In our daily practice we frequently come across questions about exemptions under Articles 403 & 408 of Book 2 Title 9 of the Dutch Civil Code. What is the real issue here and how can your company benefit most from these exemptions?

The provisions in Article 408 are concerned with the consolidation exemption regarding so-called intermediate holdings. Under certain circumstances an international group company is exempt from presenting consolidated figures at the level of a Dutch intermediate holding. The condition that has to be met is that inter alia the figures of the underlying entities shall be consolidated at a higher level in the group and that this fact is reported as such in the separate financial statements, which are filed with the Netherlands Chamber of Commerce. If a company as a separate entity qualifies as large or medium-sized, then it not exempted from the statutory audit requirement.

You often see income from interest and dividends from subsidiaries included in the turnover of an intermediate holding, which begs the question of whether such flows should actually be added to the turnover of intermediate holdings. The RJ (Dutch Council for Annual Reporting) provides guidance in cases where exclusion is a possibility. Depending on the other criteria (number of personnel, and balance sheet total) an intermediate holding without income from interest and dividends could well be classified as ‘small’ and therefore would require a statutory audit. The utmost care must be taken in the face of such considerations.

Article 403 stipulates that in the event that a parent company is formally liable for the obligations of a subsidiary (and the directors/board of the subsidiary have formally consented to this), then the subsidiary does not have an independent obligation to publish and file said publications with the Chamber of Commerce. However, this does not discharge the subsidiary from the (statutory) obligation to prepare annual financial statements, even though there is no publication requirement. If Article 403 is applicable, then the figures of the subsidiary are aggregated with those of the parent company in the consolidated statements. Subsequently, it should be determined at the level of the parent company whether the subsidiary is a small, medium or large enterprise.