Technological changes, innovation of financial instruments, increased fragmentation in markets and data and a financial crisis have been catalytic for the replacement of the Markets in Financial Instruments Directive (MiFID I). The MiFID II legislative package consists of a Directive (MiFID II) and a Regulation (MiFIR), which both entered into force on 2 July 2014. The Regulation is a binding legislative act and the Directive sets out goals that all EU member states have to achieve. EU member states need to implement the Directive into national laws ultimately by 31 December 2016.
The Dutch Ministry of Finance recently published its first legislative proposal for the MiFID II Implementation Act 2014 (Wet implementatie richtlijn markten voor financiële instrumenten 2014). Among other things, the Dutch Implementation Act requires so-called third country investment firms to establish a legal presence in The Netherlands, if they provide services to non-professional clients in The Netherlands.
Wondering how to structure legal presence in The Netherlands? Below we will compare the opening of a branch with the establishment of a BV in The Netherlands and highlight the main differences.
Opening a branch office
A branch is not considered a legal entity, but it rather is a permanent establishment of a foreign company. Hence, the parent company is responsible for the actions of the branch and has unlimited liability for the obligations of the branch. The members of the management board of the branch usually operate as proxy holders under a power of attorney. If the branch has employees, Dutch law generally applies to those employees.
To successfully establish a branch in The Netherlands, registration with the Dutch Commercial Register (Kamer van Koophandel) is required. A branch must be registered between one week before and one week after the commencement of the business activity of the branch. The investment firm needs to provide information on both the branch office and the foreign branch owner. The registration forms are to be completed in the Dutch language, but the supporting documentation may be submitted in English.
Establishing a Dutch BV
A BV is a private limited liability company subject to Dutch law. Accordingly, the foreign parent company as shareholder of the BV has limited liability for the obligations of the BV. This makes the establishment of a BV an attractive choice. Another advantage of using a BV to establish legal presence in The Netherlands is that is allows investment firms to obtain an European passport to provide investment services or perform investment activities throughout the European Economic Area (EEA).
To successfully establish a Dutch BV, at least one person needs to sign the deed of incorporation including the articles of association. This deed needs to be incorporated before a Dutch civil law notary. This may be performed on the basis of a special power of attorney. At the moment the notarial deed is executed, the BV becomes a legal entity. Subsequently, the BV is registered with the Dutch Commercial Register. Since 1 October 2012 a BV can be incorporated with a capital of only 1 Euro cent. Our civil law notary will be pleased to assist you with the incorporation of a Dutch BV and registration with the authorities.
Summary of main differences
For the structuring of the legal presence, please don’t hesitate to contact us. We are happy to assist with either the opening of a branch or the incorporation of a Dutch BV including all registration formalities.