Group restructurings to be simplified with new Dutch law

Amsterdam-based Emile Doelwijt of Pinsent Masons, who advises businesses on mergers and acquisitions and internal reorganisations, was commenting ahead of The Implementation of the Cross-Border Conversions, Mergers and Divisions Directive Act coming into force on 1 September 2023.

Among other things, the new legislation expands the scope of the simplified merger procedure in the Netherlands to a greater range of transactions between companies operating in the same group. It will also be possible for Dutch capital companies to convert into a capital company of an EU Member State.

Currently, the simplified merger procedure is only open to transactions involving either companies in the same group where either a subsidiary, as disappearing entity, merges with its parent company, as acquiring entity, or where two entities that are wholly owned by the same parent company merge with each other. It is not open to companies where, for example, there is only an indirect shareholding link between the companies – such as where a company sits between the ultimate parent company in the group and companies lower down the group structure, like where a subsidiary mergers with a subsidiary of the ‘granddaughter’ company.

The law has now been changed to also allow a simplified merger in any situation whereby two entities that have the same indirect parent merge. It will also be possible to directly merge a subsidiary and the granddaughter company, both as disappearing entities, directly with their parent company.

The benefit to businesses of having access to the simplified merger procedure is that the transaction does not fall subject to the usual administrative burdens and scrutiny that non-simplified mergers have, such as involvement of an auditor. Furthermore, it will no longer be required to complete multiple upstream mergers in order to merge multiple indirect subsidiaries into the ultimate parent company.

The benefit of the legal basis for cross-border conversion is that it is no longer based on case law only and that there is a clear process to follow.

Doelwijt said: “The new possibilities for simplified mergers will simplify group restructurings.”