Credit committees rarely decline a proposal because the structure is complicated. They decline because the file fails to answer, in a form the committee can rely upon, four questions: who owns what, which legal person is contracting, what services the debt, and who is entitled to sign. A Dutch platform assembled for holding, governance or treasury reasons will usually satisfy all four in substance. The difficulty is evidentiary. The proof sits in different registers, in different languages, and in states of currency ranging from immaculate to two years stale. Bankability is therefore less a property of the structure than of the record that describes it, and that record is built deliberately or not at all.
What a financier is actually underwriting
A lender underwrites a claim against a named legal person, supported by whatever recourse the documents create and whatever cash is contractually able to reach that person. Every other element of the file exists to describe the reliability of that claim. Group narrative, market position and sponsor track record inform pricing and appetite; they do not substitute for the identity of the obligor and the enforceability of the security package.
This has a practical consequence that is often missed by groups whose Dutch entity was designed for a different purpose. A holding company created to hold participations, insulate risk and centralise dividend flow is not automatically the right borrower. It may be the right guarantor, or the right pledgor of shares, or the entity at which a covenant package is tested. Deciding which role it plays, and then aligning the corporate documentation with that decision, is a structuring exercise in its own right, and one best undertaken before a term sheet exists rather than during confirmatory due diligence.
The ownership chain must be legible on its own
Legibility means that a reader with no prior knowledge of the group can move from the ultimate beneficial owner to the operating assets without asking a question. In Dutch practice this is achievable: incorporation before a civil law notary and registration with the KVK produce a public, dated trail, and the deed of incorporation, the shareholders’ register and the extract together establish existence, capital and representation. Where chains fail is above or beside the Dutch entity, in intermediate vehicles whose registers are informal, whose share transfers were documented by side letter, or whose historical restructurings were implemented but never papered.
The choice of vehicle affects how easily the chain reads. A BV with a conventional register is straightforward; a cooperatie, a stichting or a STAK introduces membership or certification mechanics that are perfectly respectable but require explanation, and the explanation must be in the file rather than in the adviser’s head. Groups that have selected a vehicle for a specific legal function should expect to evidence that function, not merely assert it.
Beneficial ownership deserves separate attention. The UBO register held at the KVK exists, and although public access was restricted following a judgment of the Court of Justice of the European Union in November 2022, institutions subject to anti money laundering obligations remain required to identify and verify beneficial owners. Divergence between what the register records, what the group’s own compliance pack states, and what the shareholders’ agreement actually provides is among the more reliable ways to stall a financing. It is also entirely avoidable.
The borrower and the assets behind it
An entity that owns nothing but shares in other entities offers a lender structural subordination and little else. That is not a defect of the holding model; it is its point. But it means the credit case has to be built explicitly, either by lending at the level where the assets sit, by taking share security over the participations, by obtaining upstream guarantees, or by some combination whose limits are understood by both sides. Upstream support raises corporate benefit and capital maintenance questions that Dutch directors are expected to consider seriously, and a guarantee granted without a documented board assessment is a weaker instrument than it appears.
Where the underlying assets are real property, the analysis extends further. Dutch transfer tax applies to the acquisition of immovable property, with a distinct treatment for a dwelling acquired as the purchaser’s own residence, and the acquisition of shares in a property rich company may itself fall within the charge. A lender assessing an eventual enforcement route will want to know whether a share sale or an asset sale is contemplated, and what the tax consequence of each would be. This belongs in the file at origination, not in a distressed negotiation.
Predictability of cash flow, not its magnitude
Financiers price volatility more harshly than they price scale. What matters is whether the cash that services the debt arrives on a schedule that can be modelled and is not contingent on discretionary decisions taken elsewhere in the group. Dividend flow from participations is generally shielded at the Dutch level by the participation exemption, which exempts qualifying dividends and capital gains where the minimum holding and the motive, taxation and asset tests are met, and which is mandatory and symmetrical rather than elective. The exemption governs taxation, not availability. Distributable reserves, minority consents, local corporate restrictions, and the group’s own treasury policy all sit between profit and receipt.
