Head of Business Development | The Netherlands CSC Global Financial Markets
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Why is a stichting attractive for securitization?
Its origins may date back to the 1500s, but a Dutch stichting is modern and adaptable. When used as an independent bankruptcy-remote shareholder of a securitization vehicle, it can be more effective than structures from other jurisdictions.
A stichting is a legal entity established under Dutch law, translating to “foundation” in English. A stichting is a self-contained legal entity with a separate legal personality, which has no members or shareholders and therefore, no recognized owner. Instead, a stichting only requires a board of directors to operate, which has full control of the entity. This makes a stichting unique among legal entities, and why it’s known as an “orphan” entity or structure.
How does a stichting work in securitization?
Three simple steps secure the transaction.
- Set up a Special Purpose Vehicle (SPV): An originator sells a pool of receivables or other assets to an SPV entity that wants to remove them from its balance sheet. The SPV finances the purchase of the pooled assets by issuing debt securities, in the shape of notes or bonds, to sell to capital market investors.
- Structure the SPV as an orphan entity: To protect the SPV assets against a potential bankruptcy, the SPV should be properly structured as an orphan entity, isolating the assets in a bankruptcy-remote manner.
- Establish the SPV in tandem with a stichting: This streamlines the bankruptcy-remote status, allowing it to act as an independent incorporator and shareholder as well as providing the ideal bankruptcy-remote structure.
Who can do the set up?
CSC can help.
For decades, the experts in CSC’s Netherlands office have been helping clients set up and maintain stichting structures to achieve a variety of business goals. The most popular is as part of a securitization transaction, but stichting structures are also formed to hold legal ownership of assets for investment funds, and in conjunction with M&A and corporate structuring.
Whether you need a standard stichting structure, which can be set up relatively quickly and affordably, or your needs are more complex, our Dutch team will partner with you complete the transaction. The process includes:
- Appointing the stichting’s board of directors,
- Executing a loan agreement, which allows the stichting to incorporate and subscribe to the shares of the SPV, and
- Referring a notary firm to execute the incorporation deed.
CSC is one of the world’s largest privately held businesses to offer specialized outsourcing services to asset managers, capital markets participants, and corporations across key financial jurisdictions around the globe. We have been partnering with clients to provide unparalleled service for more than 120 years. Our experts take the time to understand the nuances of complex deal structures, yet are flexible enough to expedite appointments when time is of the essence.
If you would like to discuss a Dutch stichting in more detail, contact firstname.lastname@example.org.
This is the first part of a three-part series on the benefits of setting up a Dutch stichting structure.