|Fund Structure||CV, NV and Coop|
|Cost||The AFM charges €4,400 for a small managers regime registration|
Formation can become costly depending on the law firm or tax advisor engaged
|Timing||Varies depending on the regulatory regime|
Small Managers Regime is considerably quicker and better suited for new fund managers
|Fund Marketing||Fund Managers are subject to AIFMD|
AIFM required to gain approval from AFM prior to marketing fund to investors in the EU
|Tax Treatment||Dependent on the tax regime – open / closed and many other variables|
|Netherlands Private Equity & Venture Capital Association||https://nvp.nl/en/|
The Netherlands is quickly becoming a hot spot for new fund managers due to its relatively cheap costs in the EU and tailor-made “Small Managers Regime” for smaller funds. As a jurisdiction with one of the most double tax treaties and clear-cut cross-border capital deployment regulations, fund managers can partake in many of the investment opportunities across Europe and raise capital with relative ease. The Netherlands’ other strengths come from its stable, albeit slightly complex legal framework, as well as its decades-long reliable economic environment.
While the Netherlands is a favorite spot for corporations to hold their IP in a tax avoidance scheme referred to as the Double Irish with a Dutch Sandwich, it is not as beneficial for established and large AIFs. Though the Netherlands has not traditionally been seen as a jurisdiction to domicile an AIF, as mentioned it’s emerging as a well-suited domicile for new managers and has been experiencing a gradual increase in registered small fund managers falling under the AIFMD regime. This can partly be attributed to the strong service industry that is comparatively cheaper for small funds and their managers.
New fund managers should note the difficulty in setting up a fully licensed fund as the structure is very difficult to navigate. The costs associated with establishing a fund heavily depend on the structure and vehicles chosen by the fund managers. The Dutch regulatory body (AFM) has a stringent process for the fully licensed regime, under which the AIFMs must obtain a license from the AFM to operate. A 26-week review period of the application may be suspended if additional documentation is required. The AFM then has one month to make a decision which can also then be extended by another month. Suffice it to say this process is not for the faint-hearted and primarily where this regime loses its appeal to new fund managers with small funds.
Consequently, the lighter “Small Managers Regime” is the preferred choice by new managers entering the Netherlands as it is much quicker to form a fund in comparison. To qualify for the said regime, a manager’s total assets under management in the AIF (and other vehicles including managed accounts) must not exceed €100m. Additionally, participation must be offered to less than 150 professional investors or each investor must invest a minimum of €100,000.
Once the structure is agreed upon fund managers can providently begin the preparation of documents such as memos, pitches, and presentations for pre-marketing to investors. If the AIF is managed or marketed to professional investors outside the Netherlands, a marketing passport needs to be obtained, pursuant to the Dutch implementation of Article 32 of the AIFMD circa August 2, 2021.
Overall, the Netherlands presents a unique value proposition as an AIF domicile for new fund managers and should be carefully considered. The lighter regime provides a good offering for funds with less than €100m AUM. The legal complexity is somewhat offset by the readily available and affordable set of local advisories for new managers. The long time to market due to new regulations regarding KYC is a trend seen in recent years, especially in Europe. Most neighboring domiciles also face challenges in balancing access to their market with security and the welfare of the ecosystem as a whole.
More Domicile Analysis
For more information on fund domiciles, including details and analysis below:
- Venture Capital Domicile Report
- Fund Domicile in Delaware, United States
- Fund Domicile in Ontario, Canada
- Fund Domicile in Singapore
- Fund Domicile in Hong Kong
- Fund Domicile in Caymans
- Fund Domicile in Mauritius
- Fund Domicile in the Netherlands
- Fund Domicile in Luxembourg
- Fund Domicile in Estonia
- Fund Domicile in the United Kingdom