The Netherlands is sprucing up its welcome mat for investors, shaking off the dust of existing laws that officials believe made the country less attractive to entrepreneurs. Two new laws are intended to sweep away regulatory cobwebs and make the country the European location of choice for domestic and foreign businesses.

The Flex-BV Act that becomes effective on October 1 applies to private companies with limited liability (besloten vennootschappen, or BVs). It simplifies the process and cost of incorporating privately held companies.

And a second law, the One-Tier Board Act expected to come into effect in January 2013, will allow Dutch companies to adopt less complex control structures, using a single board instead of the current two-tier system consisting of a supervisory and management board. It is a change that will be especially welcome to US and UK companies that are used to a single-board system.

Fewer formalities

“A lot of jurisdictions around us already have companies with a more flexible form. This law is intended to make it more favorable for investors to come to the Netherlands instead of Germany or the UK, or other European countries,” said Paul Westhoff, a partner in the Amsterdam office of the international Greenberg Traurig law firm.

“The new law gives shareholders and the company more flexibility, and there is less formality and more room to organise a BV as the parties wish,” says Manon Cremers, a partner in the Dutch law firm Stibbe. “This can be attractive for big international companies with subsidiaries in the Netherlands, for family-owned companies or for joint ventures, but also for smaller companies with only one shareholder.”

While the old BV’s tax implications were attractive to foreigners, Ms Cremers says all of its legal requirements dragged out the process of incorporation, and drove investors to incorporate in other jurisdictions.

The new BV law does away with many of these restrictions. Companies will no longer have to come up with €18,000 in initial capital and provide a bank statement to prove it. Also dropped is a rule that at least 20% of a company’s authorised capital had to be issued.

The requirement that shares could only be sold or transferred to other shareholders, unless specifically approved, has been jettisoned, and is now optional. Shares that do not have voting or dividend rights can now be issued.

In another change, a company’s articles of association may now give certain classes of shares and certain shareholders the authority to appoint a director themselves – without approval by a shareholder meeting – provided that shareholders have a say in the appointment of at least one director. Shareholder meetings may now also be held outside the Netherlands. 

US importance

The Netherlands Foreign Investment Agency reported a record number of new FDI projects in 2011, with investments totalling $1.95bn. Slightly more than half the projects were from Asia and 26% from North America – including 46 US projects, two-thirds of them new investment. Indeed, according to US government statistics, the largest proportion of US investment abroad (14.3%) is in the Netherlands, many of which are in the form of holding companies that invest funds in other countries.

If the new laws work as planned, it could well be more than just the US that utilises the Netherlands' investment landscape so readily.