M&A – Main differences between Share Deals and Asset Deals in The Netherlands

•  The Share Purchase Agreement (SPA) or Share Sale Agreement (SSA) needs to be carefully tailored to the specific deal, the target(s) and their business, and should include adequate representations and warranties (including customary limitations and exclusions), indemnities (a general tax indemnity should be included when acting for purchaser), due diligence and disclosure mechanism, non-compete and non solicit obligations.
• If included, conditions precedent such as a MAC clause require careful drafting, taking into account Covid-19 effects where appropriate.
• The SPA/SSA should be signed by authorized representatives. 
• The locked box system is quite popular in the Netherlands but due to Covid-19, it is expected that closing account mechanisms will increasingly be applied.
  

• Sale, purchase and transfer of assets takes place in different legal ways, depending on the asset. For example, immovable property requires a notarial deed of transfer; inventory is delivered by taking possession.
• The asset purchase agreement (APA) should be carefully drafted and must describe the legal transfer per type of asset. In addition, the APA needs to be carefully tailored to the specific deal, and should in the same way as a SPA, include adequate representations and warranties (including customary limitations and exclusions), indemnities, due diligence and disclosure mechanism, non-compete and non solicit obligations.
• When the complete untertaking is transferred, the employees connected to the activities of said undertaking are transferred to the purchaser as well. This is EU mandatory law: Directive 2001/23/EG (Transfer of Undertaking).
• The APA should be signed by authorized representatives.
  

Since most M&A deals in the Netherlands concern limited liability companies, below mentioned general features relate to the sale and transfer of registered shares of a B.V. A public limited liability company may have registered shares or bearer shares and different rules apply. For stock listed companies, different rules apply as well.

Besloten vennootschap (B.V.) – limited liability company

• Share transfer requires a notarial deed. 
• The share transfer is recorded in the company’s shareholders register and – in case of a 100% share transfer - in the trade registry of the Dutch Chamber of Commerce. 
• There is no requirement to amend the company’s articles of association unless the purchaser wishes to do so.
• The works council(s) (if there are any) must be consulted prior to the take-over taking effect.
• The trade unions, if involved, should be timely informed, as well as the Social Economic Council if certain thresholds are met.
• If the purchaser and the target(s) jointly have a turnover of EUR 150 million or more worldwide, and at least two of the companies involved in the transaction have a turnover of EUR 30 million or more in the Netherlands, prior approval from the Dutch Competition Authority (ACM) must be obtained. For M&A transactions in health care, lower turn-over thresholds apply and in addition to the ACM, prior approval of the Dutch Healthcare Authority (Nza) must be obtained.
  

• Each asset is transferred in its specific way as prescribed by Dutch law. 
• Some assets are personal (e.g. certain permits) and cannot be transferred. 
• The works council(s) (if there are any) must be consulted prior to the take-over taking effect. 
• The trade unions, if involved, should be timely informed, as well as the Social Economic Council if certain thresholds are met. 
• Approval of the Dutch Competition Authority and if applicable, the Dutch Healthcare Authority must be obtained, taking into account the turnover of the undertaking involved (See under transfer of shares for thresholds).
  

• No transactional tax, unless a transfer tax of 6% in case of a sale of shares in a real estate company (purpose and assets mainly focused on real estate investment).
• In case of a shareholding of at least 5% by a company, a participation exemption applies and by an individual the capital gain will be taxable at a rate of 26,2% (box 2). 
• It is common practice to include a tax deferral in the closing accounts in a share transfer, as a deduction for future taxation on hidden reserves of the assets.
• Should the company from which the shares will be sold be part of a tax group (fiscale eenheid), one has to be aware of potential tax liabilities as a result of the termination of the tax group situation and previous tax facilities received in this regime.
  

• No transactional tax, like stamp duty or VAT provided that the assets qualify as a unity. 
• Sale of real estate is subject to a 6% transfer tax (or 2% on dwellings). 
• The capital gain on the sale of assets will be taxable to the applicable corporate tax rate of 25% (and 16,5% upto the first € 200.000). However, under certain conditions a roll-over relief may be applicable in case of a reinvestment reserve, to be used for similar investments within 3 years.