On 31 January 2014 the preliminary bill cross-border conversion capital companies (the ‘Preliminary Bill’) has been published. The Preliminary Bill is published for consultation, meaning that legal practitioners can give their opinion on the Preliminary Bill, so that these comments can be incorporated into the final bill. The Preliminary Bill includes amongst others a provision in which the terms are set for a cross-border conversion of not only ‘naamloze vennootschappen’ (‘NV’) and ‘besloten vennootschappen’ (‘BV’) into a foreign capital company and vice versa, but also a provision for the cross-border conversion of other legal entities.

In the existing legal system every Dutch legal entity has to have its statutory seat in The Netherlands. A Dutch legal entity is subject to Dutch law. Under Dutch law it is possible to change legal form. For example, a BV can be converted into a NV and a foundation can be converted into a BV. The conversion does not mean that there is a transfer of assets; only the nature of the legal entity changes.

Dutch law does not yet provide extensive regulation concerning cross-border conversion (also cross-border transfer of registered office). The Voluntary Transfer of Registered Offices (Third Countries) Act (Stb. 1994, 800) only takes into account the transfer of the registered office of e.g. NV’s and BV’s to a country outside The Netherlands in the event of war, immediate danger of war, revolution or comparable extraordinary circumstances. In accordance with the Kingdom Act Voluntary Transfer of Legal Entities, it is possible to transfer the registered office to another part of the Kingdom of The Netherlands under similar circumstances (Stb. 1967, 257 and Stb. 2010, 388). For ‘normal’ cases of transfer of registered office, which is frequently requested in practice, there is no regulation in The Netherlands.

The Court of Justice of the European Union ruled in 2008 (NJ 2009/202, Cartesio Oktató es Szolgáltató) that transfer of registered office within the European Union should be possible, under the condition that the entered Member State accepts the transfer, unless a compelling reason of public interest interferes.

On 12 July 2012 the Court of Justice of the European Union rendered a judgment about the requirements a Member State can set for a legal entity to relocate in that state (NJ 2012/581, VALE Épitési). The receiving Member State is entitled to determine that its own national law will apply to this action and thus to apply the regulations of its national law concerning national conversions that regulate the founding and functioning of a legal entity. The Vale judgment is considered as the successor of the Cartesio judgment.

Since the Cartesio judgment (and the Vale judgment) it has become clear that cross-border transfer of seat is possible. However, a legal basis is missing, leading to uncertainty on the procedure which is to be followed, even though a cross border of seat is possible. The Preliminary Bill is a reaction to the aforesaid judgments whereby a formal procedure for cross-border transfer of seats will be implemented.

The main objective of the Preliminary Bill is to protect the interests of creditors, minority shareholders and employees and to create a legal basis for cross-border transfer of statutory seat. The Preliminary Bill describes the preconditions that need to be met before a cross-border conversion can take place and contains procedural provisions. The cross-border conversion of a Dutch NV/BV in a capital company subject to EU/EER-Member State (outbound) law is therefore governed by Dutch law until conversion.

Vice versa is the conversion of a EU/EER legal entity to a Dutch NV/BV (inbound) primarily governed by the law of the country of departure. The country of departure decides whether or not the concerning legal entity may convert cross-border.

Eversheds Nederland monitors the development regarding cross-border conversion closely. In case you are interested in receiving information or are looking to explore the possibilities of cross-border conversion please contact Freerk Volders (partner, civil-law notary) or Emilie van Blokland (candidate civil-law notary). Although lacking a formal procedure, there are possibilities for cross-border conversion.