How to transfer shares in your Dutch Company

May 5, 2022

Starting your business in the Netherlands is one thing, but expanding it to new levels is quite another. Expansion sometimes involves taking a new shareholder on board, like an investor, a business partner or an important employee. If you do this after you set up your company (as opposed to doing it directly at the beginning) you’re going to need to transfer shares in your company. How this process works, we explain in this article.

When do I require a share transfer?

Whenever something changes in the ownership of shares in your company, you are required to perform a share transfer. Examples include:

  • Selling shares to an investor, in return for cash

  • Transferring shares to a star employee, as part of employment terms

  • The execution of an option agreement by an option holder

  • The sale of your entire company to a purchaser

  • The company buying back shares from a shareholder (“share buy back”)

  • A convertible loan agreement gets “converted” into shares.

  • Setting up a personal holding BV and transferring shares to it later on. 

Only a company that has shares can actually transfer them. This seems obvious, but sometimes people forget this. This means that only a Dutch BV or NV can transfer shares. The VoF, Eenmanszaak, Stichting and Cooperatie are all unable to play ball here. 

How does a share transfer work?

Much like the incorporation of your BV, a transfer of the shares in your BV must be performed by a Dutch notary. He will execute the deed of share transfer, draft the necessary resolutions and, if necessary, register the mutations at the Chamber of Commerce registers. Most importantly, he will check whether all requirements for the transfer are being met. These requirements are laid down in the deed of incorporation of your BV, and additional rules from your shareholder’s agreement may apply. There is no margin for error for the notary here: a mistake in the procedure can render the entire transfer null and void. 

Before the notary gets to work he requires at least the following information:

(i) The purchase price of the shares.

(ii) A substantiation of the purchase price of the shares (for example: a valuation report).

(iii) Deed of incorporation, shareholder’s agreement (if any), shareholder’s register and any previous deeds of share transfer of your company.

The purchase price will be negotiated between the buyer and the seller, of course, but then this amount needs to be substantiated by an accountant. This is a very strict requirement. Furthermore, the notary requires all deeds pertaining to the BV in original versions. Once you gathered all this information, it is strongly advisable to enter into a purchase agreement for the shares (SPA). The SPA outlines the purchase price of the shares and also some additional aspects of the deal, such as payment terms, warranties and guarantees. An SPA is not mandatory for a share transfer, but comes very very much recommended. 

Once the SPA has been agreed, you go to the notary to effectuate the actual share transfer. These are two separate things, so don’t make the mistake of thinking only the SPA will transfer the shares for you. Under Dutch law, any setup of a Dutch company, or a transfer of shares therein, must be done by a Dutch law notary.

It seems very heavily regulated. Why is that?

The Dutch notary is obliged by law to take “a long hard look” at all share transfers before they sign off on it. This is because a lot of fraud takes place with share transfers. Examples include : selling for a way too low purchase price to avoid taxation, setting up a company by a “stooge” and then transferring to a con man who has to remain invisible. So be prepared for a lot of questions (and don’t take them personal). 

What does this cost?

Be prepared to look at a minimum of € 1,250 in notarial costs. Additional costs may be charged by your accountant, tax advisor or attorney. 

Why is this so much more expensive than setting up the BV in the first place?

This puzzles many people, but in legal terms the answer is simple. The setup of a BV is a unilateral legal act. This means very little can go wrong in terms of valuation or identification, because there’s no person on the other side of the table that can be harmed. A share transfer is a legal act between two or more parties, where a lot can go wrong. A notary is therefore required to perform an extensive appraisal of both the legal and financial aspects of the deal, identify all parties involved and make sure they understand what’s happening. So if possible, you should always try to set up a BV immediately with all shareholders on board from the get-to, so as to prevent this costly procedure later on. Once that ship has sailed, you have no other option. 

NB: The same applies to setting up a personal holding BV later on. This requires a share transfer as well, from you in person to your new personal holding. Be sure to do that right at the beginning!

Is there any way I can transfer shares without having to go through all this trouble?

Yes there is. Under Dutch law you can set up a foundation that holds shares in your company and issues depositary receipts on these shares. These depositary receipts, which in Dutch are called “certificaten op aandelen” can be freely transferred without the intervention of a notary. It is still advisable to hire expert legal advice to draft these documents. 

What is the difference between a share transfer and a share emission?

As the name suggests, a share transfer effectuates the transfer of shares from one shareholder to another. A share emission creates a new batch of shares which are handed out to a new shareholder. Although both can be used to bring a new shareholder on board, they are different in one crucial respect: a share emission changes the total amount of outstanding shares. It therefore dilutes the shareholdings of all shareholders involved, which can have severe financial and tax effects. A share emission follows the same basic process as a share transfer, but will require some additional looking into the consequences of the dilution.