You want to sell your company. Start by drawing up a memorandum of sale. This memorandum contains facts and figures about your business, some of them sensitive. You have to lay bare all the relevant data, since you have an obligation to disclose information (mededelingsplicht). Protect your data by asking potential buyers to sign a confidentiality agreement. If the sale goes through, you have to notify the Netherlands Chamber of Commerce (KVK) and the Dutch Tax Administration (Belastingdienst).
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Find a sales advisor
Selling your company is a complicated process. Enlist the services of a sales advisor (in Dutch) to help you.
Company valuation: how much is your business worth?
Draw up a memorandum of sale to determine the worth of your business. This memorandum contains extensive company information, for instance the sales price and how you have set it; this way, you can show the buyer what exactly you are selling. Items like:
- Business premises. If you rent premises, you need the owner’s permission. To take out a mortgage or end one, you go to the bank.
- Intellectual property. For instance, trading names, copyrights, patents, design rights, and brand names.
- Current court cases, product liability and warranties.
- Current contracts, phone numbers and subscriptions.
The value of your company is not only measured in tangible assets. Your goodwill influences your company’s value as well. Do you need advice? Get a financial expert (in Dutch) to determine how much your business is worth.
Two ways to sell a private limited company
You can opt for share transfer. That way, you sell everything that belongs to the company. You can also opt to sell only the assets and liabilities. If you choose this way, you and the buyer agree which parts you sell and which ones you don’t.
Draw up a confidentiality agreement
In the sales memorandum and during sales talks you share confidential information about your company. To ensure that this information stays between you and the potential buyer, you ask them to sign a confidentiality agreement. This agreement states, for instance:
- which information must remain confidential;
- who is allowed to view the information;
- what happens if the confidentiality agreement is breached;
- the period during which the agreement is valid.
Draw up a declaration of intent
Make agreements about the negotiation procedure, and record them in a declaration or letter of intent. Be aware that the agreements you record in the letter of intent are binding. Violation of the declaration of intent has financial consequences, both for you and the buyer. You can draw up a preliminary purchase contract with the buyer, if the letter of intent shows that you agree on the main issues.
What happens with your employees?
Do you employ staff? Usually, the staff of a company is transferred to the new owner. The buyer is not allowed to make any changes in their contracts and labour conditions. All running procedures are also transmitted to the buyer: dismissal, illness, hiring new employees. It can be advisable to finish these procedures before you sell your company: they may affect your company value. See also: Takeovers and employee rights.
You have an obligation to disclose information
The buyer can ask for a due diligence investigation to establish the accuracy of your figures, prognoses and conjectures. This will give the buyer a better idea of who your customers are, and how many contracts you have. You are under an obligation to disclose information. This means you are obliged to give accurate and sufficient information about your company.
Signing the purchase agreement
You draw up the final purchase agreement together with the buyer. This contract is the basis for tackling any future disputes. The contract contains information about (among other things):
- what you sell. For instance real estate, inventory, stock or goodwill;
- the sales price;
- the payment method;
- cancellation clauses;
- date of transfer;
- if you will continue to be involved in the company;
- staff matters;
- transfer procedure;
- competition clause.
Use a notary for the transfer of shares
When you sell shares in a private or public limited company (bv or nv), you use the services of a notary. The share transfer is done by notarial deed. When you sell a sole proprietorship, a commercial partnership, or a private limited company’s assets and liabilities, you don’t need a notary.
Report the company transfer to the KVK and Tax Administration
You must report to the Netherlands Chamber of Commerce KVK that you are transferring the company (in Dutch), and to whom. The company will then no longer be registered in your name. The KVK will report the transfer to the Tax Administration.
Settle with the Tax Administration
As soon as the KVK has reported your company transfer, the Tax Administration can settle with you. For instance, do you have a retirement reserve? That will probably influence your profit, and your income tax. What you need to settle with the Tax Administration depends on your business’ legal structure.
Sole proprietor or commercial partnership (vof)
When you sell a sole proprietor business or transfer your share in a commercial partnership, you have to calculate discontinuation profit (in Dutch). That is the difference between your company’s book worth and the actual value at the moment of transfer. You pay income tax over this profit. In some cases, you can deduct discontinuation relief.
Ask an expert to help you
Calculating your discontinuation profit is a complex matter. It involves quite a few conditions, and there are several exceptions. Ask a tax expert, for instance your accountant or tax consultant, to help you, so you don’t pay too much.
Private or public limited company (bv or nv)
Depending on your company’s legal structure, you will have to pay different taxes. For instance, if you have a substantial interest (more than 5% of the company shares) and are selling your shares privately, you will have to pay income tax over the proceeds. Are you also selling real estate? Then you will have to pay property transfer tax.
Financing options for the buyer
You can help the buyer finance the transfer (in Dutch) of your company by alternative means. This often means you will remain involved in your company for a while. Examples of these financing options are:
- a subordinated loan (where you agree to come last in the line of creditors, in case of bankruptcy);
- profit-sharing rights/earn-out;
- gradual transfer.
Don’t charge VAT on the sales price
All VAT rules that apply to your company are transferred to the buyer. You, as seller, do not personally own the right to charge VAT on company transactions; the owner of your company does. You do remain liable for VAT debts until the moment of transfer.
Keep your business records
Even after the sale of your company, you or the buyer have to keep your business records for at least 7 years. You can store them digitally if you want. Lay down who will keep the records in the purchase agreement. When you sell real estate, like business premises, you have to keep the records for 10 years.
Exception: selling to family
Taking over a company business works the same way as taking over any other business, but if the transfer is a donation or an inheritance (in Dutch), you have to pay inheritance tax. You will have to inform the Tax Administration.