Stichting

A Stichting (foundation) is a Dutch legal entity with limited liability, but no members or share capital, that exists for a specific purpose.[1] 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]

Formation

A Stichting is a legal person created through a legal act. This act is usually either a notarised deed (or a will) that contains the articles of the foundation which must include the first appointed board. No government authority is involved in the creation or authorization of a foundation. It 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 foundations are defined in the Dutch Civil Code (Burgerlijk Wetboek), Boek 2 Art 285-304. It is not necessary in the Netherlands that a foundation serves a purpose of general interest, but its official goal cannot include making payments to anybody, except for charitable causes. A foundation is governed and represented by a board that is responsible for the foundation's administration. The board does not have a requirement for specific number of members.

Art. 2:289 of the Civil Code establishes that all foundations must be registered in the Register of Commerce or "Kamer van Koophandel". 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.

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

Examples

Charitable organizations

Takeover defense

Stichting 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.[3] The stichting was activated in July 2015 to block a planned takeover by Teva Pharmaceutical Industries.[4]

Finance and investment

Stichting 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 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.[3]

Netherlands Antilles

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

See also

References

  1. ↑ http://www.step.org/dutch-foundation
  2. ↑ The Wall Street Journal 'Going Dutch Has New Meaning In Corporate Takeover Battles' May 22, 2006
  3. 1 2 Raice, Shayndi (22 April 2015). "The Rise of the 'Stichting,' an Obscure Takeover Defense". Wall Street Journal. Retrieved 28 July 2015.
  4. ↑ Raice, Shayndi (27 July 2015). "Mylan's Leverage to Resist Teva Deal Reveals Shift in Rules". Wall Street Journal. Retrieved 28 July 2015.
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