FormalitiesDate of reorganisation
Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?
Most corporate reorganisations require the execution of a notarial deed. The basic assumption by law is that the execution of a notarial deed or the registration of the notarial deed in a public register (if applicable) triggers immediate legal effects. In principle, such legal effects cannot be backdated or subjected to a subsequent condition. The effectiveness of a notarial deed can generally be temporarily suspended or subjected to a condition precedent (provided that the occurrence of such events can be objectively determined by third parties based on the information that is made available for reference in the Dutch trade register).
Certain exceptions are made in respect of particular types of corporate reorganisations. For example, a merger becomes effective one day after the execution of a notarial deed. Parties are not empowered to deviate from this rule. A similar regime applies in respect of a split-up of a company.
Notwithstanding the above, it would be possible to determine, for example in a share purchase agreement, that a transaction would be concluded with economic effect from a date in the past. The legal transfer would then still take place on the day of execution of the notarial deed or on the date otherwise determined in the relevant notarial deed.Documentation
What documentation is required in a corporate reorganisation?
A corporate reorganisation generally requires a notarial deed. A notarial deed that provides for an amendment of the articles of association must be executed in Dutch. In such cases, an unofficial English translation is generally prepared for the benefit of international investors and international trade partners. In most other cases, a notarial deed can be executed in a foreign language.
Other documentation that is required in a corporate reorganisation depends on the reorganisation type implemented in the relevant case, but may typically include due diligence and valuation reports, accounting statements, management reports, corporate resolutions, amended constitutional documents (eg, amended or new articles of association), share and business sale agreements, escrow agreements, and filings at the Dutch trade register and other public registers.Representations, warranties and indemnities
Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?
Parties are free to determine the scope of any representations, warranties or indemnities. The exact scope depends, to a large extent, on the type of corporate reorganisation, the relevant sector or industry in which the relevant parties are active and the bargaining powers of the relevant parties. Another important factor includes the increased use in practice of warranty and indemnity insurances by purchasers (often upon request of the sellers) pursuant to which potential liability is shifted to the insurer.
Important examples of pre-closing representations or covenants include the obligation to carry on the business of the target company as a going concern in the ordinary course, permitted and restricted behaviour that may have a material impact on the composition of the estate of the target company (eg, asset disposals or the incurrence of new liabilities), limitations on share repurchases and providing security or guarantees to third parties. Post-closing representations or covenants may include, for example, non-competition and ‘wrong pocket’ clauses.
Warranties may typically relate to internal corporate authorisations, title to shares and assets (in case of dispositions), corporate resolutions, licences granted to the target company, environmental issues, and pending or threatening litigation, or administrative proceedings and other material aspects of the target company.
The scope of indemnities differs significantly case by case. Typical indemnities may relate to, inter alia, pending or threatening litigation, possible administrative fines and penalties, and certain tax rulings.Assets versus going concern
Does it make any difference whether assets or a business as a going concern are transferred?
An important difference is whether TUPE rules concerning the protection of employees upon the transfer of an undertaking are triggered. A going concern sale is likely to trigger such TUPE rules, which means that all relevant employment contracts are automatically transferred to the purchaser. If the sale does not trigger TUPE rules, employees will only transfer to the purchaser upon agreement or if new employment contracts are being entered into between the purchaser and the relevant employees.Types of entity
Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.
Public entities implementing a corporate reorganisation are subject to extensive regulatory requirements (eg, concerning approval powers of supervisory authorities, (ongoing) disclosure obligations and market abuse rules). Significant flexibility exists to structure private deals (notably in the event that a corporate reorganisation is carried out in respect of a private limited company).
Corporate reorganisations concerning government entities are often subject to special legislation, may require additional consent (eg, from specific government entities or departments) and are often driven by public interest (as opposed to mere commercial or strategic triggers). In respect of foundations or non-profit entities, special legislation may apply (depending on the sector in which the relevant entities are active). Under general corporate law, certain simplified restructuring options are available to foundations.Post-reorganisation steps
Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?
Corporate reorganisations often require the execution of a notarial deed and the subsequent filing at the Dutch trade register. Depending on the type of corporate reorganisation implemented by the parties, filings may also be required on the land register or other public registers (eg, in the case of transfers of immovable and registered property).
Notification requirements may apply in certain regulated industries (eg, companies active in the financial services sector).