How to use a Dutch Foundation/STAK for international structuring?

The Dutch foundation (in Dutch: stichting) has proven itself for centuries. It is a legal form with a remarkable broad scope of applications: asset protection, estate planning, family office, protection against hostile take-overs of listed companies and charity/non-profit purposes. 

The lack of shareholders and members give the foundation an orphan character. The authority of the foundation is in most cases solely vested with its board, which can exist of one or more board members. Sometimes an advisory or supervisory board is added. A STAK, a type of foundation, can issue depositary receipts that give rights to the income from the assets that are legally owned by the foundation. 

The Dutch foundation has limited liability. There is no capital requirement at Dutch foundation establishment. Incorporation takes place by execution of a notarial deed of incorporation, followed by registration with the trade register. There is no requirement to file any financial figures with the trade register and in most cases the foundation is not subject to taxation. Contribution by a non-Dutch tax payor to a foundation is not subject to taxation and there is no limitation to commercial activities. For tax substance a Dutch legal address and Dutch directorship are recommended. 

How a STAK can be used?

For international clients the STAK can be used for estate planning, which enables families to efficiently transfer beneficial ownership to heirs whereby the control over the assets, often shares in a company, shall be with the board members of the STAK. The board can consist of one or more family members or trusted persons. This enables a (gradual) transfer of beneficial ownership of a company to a large number of family members, whereby only a limited amount of family members or trusted persons will be in charge over the business. It also allows the transfer of beneficial ownership of a company from the parents to their children, as depository receipt holder, whereby the parents, as board members, stay in control over the business. 

The STAK is also used to keep control over family businesses listed on the stock market. The STAK enables the issue of depository receipts instead of shares at public offerings. Well-known listed companies that apply the STAK for control are Heineken and Anheuser-Bush InBev. Hereby, shares have been contributed to a STAK of the family which issued depositary receipts. The depository receipts holders will obtain the dividend rights of the shares. The voting rights will remain with the board of the STAK. The board members of the STAK are appointed by the family members. This way the family, as advisors of the board of the STAK, can indirectly control the shareholder meeting of the listed company. 

How a foundation can be used?

Further the Dutch foundation is used by international clients for:

  • Charity and non-profit purposes, whereby the foundation will serve a specific or more general object. When certain requirement are met, donations by the foundation are exempted from gift tax;
  • Family fund, whereby the contributed funds shall be invested and distributed in accordance with the objectives of the articles and list of wishes, creating an orphan structure with many characteristics of an Anglo-Saxon trust. Assets can be revocable and irrevocable contributed to the foundation. Assets that will be contributed to the foundation shall be protected from creditors of the contributor; and  
  • Securitization, using the orphan property of the foundation to create a floating structure to offload assets from a balance sheet of for example a bank, lease company or insurance company. 

The Dutch collective investment fund (FGR) can also be an interesting vehicle to form an investment fund (often containing portfolio investments). It exists of a dipartite agreement between an investor and asset manager.  Which is sometimes also expanded to a tripartite agreement with a custodian. The Dutch foundation can also be of use for an FGR. One or more of the parties to the FGR can have a foundation as its legal form. Thus, mitigating risk of bankruptcy.  

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