Top tips for doing capital markets deals in the Netherlands

Top tips for foreign lawyers involved in capital market deals in the Netherlands:

1. IFRS Conversion of Financial Statements
When offering securities to the public within the EU or listing on an EU regulated market like Euronext Amsterdam, issuers must prepare a prospectus approved by a competent authority such as the Dutch Financial Markets Authority (AFM). This prospectus must include financial statements prepared according to the International Financial Reporting Standards (IFRS). If the issuer's financial statements are prepared according to local GAAP, they must be converted to IFRS, a process that can be time-consuming and should be started well in advance of the transaction.

2. Communications with the Regulator
The AFM is known for its pragmatic, flexible, and thorough approach. It reviews all information in a prospectus for consistency, comprehensibility, and relevance to investors, and does not have a  'tick-the-box' approach. Initiating early communication with the AFM to discuss the proposed timing and scope of disclosure can help reduce uncertainty in transaction timing.

3. Regulatory Scrutiny on Financial Disclosure
The AFM pays close attention to financial projections and alternative performance measures (APMs) in prospectuses. Financial targets must be prepared with care to avoid misleading investors and potential liability. The AFM also scrutinises medium- and long-term financial targets to determine if they qualify as profit forecasts, which require additional disclosure. APMs must not be presented more prominently than IFRS measures, must be clearly defined, and reconciled to their most directly comparable IFRS measure.

4. Sustainability Disclosure
With the increasing importance of environmental, social, and governance (ESG) factors, the AFM carefully scrutinises sustainability claims and targets to prevent greenwashing. Issuers must quantify and substantiate their sustainability claims and avoid presenting themselves as more sustainable than they are.

5. Investor Presentations
Issuers should ensure that presentation materials for investor or analyst meetings are accurate and consistent with the prospectus. Although the AFM does not formally approve these materials, it often reviews them and may comment on them, for example, it may request adding risk factors (if they are not sufficiently included in the presentation materials) to provide a more balanced view of the issuer.  

6. M&A Transaction Complexity
Significant acquisitions made during the year before a public offering may trigger the requirement to include pro forma financial information, increasing auditing workloads and potentially delaying the offering. Issuers are advised to avoid substantial M&A transactions during the public offering process.

7. Flexible Corporate Law
Dutch corporate law allows for multi-class share structures with unequal voting rights, attracting issuers from more restrictive jurisdictions. Companies can deviate from the Dutch Corporate Governance Code as long as they provide a valid explanation.

8. Compliance with Board Structure Requirements
Dutch law allows for a one-tier board with both executive and non-executive directors, but listed companies typically have a separate supervisory board of non-executive directors. Companies preparing for listing on Euronext Amsterdam may need to adjust their corporate governance structure to comply with applicable law or market practice. Additionally, listed Dutch companies must comply with gender diversity rules for their supervisory boards or non-executive directors.

Conclusion
Understanding these key aspects can help foreign lawyers navigate the complexities of capital markets deals in the Netherlands more effectively. Early preparation, clear communication with regulators, and compliance with local laws and regulations are crucial for a successful transaction.

The full text of the Practice Note can be found here (website Practical Law) and here (PDF)* .

*Reproduced from Practical Law with the permission of the publishers. For further information, visit www.practicallaw.com.