Introduction
The new possibilities of the legal division
are interesting. There are two types of division: the absolute division and the split-off. Where we use the abbreviation N.V. same goes for a B.V..
With an absolute
division the entire capital of the existing N.V (f.i. A N.V.) passes over
to two or more other N.V.’s or B.V.’s (f.i. B N.V. and C N.V.) which can be
created on the occasion of the division if desired. The shareholders of A. N.V.
become shareholders of B N.V. and C N.V and A N.V. ceases to exist.
It is also possible within the frame of an absolute division
that the splitting N.V. (A N.V.) acquires all the shares of B N.V. and/or C
N.V, in which case A N.V. continues to exist.
In case of a split-off
only a part of the assets and liabilities of an N.V. (f.i. D N.V.) is
transferred to two or more other N.V.’s or B.V.’s (f.i. E N.V and F N.V.) Either
E N.V. or F N.V. or both have to issue shares to D N.V. or its shareholders. As
in the case of the absolute division it is possible to pass the assets and
liabilities over to existing N.V’s or to N.V.’s that are founded at the
splitting.
To prevent abuse of the legal splitting, it is required by
law that the net worth of the assets and liabilities that any N.V. acquires is
not negative. The same holds for the net worth that stays in the splitting N.V.
Procedure
The procedure of a splitting looks rather complicated, but
we have to take into account that without this legal possibility, it would be a
lot more difficult and complicated to get the same result, if possible.
A division (whether an absolute one or a split-off) can only
be executed by a notarial deed.
The Board of Management has to prepare a detailed proposal
for the splitting, containing a.o.:
–
the legal form of the receiving corporation
–
the articles of incorporation (statuten) of both the
splitting and the receiving N.V.’s. In case the receiving N.V.’s will be
created at the occasion of the splitting,
a draft of the deed of incorporation (ontwerp van de akte van
oprichting).
–
whether all the assets and liabilities will be
transferred or only a part of them
–
a detailed description of the assets and liabilities
each receiving N.V. will acquire, and the same for the assets and liabilities
that will remain in the splitting N.V. (if any).
–
the value of the part of all the assets and liabilities
that any of the receiving N.V.’s will acquire and the value of the part of all
the assets and liabilities that remain in the splitting N.V (if any).
–
the intentions about the composition of the Board of
Management of all the N.V.’s concerned.
–
the intended measures as regards the acquisition of
shares in the receiving N.V.’s by the current shareholders of the splitting
N.V.
The Board of Management has to state in writing the reasons
for the division and the expected consequences for the activities with an
explanation from a juridical, business and social point of view.
This proposal should be presented to the Chamber of Commerce
with the latest three approved annual accounts. In case the latest fincancial
year for which annual accounts have been adopted, has expired more than six
months before, the Board of Management has to compile a interim statement of
assets and liabilities. The division should be announced officially in the
“Publicatieblad van de Nederlandse
Antillen” and a local newspaper.
Within a month after this publication, any creditor or other
contractual party can lodge an objection against the intended division. The
judge decides on such an objection.
The decision to divide or split the N.V. has to be taken by
the general meeting of shareholders, at least a month after the official
announcement of the division. The same formalities and the same majority rules
apply as in case of a change of the articles of incorporation.
All N.V’s that take part in the division are liable for the
performance of contracts of the splitting N.V.
Simplified procedure
Unless the articles of incorporation rule otherwise, an
existing receiving N.V. can decide to agree with the division by a decision of
the Board of Management. The same holds for the splitting N.V. if all receiving
N.V.’s are founded on occasion of the splitting and the splitting N.V. will
become their only shareholder. In that case it is not necessary to include in
the proposal for the splitting a detailed calculation of the exchange ratio of
the shares, approved by a registered account. This would be necessary in the
case of existing N.V’s that receive assets and liabities.
Fiscal aspects
The assets and liabilities of the splitting N.V. are
transferred to the acquiring N.V.’s and, withour further regulations, this
would cause taxable profit if the net value thereof is higher than the book
value, except in case the acquiring N.V.’s exist already and all are part of a
fiscal entity together with the splitting N.V.
In the near future a regulation is expected for the merger
and division as regards the passing on of reserves (hidden and fiscal) and
goodwill to the acquiring N.V.’s comparable to the existing regulation for the
transition of assets from a sole proprietorship to an N.V. The aforementioned
regulation holds that the difference between market value and book value of the
business that is brought into the N.V, is exempted from income tax on the
condition that the N.V. that continues the business, will apply the same valuation
principle and the same book values of the assets and liabilities (including
goodwill) as they had in the sole proprietorship. This means that the N.V. has
to apply lower depreciations during the depreciable life of the assets than in
the case wherein it could value those assets (including goodwill) at the
takeover price, as would be sound commercial practice.
After the division, the dividing N.V. (if it continues to
exist and acquires the shares in the receiving N.V.’s) can apply the
participation exemption when it sells the shares in the receiving N.V.’s. The
shares should not be sold within a three year period though, because in that
case the division is supposed not to have taken place for business purposes,
and the facilities for the division will not be applicable, unless business purposes
for the division can be proved or made plausible.
But at the moment there is no such a regulation for the
merger nor for the division. For this reason, it is necessary to negotiate with
the tax authorities to assure a division without fiscal problems.
For the immovable property of the dividing N.V. the transfer
tax has also to be taken into account. At this moment there is no provision in
the transer tax for the transition of
immovable property in within the framework of a legal division. The N.V. that
acquires immoval property during the division, would owe this tax according to
the letter of the law, which amounts to 4%. But we have a notarial commitment
that the transfer tax is not applicable in case of a division.
As far as the sales tax is concerned, there is a regulation
for the transfer of a business that dates from 2001, years before the
introduction of the legal merger and division. But the wordings of it are
rather general and this regulation seems to be applicable to legal merger and
division.
We have advised on splitting a company in a case where 2 siblings were shareholders in an N.V. with sizable assets. The siblings differed in opinion on how to proceed so we made two separate N.V.'s out of one so that both could go their merry way.
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