Within the Netherlands, it is possible to convert one type of legal entity into another. For example, an association that wants to become a cooperative, or a B.V. that wants to become a N.V. or vice versa. This is different from a silent conversion or a closed conversion. There, it concerns a company not driven through a legal entity into a company driven through a legal entity.
When converting from one type of legal entity to another, the converting legal entity continues to exist. A transfer of all assets is not required. A conversion can only be done by notarial deed, by virtue of a resolution of the general meeting or, in the case of a foundation, by virtue of the meeting that may resolve to amend the articles of association.
In addition, there are a number of specific formalities to be observed. For example, when converting from or into a foundation or association, it is necessary for the court to grant permission.
Tax
Unfortunately, the tax authorities sometimes do consider a conversion to be a taxable event. So when converting, it is important to have everything properly supervised for tax purposes.
Cross-border conversion
From a Dutch perspective, it is possible for a legal entity to move to another country while remaining a legal entity under the law of the country from which it left. Compare a Dutchman who goes to live in France, who simply retains his Dutch nationality, on the understanding that he does have to start paying taxes in France.
Some countries believe that a legal entity actually established in a certain country should also be governed by the company law of the country concerned. As a result, a Dutch BV moving to such a country suddenly becomes a legal entity under the law of that other country. This is troublesome because the articles of association then do not meet the requirements of that other country; while the Netherlands still considers it to be a Dutch legal entity.
European Court
Based on case law of the European Court of Justice, countries must accept that legal entities establish in their country without being allowed to determine that their company law will then apply. Based on that case-law, countries must also accept that a legal person governed by the law of one country wants to convert to a legal person governed by the law of another country.
In the Netherlands, these cross-border conversions are not yet regulated by law. But it is already possible based on European Court case law. Europe is working on a regulation to regulate cross-border conversions.
If you have more information on cross-border conversions or ordinary conversions, please contact us. We will be happy to help.
pkooijman@kooijmanautar.nl
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