Stichting

A stichting (lit. 'foundation') is a Dutch legal entity with limited liability, not aiming to make profit, with no members or share capital, that exists for a specific purpose that is serving a public, social or an idealistic interest.[1] A stichting is allowed to make profit but the legal condition is that this profit must be spend on achieving the foundation's goals. This form of entity makes it possible to separate functions of ownership and control.

Its use has been pioneered successfully in recent years as a 'poison pill' style defence tactic in hostile takeover situations by Scott V Simpson, one of Europe's leading mergers and acquisitions lawyers.[2] This however was not the use Dutch lawmakers had in mind when drawing the law.

Formation

A stichting is a legal person created through a legal act. This act is usually a notarised deed, but can also be established by a Dutch will ('uiterste wilsbeschikking'), and must contain the articles of the foundation which must include the first appointed board. The notary works here in a public role, and is seen as the public authority involved in the creation and authorization of a foundation. The stichting acquires full legal capacity through its sole creation. A foundation has no members and its purpose must be stated in its articles, using capital dedicated to such goal. The rules for foundations are defined in the Dutch Civil Code (Burgerlijk Wetboek), Boek 2, Titel 6 (artt. 2:285-304).[3] It is not necessary in the Netherlands that a foundation serves a purpose of general interest, it can also be a social or an idealistic goal and its official goal cannot include making payments to anybody, except for charitable causes.

A foundation can be governed and represented by one board that has both executive and controlling tasks and is also responsible for the foundation's administration. The law does not have a requirement for a specific number of members but speaks of 'members' in plural. It is possible to create two boards (two-tier board structure), one has the function of overviewing the executive day-by-day governing, the Governing Board ("Raad van Bestuur"), the other one has an overall control function, the Supervisory Board or Board of Trustees ("Raad van Toezicht" of "Raad van Commisarissen).[4][5]

Art. 2:289 of the Civil Code establishes that all foundations must be registered at the official public Commercial Register ("handelsregister" at the "Kamer van Koophandel"). As long as the foundation hasn't been registered, the boardmembers bear personal responsibility.[4] In another register, UBO, the ultimate beneficial owner(s) have to be undisclosed.[5]

Commercial activities are allowed if they are within the purpose of the foundation and are taxed. Board members can be held liable for the foundation, civilly as well as criminally, when they do not comply with general rules of good governance, like for instance written down in the "Nederlandse Corporate Governance Code".[6]

The Dutch Tax Service can declare an institution to be an "institution for general benefit" (ANBI), with tax benefits. Often, but not necessarily, this is a foundation. Conversely, not every foundation qualifies.

Examples

Charitable organizations

Takeover defense

Stichtingen (Dutch plural form) are used as a type of poison pill (takeover defense mechanism) for publicly traded companies. In one case, the Dutch-incorporated pharmaceutical company Mylan established a stichting for the purpose of "safeguarding Mylan’s strategy, mission and independence" and gave the stichting the right to veto any proposed hostile takeover of Mylan.[7] The stichting was activated in July 2015 to block a planned takeover by Teva Pharmaceutical Industries.[8]

Finance and investment

Stichtingen are used by institutional investors, such as banks and wealthy individuals, as a means of controlling assets while not having legal ownership or consolidating the assets on their financial statements. The properties of a stichting can be used to avoid inheritance tax, trade sanctions and expropriation. In one case, the Libyan-based oil company Oilinvest used a stichting structure to avoid sanctions on Libya and ensure its continued operation following the overthrow of Muammar Gaddafi; in another case, the Russian oil company Yukos used a stichting structure in an attempt to shield its assets from tax claims by the Russian government.[7]

Netherlands Antilles

Foundation legislation was last reformed in 1998, giving rise to the Netherlands Antilles Private Foundation (Stichting Particulier Fonds).

See also

References

  1. ^ "The Dutch foundation | STEP". www.step.org. Archived from the original on 2013-08-01.
  2. ^ Cohen, Adam (22 May 2006). "Going Dutch Has New Meaning In Corporate Takeover Battles". Wall Street Journal. Retrieved 22 January 2021.
  3. ^ Titel 6 Burgerlijk Wetboek Boek 2
  4. ^ a b "De stichting | Ondernemersplein". ondernemersplein.kvk.nl (in Dutch). Retrieved 2024-07-04.
  5. ^ a b Schuurman, Sergej. "Dit betekent de WBTR voor je organisatie". KVK (in Dutch). Retrieved 2024-07-04.
  6. ^ Prof. mr. W.J. Oostwouder, Mr. T. Spronk (2019). "Twee heren (in één transactie) dienen, mag dat nu wel of (soms) toch niet?". openaccessadvocate.tijdschriften.budh.nl (in Dutch). Retrieved 2024-07-04.
  7. ^ a b Raice, Shayndi (22 April 2015). "The Rise of the 'Stichting,' an Obscure Takeover Defense". Wall Street Journal. Retrieved 28 July 2015.
  8. ^ Raice, Shayndi (27 July 2015). "Mylan's Leverage to Resist Teva Deal Reveals Shift in Rules". Wall Street Journal. Retrieved 28 July 2015.