Starting Up in the Netherlands
In preparing to conduct business activities in the Netherlands, a company is presented with several choices of how to go about it as well as a number of legal requirements to be complied with. From a legal and tax point of view, the first priority is deciding on which legal form to use ‘to house’ the proposed Dutch-based activities.
Compared to other EU countries, the Netherlands has a flexible and liberal legal framework for the organization of enterprises by non-resident companies or individuals. There are no special restrictions on foreign-owned companies that wish to start a business in the Netherlands. Business operations can be set up as having either legal personality or not. If a legal entity has legal personality, the entrepreneur cannot be held liable for more than the sum he contributed to the company’s capital. A private limited liability company – ‘Besloten Vennootschap’ (BV) – and a public limited liability company – ‘Naamloze Vennootschap’ (NV) – are examples of limited liability companies with legal personality.
Most foreign investors in the Netherlands conduct their business activities in the form of a private company with limited liability (BV). The BV is commonly used for all types of business ventures. However, a public limited liability company (NV) is the usual form of business enterprise adopted when capital is to be acquired through public offerings. A BV or an NV is incorporated by a notarial deed of incorporation executed before a Dutch civil law notary, to which notarial deed the foreign investor is a party. The minimum share capital requirement for a BV has been abolished as of October 1, 2012 the Flex BV Act. The new requirement is that the share capital exists of at least one share. The nominal value of a share can be as little as 1 Eurocent. The nominal value of the shares in a BV may also be denominated in another currency then Euro. The minimum amount required upon incorporation of an NV is EUR 45,000. The deed of incorporation must in addition contain the articles of association of the company. To complete the incorporation procedure, the incorporators have to register the new company with the Trade Register.
Sole traders, general and limited partnerships are examples of legal forms without legal personality, wherein the guiding principle is that the entrepreneur remains personally liable for the company’s debts. A partnership format can be used when two or more partners wish to do business jointly and under a joint name without having to meet all the legal requirements that a BV or NV would entail.
If the foreign investor prefers not to set up a legal entity in the Netherlands, a branch might be a better option. A branch is easier and less expensive to establish than a subsidiary. However, a branch is not a separate legal entity, so a branch’s foreign parent is fully liable for all of its obligations.