The Dutch Digital Security Offering

The Dutch Digital Securities Offering

Law & Blockchain Consultancy can take care of all your legal needs when issuing digital securities in the Netherlands. LBC provides strategic advise on your fundraising needs and can take care of the legal implementation of your digital securities offering, including the contracting thereof, your legal structuring, compliance with securities laws globally (incl. the drafting of a prospectus or the usage of exemptions thereto) and compliant KYC/AML practices.

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The Dutch Digital Securities Offering

The Netherlands is increasingly emerging as an attractive jurisdictions for the issuance of security tokens. Indeed, the legal burden associated with the issuance of security tokens in the Netherlands is currently relatively low. This is mainly due to two factors: the flexibility of dutch corporate law and the relatively low issuance requirements applicable to fundraising efforts raising less than 5 million EUR over a period of 12 months.

The flexility of dutch corporate law with regards to depositary receipts provides great benefits for security token issuers. This is mainly due to three reasons:

  • depositary receipts are freely transferable in the Netherlands without intervention by a notary;
  • the legal structure to issue depositary receipts is well-recognized in the Netherlands, which significantly reduces legal uncertainty for token issuers; and
  • Dutch business entity structures are very flexible.

In short, it works as follows: A company issues shares and transfer them to a foundation. The foundation, which is made responsible for the administration of the shares, splits the shares’ economic rights (ie. dividends and bankruptcy liquidation rights) from their governance rights (voting rights in the annual shareholders meeting). The economic rights are subsequently offered to investors in the form of tokenized depositary receipts, while the underlying shares are retained by the foundation. As such, this legally compliant security token issuance method allows companies to raise funds by issuing security tokens, without giving up governance rights.

The second important factor why the Netherlands is an attractive jurisdictions for security token offerings is its implementation of EU prospectus exemptions. In the EU, to raise more than 1 million EUR from the general public, the issuance and regulatory approval of a prospectus is required by EU financial law. The time consumption, legal burden and costs associated with the approval of a prospectus are incredibly high. However, the Netherlands has implemented a relatively lenient exemption for issuers raising a maximum of 5 Million EUR over a period of 12 months, with far less legal requirements.

Law & Blockchain Consultancy helps issuer wishing to raise funds via this Dutch Digital Security Offering throughout the whole process. Together with our partner notary, we take care of all legal needs, including the required legal structuring and contracting, compliance to all requirements imposed by the 5.000.000 exemption, AML/KYC compliance and more. Get in contact to learn more.

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