Financial services

Acquiring a qualifying holding of 10 per cent or more in a regulated Dutch financial undertaking may require a declaration of no objection under the Financial Supervision Act. Which regulator assesses the application depends on the type of undertaking; for banks, the decision rests with the ECB. The assessment covers the proposed acquirer's reputation, financial soundness, the ability of the target to continue to meet the applicable requirements, and the transparency of the ownership structure up to the ultimate beneficial owners. Sponsor structures with multiple fund entities and limited partners tend to take longer, because the regulator will work up the chain.

What is reviewed is broader than the acquirer itself. The integrity and suitability of the persons who will determine policy, the source and sustainability of the funding and the risk of money laundering or terrorist financing are all taken into account. Indirect holdings count as well: an investor acquiring a stake in an ultimate parent may thereby acquire an indirect qualifying holding in regulated entities beneath it, each of which can require its own declaration. Acquisition debt at the level of the bidding vehicle attracts particular attention, since the regulator considers whether it can be serviced without recourse to the capital of the regulated entity.

Statutory assessment periods are long and can be suspended when the regulator requests further information. In practice this means that the application is best prepared in parallel with the SPA rather than after signing, that the SPA needs a realistic long-stop date and a clear allocation of regulatory risk, and that the parties need to agree in advance who bears the cost and the consequence of a refusal or of conditions being imposed.

Regulated targets come with governance obligations that survive the transaction. Proposed directors and, where the applicable regime requires it, supervisory board members are subject to fit and proper testing, covering suitability and integrity, before appointment, and a buyer that intends to change the board should factor those assessments into the closing timetable rather than the integration plan. Where the buyer intends to run the entity from abroad, the substance, control and outsourcing analysis also needs to be done in advance.

Remuneration rules affect the retention and incentive arrangements available to a foreign or sponsor buyer. Variable remuneration in the Dutch financial sector is subject to a strict statutory cap and severance payments are subject to their own limit, which constrains the retention and incentive arrangements that a buyer would otherwise use to hold a management team through an integration. A package designed on ordinary M&A assumptions is therefore tested against those rules before it is offered, and the alternatives, longer notice periods, adjusted fixed remuneration and non-financial retention, are settled in parallel with the purchase agreement. The oath or affirmation required in the financial sector applies to the people the buyer appoints in the same way as to those already in place.

• DORA makes ICT risk management, incident reporting and third-party arrangements a diligence item, particularly for firms with concentrated cloud or vendor dependencies. The record the firm has to keep of its contractual arrangements with ICT providers is a useful diligence document in its own right, since it shows which functions are supported by which suppliers and which of them the firm regards as critical.
• MiCA regulates crypto-asset service providers and imposes requirements on issuers of certain crypto-assets. The authorisation and passporting position is therefore a transaction-critical diligence item in that sector.
• PSD2 and the EU rules that follow it govern payment and account information services; licence scope and agent registrations need to be verified rather than assumed, and safeguarding arrangements for client funds are reviewed against how the firm actually operates them.
• Wwft obligations sit on the target's own operations, and historic customer due diligence failures are a recurring source of specific indemnities and, occasionally, of walk-away conditions. Remediation of a legacy client file is slow, it is carried out by the entity rather than by the seller, and its cost falls after closing, so it is priced rather than warranted.
• The European anti-money laundering package replaces much of the current framework in stages and establishes a European anti-money laundering authority, so a target's remediation programme is assessed against the regime that will apply after closing rather than only the one it was designed for.
• The Dutch Cybersecurity Act implementing NIS2 can also be relevant, with sector overlap that needs to be mapped against DORA rather than duplicated.

• Informal contact with the supervisor before an application is filed is customary in the Dutch market and tends to shorten the formal process, because the questions that would otherwise suspend the assessment period are identified while the file is still being assembled.
• Investment screening under the Vifo Act can apply where the target qualifies as a vital provider, adding a second parallel approval track with its own standstill obligation.
• Works council consultation under the WOR applies in the usual way and must be sequenced against a regulatory timetable that is already long, and the appointment or dismissal of a director on completion can give rise to a further advisory right.
• Share transfers require a notarial deed (art. 2:196 DCC), and closing is coordinated with the regulator's approval rather than the other way around, so the deed, the board and shareholder resolutions and the appointment documentation are held in escrow against a decision whose date is not within the parties' control.
• Portfolio and receivables transfers use assignment under art. 3:94 DCC, with notice requirements that have practical consequences for silent assignments and for servicing arrangements.
• Contract transfer under art. 6:159 DCC requires counterparty cooperation, which is why portfolio transactions are usually structured as assignments with a servicing overlay.
• A licence that will no longer be used is withdrawn on application rather than allowed to lapse, and winding down a regulated entity carries its own obligations towards customers, towards the deposit guarantee or investor compensation arrangements where they apply, and towards the supervisor, all of which can run well beyond the closing date.