Companies Formally Registered Abroad Act applicable to UK companies after Brexit
As a result of Brexit, the Companies Formally Registered Abroad Act (Wet op de formeel buitenlandse vennootschappen) will become relevant for companies that are incorporated in the United Kingdom, but are performing their activities entirely or virtually entirely in the Netherlands without having an actual nexus with the United Kingdom.
The Companies Formally Registered Abroad Act aims to prevent the use of legal entities for the purpose of circumventing rules protecting
creditors and other stakeholders. These rules could be circumvented by having activities in the Netherlands performed by a legal entity incorporated under the laws of a country with a liberal corporate regime whereby this company does not perform any activities outside the Netherlands and has no nexus with its country of incorporation. In order to prevent such abuse, the Companies Formally Registered Abroad Act imposes certain obligations to companies incorporated outside the EU.
These obligations include (i) reporting to the Dutch trade register that the company conforms to the statutory description of a company formally registered abroad, (ii) mentioning the complete name, legal form, statutory seat and meeting the criteria for a company formally registered abroad on all documents, printed papers and announcements and (iii) the preparation and deposit of annual accounts and a directors’ report with the Dutch trade register in accordance with the statutory rules applying to Dutch legal entities.
In addition, certain provisions of the Dutch civil code, in particular regarding distributions to shareholders, the repurchase of shares and the decrease of the issued capital with a repayment on the shares, apply to these legal entities. The main purpose of these provisions is the protection of creditors.
After the United Kingdom has ceased to be a member of the EU, companies incorporated in the United Kingdom will qualify as companies formally registered abroad if they perform their activities entirely or virtually entirely in the Netherlands without having an actual nexus with the United Kingdom. These companies will have to comply with the additional obligations described above. A point of attention for the directors is that they will be jointly and severally liable for each legal act performed on behalf of and binding the company prior to having reported to the Dutch trade register that the company is a company formally registered abroad.
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