The holding company

A holding company is the highest company in a group of companies. The purpose of a holding company is to hold assets, such as shares in one or more other 'besloten vennootschappen' (comparable to private limited companies), business premises or profits. A company in which a holding company holds shares is called an operating company. A company, such as a bv or an nv, is a so-called legal structure.

What is a holding company?

Most holding companies are bv's, but some are nv's (naamloze vennootschappen, comparable to public limited companies). With a holding company, you shield the business risks of your operating company from the assets you have placed in your holding company. You can set up a holding company when you set up your company or at a later stage. 

Shares

The law states that a bv must have capital upon incorporation. You can determine how much capital the bv will hold, but it should be at least € 0.01. The articles of association of the bv specify that this capital is split up into a certain number of shares. Shareholders, the owners of the shares, pay the value of their shares to the company. A holding company holds shares in one or more other companies. If you are the sole shareholder of the holding company, it is your personal holding company. 

If you have more than 5% of the shares in a bv and you work in the bv, you are considered its Director and Principal Shareholder, or DGA in Dutch. 

Holding graph 1

You are the shareholder of the holding company and the holding company is the shareholder of the operating company. It is best to transfer ownership of the company’s most important assets to the holding company, such as your trademark rights, the business premises or the profits you make with the operating company. 

Business risks

Holding companies do not ‘do business’. The operating companies do the actual work. An operating company runs business risks, such as claims from customers or failing to honour agreements. If your operating company goes bankrupt, the assets in your holding company remain unaffected. 

Intermediate holding company

A holding company can have any number of operating companies, a dedicated operating company for different lines of business for example. For example, you could have one operating company for selling cars and another operating company for renting out cars. In some cases, it can be useful to create another company to sit between the holding company and the operating company, for example to spread business risks or to facilitate succession (in Dutch). This is what we call an intermediate holding company. In this system, the holding company owns the shares in the intermediate holding, while the intermediate is a shareholder in the operating company. 

Holding graph 2

Entrepreneurs often use this structure to collaborate with others, in which case the personal holding companies of all entrepreneurs involved are joint shareholders of the intermediate holding company. The intermediate holding company is the sole shareholder of the operating company. With this approach, the various entrepreneurs involved control the intermediate holding company, while the business risk lies with the operating company. 

How do I set up a holding company?

Structures consisting of an operating company with a holding company are called holding structures. You can set up a holding structure when you set up your business, but you can also incorporate an existing business into one. 

Setting up a new business

To set up a bv, you need a notary. If you want to set up a holding structure, you should first set up the holding company with the notary, after which you set up the operating company on behalf of the holding company. When the holding company is incorporated, you own all the shares of the company, while ownership of the shares in the operating company is transferred to the holding company. The notary registers the bv's in the KVK Business Register, as well as documenting the identity of the Ultimate Beneficial Owners (UBOs) of the bv's. 

Incorporating an existing business into a holding structure

You can also switch to a holding structure if you already have a business, a sole proprietorship for example. You can do this in two ways. Which way makes the most sense for you depends on your personal situation. It is best to discuss this with your accountant or tax advisor. 

1. Converting your sole proprietorship into a holding company and operating company

The first step is to form a holding company with a notary. The shares of this holding company have a certain value, as stated in the articles of association of the holding company. In this case, the value of these shares is not paid up with money, but with the assets and debts of the sole proprietorship. The notary draws up a deed of contribution and contribution memorandum for this purpose. 

After this, the holding company forms an operating company. The assets and debts transferred to the holding company in the first deed of contribution are used by the holding company to pay up the shares of the operating company, requiring a new deed of contribution and contribution memorandum. The activities of the sole proprietorship can then be resumed by the operating company. Make sure to seek expert advice about this procedure and the financial and other consequences. 

2. Forming a holding company and operating company and selling your sole proprietorship to the operating company

You can also decide to form a holding company and an operating company first and pay up the shares with money. This involves selling the assets and debts of your sole proprietorship to the operating company. You can then dissolve your sole proprietorship and continue your business through the operating company. 

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