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Banking

Netherlands

Pursuant to Section 4.23(1) of the Financial Supervision Act, a mortgage adviser must inform himself or herself of the consumer's financial position, knowledge, experience, goals and willingness to accept risks, and any advice must be based on this information. In a recent case the Authority for the Financial Markets ruled that Postbank NV had failed properly to inform itself of consumers' financial situations.

It is established case law that a bank has a special duty of care towards private individuals. The scope of the duty of care is determined by the particular circumstances of the case, including the nature of the agreement between the bank and the borrower and the degree of expertise of the borrower. The Utrecht District Court recently provided further insight into the scope of the duty of care.

A recent Trade and Industry Appeals Tribunal decision confirms that it is almost impossible to raise funds from the public without a banking licence. Informal environments such as churches and sports clubs will rarely constitute the requisite 'restricted circle' between borrower and lender. The decision also confirms that there is no easy way to avoid orders for periodic penalty payments.

The legislation on the system of financial supervision has undergone a drastic change. The introduction of the Financial Supervision Act is the result of a major operation which constitutes the largest legislation reform in the Netherlands since World War II. This update provides a brief overview of the banking rules and the position of finance companies in the Netherlands.

The Supreme Court has recently ruled that the granting of secured credit may, under certain circumstances, prejudice unsecured creditors of the late bankrupt and may therefore be nullified. When granting secured credit, banks must pay special attention to whether the borrower might become insolvent.

The Supreme Court has ruled that a judgment creditor that has attached a receivable may enforce its claims towards the debtor by collecting the receivable of the debtor towards a third party. If the attached receivable is secured by a right of mortgage, the judgment creditor benefits from the right of priority pursuant to the right of mortgage and its claims rank above the unsecured claims of third parties.

Capital Markets

Netherlands

The supervisory authority for the prudential supervision of financial institutions, the Netherlands Central Bank NV, has recently issued a set of guiding principles for the risk assessment of alternative investments. The Central Bank's goal is to increase awareness and improve risk management with respect to alternative investments and to involve the financial sector in the development of the principles.

Company & Commercial

Netherlands

Royal DSM NV decided to implement a loyalty programme pursuant to which certain loyal shareholders would receive a greater dividend. According to the Enterprise Chamber, the programme contravened Section 2:92(1) of the Civil Code. The Supreme Court overruled the Enterprise Chamber, stating that Section 2:92(1) does not mean that holding shares of the same class should always give the exact same rights.

Corporate Finance/M&A

Netherlands

The Dutch Private Equity and Venture Capital Association has issued a press release entitled "Companies Flourish after Private Equity Investment"; the Corporate Governance Commission has recommended that the scope for discouraging securities lending for the (exclusive) purpose of acquiring voting rights must be investigated; and the Ministry of Finance has published a draft proposal for various act amendments.

The finance minister recently informed Parliament of the outcome of an investigation into private equity and hedge funds in order to locate potential problems and create a clear strategy for such investments. The investigation was conducted by an RSM Erasmus University Rotterdam research team and included relevant scientific studies and actual cases. An inquiry was also conducted into listed companies.

The Dutch Private Equity and Venture Capital Association has recently adopted a new code of conduct for associated private equity firms. The new code aims to enhance transparency with regard to the operating methods of private equity firms and encourage professionalism in the private equity sector as a whole.

The Dutch Cabinet has recently presented its views on the report of the Monitoring Commission Corporate Governance on hedge funds and private equity. The Cabinet intends to lead an investigation into hedge funds and private equity in order to highlight possible problems and create a sound basis for this type of investment.

When performing an M&A transaction in the Netherlands, Anglo-Saxon dealmakers may be caught by surprise by the principles of good faith and reasonableness and fairness. This update highlights two consequences of these principles in respect of M&A transactions.

The Supreme Court has ruled that, in a company acquisition, the seller's duty to disclose certain relevant information voluntarily or without being asked prevails over the purchaser's duty to investigate the target. Even where a professional purchaser has conducted a due diligence investigation, the seller may still be obliged to disclose relevant information to the purchaser without being asked.

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