Interest flows require a parallel analysis. Deductibility at the payer is constrained by the earnings stripping rule implemented under ATAD, which limits net interest by reference to a percentage of fiscal EBITDA subject to a minimum threshold, with parameters that have moved over time. Withholding on outbound payments must be mapped as well: the general dividend withholding rate is fifteen per cent, reduced or eliminated by treaty or under European Union exemptions, each subject to anti abuse conditions, and a conditional withholding tax has applied to interest and royalties paid to low taxed or listed jurisdictions since 2021. A debt service model that ignores the interaction between deductibility and withholding will be corrected by the lender’s own tax counsel, at a cost to credibility.
Governance and the capacity to sign
Capacity is a documentary question with a substantive core. The KVK extract records directors and their authority, but joint signature requirements, reserved matters in articles or shareholders’ agreements, and board composition following changes never filed can all diverge from the public position. Lenders resolve this with legal opinions; groups that force reliance on remedial filings and ratifications during closing pay for it in time and in perceived control weakness.
A structure that cannot be explained in one diagram and evidenced from one folder will be financed, if at all, on the terms available to structures that can.
The deeper point is that governance quality is read as a proxy for management quality. Minutes that record real deliberation, decisions taken by the persons with authority, and meetings held where the entity is managed all support the same position that Dutch ruling policy has required since July 2019, namely genuine economic nexus. Governance designed for operation rather than for form serves the tax file and the credit file simultaneously.
The quality of the financial information
Financial information is assessed on three axes: currency, consistency and reconcilability. Currency means the ledger is closed on a predictable cycle and management accounts exist between statutory reporting dates. Consistency means the same figures appear in the statutory accounts, the tax return, the covenant certificate and the model. Reconcilability means the bridge from consolidated to entity level can be walked without improvisation.
Transfer pricing sits inside this discipline rather than beside it. Article 8b imposes the arm’s length principle and a documentation obligation without any threshold, with Master File and Local File requirements from fifty million euro consolidated turnover and country by country reporting from seven hundred and fifty million, the same threshold from which the Pillar Two minimum rate of fifteen per cent applies. Intra group interest, guarantee fees and management charges appear in the debt service model; if their pricing is undocumented, the model rests on numbers the group cannot defend. Value added tax follows a similar logic, since a pure holding company is generally neither a taxable person nor able to recover input tax, while one supplying management services for consideration is.
What blocks a file
- Opaque chains. Intermediate entities whose ownership or purpose cannot be evidenced, or whose historical transfers were never documented.
- An assetless borrower. Debt placed at a level with no recourse to cash generation and no compensating security or guarantee package.
- Delayed accounting. Overdue statutory filings, unclosed ledgers, or management accounts prepared only when requested.
- Inconsistent beneficial ownership. Divergence between the register, the compliance pack and the underlying agreements.
- Unsupported intra group pricing. Charges that drive the model but rest on no documented analysis.
- Stale corporate records. Directors, authority and articles that do not match the current reality.
Credit file preparation as a discipline
Treating the credit file as a standing asset rather than a transaction artefact changes the economics of financing. A group that maintains a current structure chart, complete corporate records, closed monthly ledgers, documented intra group arrangements and a coherent tax position enters negotiation with its information advantage intact. A group that assembles the same material under deadline concedes it, and concessions in diligence are rarely recovered in pricing or covenants.
The discipline is unglamorous and cumulative. It consists of filing what should be filed, closing what should be closed, and ensuring that the entity presented as the borrower is genuinely capable of being one. None of this is specific to any lender or any market cycle, which is precisely why it is worth building before it is needed.
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This article is informational and does not constitute tax, legal or investment advice. Each engagement is subject to scope and applicable regulation.