Company law - Brexit from a Dutch perspective

However, there are consequences for the possibility of simplified restructuring methods and there are consequences for the financial reporting of Dutch and UK legal entities.

Some consequences of leaving:

• Legal mergers are frequently used when restructuring groups of companies. By means of a legal merger, the assets and liabilities of one company are transferred under a universal title to another company. Companies can also merge across borders, provided they are within the EU. In addition to cross-border mergers, cross-border conversions are also carried out whereby a legal entity under the law of one country is converted into a legal entity of another country (e.g. a German GmbH into a Dutch BV). The basis for this is currently still found in a series of judgments by the European Court of Justice (Sevic, Cartesio, Vale and Polbud) relating to the right of freedom of establishment within the EU. Finally, 2019 saw the adoption of the European Directive on Cross-Border Restructuring, which will also allow for cross-border demergers of companies. As a result of the Brexit, these restructuring techniques can no longer be used for restructurings between companies under UK law and companies under Dutch law.
  
  
• Companies incorporated under a law other than Dutch law are, in principle, not governed by Dutch company law. The Netherlands applies the so-called incorporation doctrine, according to which a company is subject to the law of the country in which it is incorporated. An exception to this is the regulation of the Formal Foreign Companies Act (the "Act"). A Formally Foreign Company ("FFC") is a company incorporated under a law other than Dutch law which carries out all or almost all of its activities in the Netherlands and has no real connection with the state in which the law of which it is incorporated applies. Most provisions of the Act do not apply to companies governed by the law of one of the EU Member States or of a state party to the EEA. Due to the Brexit, the Act is now fully applicable to legal entities governed by UK law, which have the centre of their activities in the Netherlands, and which have no actual connection with the UK. Before the flexibilisation of Dutch BV law, Limited Companies were often incorporated under UK law to avoid the then still stricter BV rules. For all these companies the Act now applies in full, which means, among other things:
  
  

  a. The directors of an FFC shall (i) register with the Dutch Trade Register that the company is an FFC, (ii) file copies of the deeds of incorporation and articles of association with the Dutch Trade Register, (iii) register with the Dutch Trade Register the foreign register in which the FFC is registered and the registration number, and furthermore (if applicable) provide the personal details of the person holding all the shares in the capital of the FFC;
  
  b. in all writings or documents emanating from an FFC or to which an FFC is a party, specific information shall be included concerning the company and the fact that the company is an FFC shall be mentioned
  
  c. the provisions of Dutch law on the distribution of dividend and reserves, the provisions on repurchase of shares and reduction of capital, the provisions on preparation and filing of the financial statements and the possible liability of directors arising out of these provisions shall apply to the FFC
  
  d. the provisions of Dutch law with regard to the liability of executive and supervisory directors in the event of misleading presentation of the financial statements shall apply to the FFC
  
  e. the directors of the FFC are required, before 1 April of each year, to file a certificate of registration with the commercial register in the register where the company must be registered pursuant to the law applicable to it.
  The declarations to the trade register must be made within 3 months after the provisions become applicable to the FFC. Article 11a of the Act specifically provides that for companies incorporated under the laws of the UK, the returns must be made within 3 months after the UK has left the EU, so no later than 30 April 2020. Directors of an FFC will be jointly and severally liable with the company for any legal acts performed during their management which bind the company before the declarations have been filed with the trade register.
  
  

• A company that is part of a group of companies does not have to file its annual accounts with the trade register if the parent company files a liability statement (a so-called 403 statement). In that case, only the parent company has to file its annual accounts. A condition is that the EU Regulation on the application of international accounting standards applies to the financial data of the parent company. As a result of Brexit, Dutch companies that first did not file their annual accounts because their parent company in the UK had filed a 403 declaration, now have to file their own annual accounts. If they fail to do so (or fail to do so in time), this may have consequences for the liability of the company's directors.
  
  We recommend that you take the following actions:

  1. Do you, as a Dutch BV, make use of the exemption from filing annual accounts on the basis of a 403 statement issued by the parent company? Check whether the 403 declaration has been issued by a company under UK law. If so, please seek advice on your obligation to file your annual accounts;
  
  2. Are you a company under UK law (e.g. a Ltd.)? Then check whether you are an FFC or not. If so, you must comply with the above obligations. If in doubt, seek advice.