ranging from branch offices to headquarters of multinationals. If you have any questions about the entire process, or would simply like to chat about the options for your current business, please do not hesitate to contact us directly. Our experienced team will help you along the way.