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 centralize 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, which article 2:175 of the Civil Code requires for a BV, and registration with the KVK under article 6 of the Handelsregisterwet produce a public, dated trail, and the deed of incorporation, the shareholders’ register required by article 2:194 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 under article 15a of the Handelsregisterwet. Public access was restricted after the Court of Justice of the European Union, in its judgment of 22 November 2022 in WM and Sovim (C-37/20 and C-601/20), invalidated the requirement that the information be accessible in all cases to any member of the general public, and article 22a of the Handelsregisterwet now lists the private parties that may still consult part of its data, while article 28 opens it to the Financial Intelligence Unit and the other bodies it names. Institutions subject to anti money laundering obligations are among those private parties, and remain required under article 3 of the Wwft to identify the beneficial owners of a corporate client and to take reasonable measures to verify their identity. 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, not least because article 2:7 of the Civil Code allows the company to annul an act that exceeded its objects where the counterparty knew this or ought to have known it without enquiry of its own.
Where the underlying assets are real property, the analysis extends further. Dutch transfer tax under the Wet op belastingen van rechtsverkeer applies to the acquisition of immovable property situated in the Netherlands, with a distinct rate for dwellings and a further one for a dwelling an individual acquires as main residence, and the acquisition of shares in a property rich company may itself fall within the charge under article 4 of that act. 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 of article 13 of the Corporate Income Tax Act, which exempts dividends and capital gains from a qualifying holding, generally at least five per cent of the paid up capital; it does not in principle apply to a participation held as a portfolio investment, which a subsidiary whose function, taken together with that of the entities in which it holds an interest of at least five per cent, is largely to finance the taxpayer or related entities is deemed to be, unless the subsidiary is subject to a profit tax that is realistic by Dutch standards or its assets consist for less than half of low taxed free investments, it does not reach payments the subsidiary can deduct, and it 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 of article 15b of the Corporate Income Tax Act, implemented under article 4 of the Anti Tax Avoidance Directive (EU) 2016/1164, which limits net interest by reference to a percentage of fiscal EBITDA subject to a minimum threshold, today the greater of 24.5 per cent of adjusted profit and one million euro, with parameters that have moved over time. Withholding on outbound payments must be mapped as well: the general dividend withholding rate under article 5 of the Dividend Tax Act 1965 is fifteen per cent, reduced by treaty or eliminated under the exemption of article 4 of that act for qualifying corporate shareholders established in the European Union, the European Economic Area or a jurisdiction whose tax treaty or arrangement with the Netherlands covers dividends, an exemption that carries its own anti abuse test and a beneficial ownership condition. A conditional withholding tax under the Wet bronbelasting 2021 has applied since 2021 to interest and royalties, and since 2024 to dividends, paid to related entities established, or acting through a permanent establishment, in designated low taxed or EU listed jurisdictions, and in defined abuse and hybrid cases. 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 point the same way as the economic nexus that Dutch ruling policy has required since 1 July 2019 before it will enter into prior consultation on a ruling with an international character, namely operational business activities of the group in the Netherlands, to which the decree adds activities at the requesting entity’s own account and risk, for which sufficient relevant staff is present in the Netherlands at group level and which fit the entity’s function within the group. 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 of the Corporate Income Tax Act imposes the arm’s length principle and a documentation obligation without any threshold, with Master File and Local File requirements under article 29g for multinational groups with consolidated revenue of at least fifty million euro in the preceding year, and country by country reporting under article 29c from seven hundred and fifty million, the same amount that, reached in at least two of the four preceding years, brings a group within the Pillar Two minimum tax at a rate of fifteen per cent. 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: as the Court of Justice held in Cibo Participations (C-16/00), the mere acquisition and holding of shares is not an economic activity and dividends fall outside the scope of the tax, while a holding company involved in the management of its subsidiaries through services supplied for consideration does carry on an economic activity and may deduct input tax in proportion to its transactions in respect of which the tax is deductible.
What blocks a file
The failures that stall a file are documentary rather than commercial, and they share a shape: something the group knows to be true cannot be shown to be true from the record. Opaque chains surface first, because they surface on the first reading. An intermediate entity whose ownership or purpose cannot be evidenced, or whose historical transfers were never documented, asks the reader to accept an assertion at the point where the rest of the chain offered a document, and what clears the objection is the missing paper rather than a better explanation. Inconsistent beneficial ownership fails later and more expensively, when the register, the compliance pack and the underlying agreements are read side by side and diverge; the three have to be brought into line before the rest of the file is of much use. Stale corporate records complete the same group, since directors, authority and articles that do not match the current reality cannot support an opinion on who is entitled to sign, and curing them is paid for in closing time.
The other group concerns what services the debt. An assetless borrower is a defect of position rather than of presentation: debt placed at a level with no recourse to cash generation and no compensating security or guarantee package leaves a claim the lender has no means of valuing, and the choice it forces is between moving the debt and building the package. Delayed accounting does the equivalent damage to the numbers, because overdue statutory filings, unclosed ledgers and management accounts prepared only when requested tell the lender that the figures in front of it were assembled for the occasion; what is asked in exchange is a ledger that closes on its own cycle rather than on request. Unsupported intra group pricing is the quietest of these objections and the most corrosive, since charges that drive the model but rest on no documented analysis take the foundation out of the exhibit the committee reads most closely.
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.