Accounts are not usually lost in a meeting called to review the relationship. They are lost in the last two minutes of a call about something else, when a client mentions in passing that the group is opening a Dutch entity and asks whether that is something the firm handles. The honest answer is often no, or not really, and the client says of course, no problem, and the conversation ends pleasantly. Nothing appears to have happened. What has happened is that the client now has a question the firm did not answer and will have to answer somewhere else.
For most firms this is invisible, because the loss never arrives as a loss. There is no termination letter and no complaint. The instruction simply goes elsewhere, and some months later the client is being advised by two firms instead of one. The purpose of this article is to describe that sequence accurately, and to set out what a firm can do about it that is neither improvising nor handing the relationship away.
How the question actually arrives
It rarely arrives as a brief. It arrives as a fragment. A client is negotiating with a distributor who insists on contracting with a European entity. An investor in the next round wants the group holding company somewhere with treaty coverage and predictable corporate law. A logistics client is told that customs handling will be far simpler with a Dutch establishment. A founder read something about how European groups are structured and wants to know whether it applies to him.
In each case the client is not asking the firm to become Dutch counsel. He is asking whether the person he trusts with his corporate affairs has a view, and whether that person can make the problem go away. Those are two different questions, and firms tend to answer the first well and the second badly.
The timing matters more than the substance. These questions surface early, when the client is deciding whether the plan is feasible at all. Whoever gives a clear answer at that point tends to be the one who is still involved when the plan becomes a transaction with fees attached.
What the client does next when the answer is no
He does not go quiet. He asks somebody else, and the somebody else is usually not chosen carefully. It is whoever a peer recommends at a dinner, or whoever appears first when the question is typed into a search engine in the client’s own language. The selection is fast and largely accidental, which is precisely why it should concern the incumbent firm.
The new adviser then does what any competent adviser does on a first instruction. He asks to see the group structure, so he sees the whole chart. He asks about the shareholders agreement, the intercompany arrangements, the loan documentation and where the intellectual property sits. Within a few weeks he knows the client’s affairs at a level of detail the incumbent took years to build, and he has formed a view about what was done well and what he would have done differently.
He also becomes the adviser associated with growth. The incumbent handles the existing business, the litigation, the contracts that were already there. The new firm handles the new market, the expansion, the thing the client is excited about. That is not a fair division and it is not usually anyone’s fault, but it is the division that determines who is called first the following year.
The Dutch entity is rarely the whole instruction
Firms underestimate what is at stake because they picture a small piece of work. An incorporation, a registration, a bank account. The Dutch layer of a group is not that, and the adviser who takes it on will be pulled into everything attached to it.
Where the holding company sits determines how dividends move, what the exit looks like, which treaty applies and how the group is financed. Setting it up means forming a view on the group’s transfer pricing, on where its people and decisions actually are, on how the parent controls what sits below it, and on what the shareholders agreement should say. The adviser doing that work is not doing a formation. He is doing the architecture of the client’s group.
That is why the small referral has an outsized effect. A firm that hands away an incorporation has often handed away the design of the structure, and with it the standing to be consulted on anything that touches it later. It is a modest fee and a substantial position, and the two are easy to confuse.
Improvising it is expensive before it is risky
The other reaction is to keep the work and study the jurisdiction. The commercial problem with this arrives long before any question of liability. It is slow. Research that a specialist would not need to do at all becomes hours that cannot reasonably be billed, and the client, who wanted an answer this week, gets a cautious one in three.
The pace also gives the client something to compare. He has probably spoken to somebody in the Netherlands by then, informally, and that person answered in a sentence what took the firm a memorandum. Clients do not usually complain about this. They quietly conclude that the firm is out of its depth on the international side, and they route the next international question elsewhere from the start.
There is a narrower version of improvisation that works, which is answering the question the client actually asked. Whether the plan is sensible, what it will cost approximately, how long it will take, and what the firm recommends. That answer does not require Dutch qualification. It requires access to somebody who has one.
The cold referral and what it costs
Referring out is respectable, and most firms do it. The problem is that a cold referral is usually the introduction of a competitor into the client’s life, presented as a favour. The firm passes a name, the client makes contact, and from that moment the relationship runs directly between them. The incumbent hears about the outcome when it is finished, if at all.
Referral fees do not fix this, and in many jurisdictions they are restricted anyway. The money is not the point. The point is who holds the relationship, who sees the documents, and who is present when the client’s next question is asked. A referral answers the immediate need and gives away all three.
There is also a quality problem. A firm referring into a jurisdiction it does not cover cannot really assess the quality of the firm it is referring to, which means it is putting its own credibility behind an unverified judgement. When the referral goes badly, the client remembers who recommended it.
The third answer: yes, through someone who stays behind you
The alternative is to arrange coverage before the question arrives, so that the answer is yes. Not yes we will find someone, but yes, we handle that, delivered in the same tone as any other capability the firm has. The client experiences a firm that covers his group. The work is done by a Dutch specialist who has no interest in the client relationship and does not seek one.
This is a different arrangement from a referral network, and the difference is who the client deals with. In an integrated arrangement the instruction stays with the original firm, the local specialist works to it, and the client's point of contact does not change. The specialist provides the technical work, the local filings and whatever must be signed by someone qualified in the Netherlands. The relationship, the advice on how it fits the client’s wider position and the commercial conversation remain where they were.
Firms sometimes assume this is only available to large practices with international networks. It is not. A single practitioner with three internationally minded clients has the same need as a fifty partner firm, and a specialist working on this basis is generally indifferent to the size of the firm in front of him. He is being paid for technical work, not for access to a client base.
What it looks like when it works
The visible test is simple. The client asks his usual adviser a Dutch question and gets a substantive answer within a day or two, from the person he always speaks to. He is not introduced to anyone new unless he wants to be, and he is not asked to explain his business twice.
Behind that, the arrangement needs three things. Response times fast enough that the firm can answer while the client is still in the conversation. A single point of contact on the specialist side rather than a general enquiries address. And documents that arrive in a form the firm can pass on or adapt, in a language the client and the firm can both read, rather than in Dutch with an offer to explain it by phone.
The commercial terms and the way the arrangement is papered are a separate subject, and they vary with the professional rules of the firm’s own jurisdiction. What is worth settling in advance is scope: what the specialist covers, what he refers back, and what he will not do without the firm’s instruction. An arrangement that is clear on that point holds up under pressure. One that is not tends to produce an awkward conversation the first time a client emails the specialist directly.
How to tell whether it is happening already
Most firms have the evidence and have never assembled it. The exercise takes an afternoon. Go through the last two or three years of client conversations and note every time a question about a European entity, a holding structure or a cross border reorganization was raised and did not become a matter. Then check what happened to those clients afterwards, and which adviser handled the work.
The pattern is usually clearer than expected. The questions cluster among the better clients, because those are the ones expanding. They tend to have been deflected rather than declined, with an offer to look into it that nobody followed up. And in a proportion of the files there is now another firm in the picture, doing work the incumbent could have coordinated.
None of this means a firm should cover every jurisdiction. It means that gaps in coverage have a cost that does not appear in any billing report, and that the cost is concentrated in exactly the clients a firm can least afford to share. Closing one gap does not require becoming an international practice. It requires knowing, before the next client asks, what the answer is going to be.
This article is informational and does not constitute tax advice. Each engagement is subject to scope and applicable regulation.