Global wealth structuring for international high- and ultra-high-net-worth (UHNW) families with traditional and alternative assets involves the use of a number of vehicle types across varying levels within holding structures. Although drivers (such as residency, family dynamics and asset composition) may differ between families, the most flexible and therefore most common vehicles for wealth preservation and succession are the trust and the foundation.
The foundation, while mainly a civil law tool, is used by families globally, but especially those with roots in civil law juridictions. One form of foundation, the Dutch Stichting Administratiekantoor – or STAK – is among the most popular foundations globally as it has proven itself for centuries. Its legal form provides for a remarkably wide scope of applications: asset protection, estate planning, succession, family office governance and many other more niche uses like protection against hostile takeovers.
In fact, the Dutch private wealth market has again found itself in favour as an increasing number of well advised global UHNW families, particularly those from or with connections to civil or Sharia law countries, look to consolidate their global wealth into Dutch STAK foundations.
In addition to the attractiveness of the STAK foundation itself, other drivers include global regulatory trends, as well as reputational risk mitigation efforts, which have prompted many families to both rationonalise their wealth structures and move them into more reputable (or ‘white-listed’) jurisdictions like The Netherlands. Further, according to the Rule of Law Index 2020, the Dutch justice system ranks as one of the most reliable and effective in the world, giving further peace of mind to UHNW families.
The use of Dutch STAKs is certainly not new. This Dutch foundation was first made famous back in the eighties, when Swedish billionaire and IKEA founder Ingvar Kamprad set up Stichting INGKA Foundation. Other well-known listed companies with closely connected family ownership that use the STAK include Heineken and Anheuser-Bush InBev among many others.
Despite being a foundation, a Dutch STAK can issue depository receipts that give rights to the income and/or gains from the assets that are legally owned by the foundation. This results in a split between the economical and legal rights of the underlying asset(s), which is similar to the (common law) trust’s legal and beneficial interest separation.
The Dutch STAK has limited liability and there is no minimum or maximum capital requirement. Establishment takes place via incorporation (comparable to a company incorporation) by execution of a notarial deed of incorporation, followed by registration with the local Dutch trade register. There is no requirement to file any financial information with the Dutch Chamber of Commerce.
In addition, contributions to a STAK made by foreign residents (i.e. non-Dutch tax residents) are not subject to Dutch taxation. Holding investments in a STAK is not considered a ‘business activity’ and as such a STAK is transparent for tax purposes, therefore is not subject to Dutch income tax. If the depository receipt holders do not live or conduct business in The Netherlands, and their investments are not located in The Netherlands, they are not subject to Dutch taxation on profits or capital gains.
How can a STAK be used in your structure?
For international clients, the most common and effective use of STAKs is, was and continues to be for estate, succession and asset protection planning, which enables families to efficiently and safely transfer beneficial ownership to heirs.
STAKS are also quite flexible, including, where appropriate, scope for families to retain influence over the underlying assets – often shares in a family company or private equity interests – by having such family member(s) sit on the board of the STAK. The board can consist of one or more family members or trusted persons and often includes an independent professional fiduciary for governance, objectivity, administrative and continuity reasons. This enables a (gradual) transfer of the beneficial ownership of, say, a family business to a large number of family members, while only a limited number of family members or trusted persons will have direct oversight over the business. It also allows the transfer of beneficial ownership of a company from parent to child, as depository receipt holder, whereby the parents (normally alongside third party fiduciary stewards) stay in charge of the business as board members.
Finally, the STAK is commonly used to keep control of family business, including listed companies, over other special groups of investors in those businesses. Put another way, STAKs and the use of depositary receipts allow for a splitting of voting and economic rights in family businesses. This includes, for example, voting rights remaining with the board of the STAK (i.e. with mostly family members), while the depository receipts holders (e.g. public shareholders) will obtain and enjoy the dividend and capital growth rights of the shares.
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If you would like more information on Dutch STAK foundations and how IQ-EQ can support you or your clients’ wealth structuring requirements, please contact a member of our expert team:
Arnaud van der Werf