At the beginning of this year a consultation was held with respect to a draft Act on the cross-border conversions of companies with share capital. The preliminary draft of this Act establishes the preconditions that must be fulfilled before a cross-border conversion of a Dutch public company (naamloze vennootschap or ‘NV’) or a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid or ‘BV’) into a foreign company with share capital can take place and vice versa. The intended purpose of the Act is to protect the interests of creditors, minority shareholders and employees.
The preliminary draft regulates a conversion in the following two situations:
- a Dutch NV or BV converts itself into a company with share capital governed by the law of another member state of the European Economic Area (‘EEA’), or into a Dutch NV or BV governed by the law of the public bodies of Bonaire, Sint Eustatius, or Saba (which countries used to be part of the Dutch Antilles); and
- a company with share capital from another member state of the EEA or a Dutch NV or BV governed by the law of the public bodies of Bonaire, Sint Eustatius, or Saba, converts itself into a Dutch NV or BV.
The scope of the preliminary draft is limited from both a substantive and a geographical perspective.
From a substantive perspective, cross-border conversion is limited to companies with share capital. The cross-border conversion of other types of legal entities is included in the preliminary draft. Based on European case law, there seems to be no reason to limit cross-border conversions to companies with share capital. This will mean that cross-border conversions of legal entities other than the NV and BV will be permitted, but not regulated. The fact that basic regulation for a conversion of these entities is not available under Dutch law creates uncertainty from a legal perspective.
From a geographical perspective, the regulation is limited in scope because the cross-border conversion to and from an entity governed by the law of Aruba, Curaçao, and Sint Maarten, is not included in the preliminary draft. Regulation in this respect is recommended given the economic ties between the Netherlands and these countries and the fact that corporate structures often include entities governed by Dutch law and the law of Aruba, Curaçao, and Sint Maarten. In addition, corporate law in these countries is very similar to that in the Netherlands. Furthermore, the regulation is limited to cross-border conversions in the EEA.