In The Netherlands, there are more than 359,000 limited liability companies. Of these, about 358,000 are BV companies (with unlisted shares) and of the remaining NV companies only a handful is listed on a stock exchange. It should be noted that a company must in principle be public (NV), which requires that the company has share capital of at least EURO 45,000 and that it is regulated in the articles of association as regarding itself as a public company in order to be listed. After the flexibilization of Dutch law on the BV some years ago, it is in principle possible to use a BV for a listing, however, this option has not yet been used as it entails too many practical issues that are easily avoided using a NV.

What to consider if you have invested in unlisted shares, which is the most common in the Netherlands

For unlisted companies, the shareholders register is primarily managed via a bound book that is entered upon incorporation of the company and thereafter updated according to each corporate event. The civil-law notary transferring, pledging, splitting or issuing the shares through a notarial deed, will update the shareholders register accordingly. Therefore, one can rely upon the information as recorded in the shareholders register, backed up by the corporate document drafted by the civil-law notary (deed of transfer, deed of issue etc). This provides a high level of security when trading in unlisted shares.

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When a share register is stored digitally, greater transparency is usually achieved by the company.

Unlisted shares often have a higher risk, but greater potential

Investing in unlisted companies is exciting to many and there are many factors that differ from investing in listed companies. The biggest drawback of investing in unlisted companies versus listed is that it can be very difficult to sell their shares. Furthermore, disclosure of information from unlisted companies may be deficient. Investments in unlisted shares usually have a greater chance of increasing, as the company is often young and it is not really known what the companies’ earnings capacity will be and whether the company will need more capital through share issues or other capital contributions. On the other hand, the potential of unlisted shares is usually much greater and the thrill of following a company development up close is great.