The Use of Dutch Foundations in International Capital Markets Structures
28 Jun 2021
Ubiquitous with traditional estate planning activities both in the Netherlands and throughout Europe, the unique features of the Dutch foundation ("Stichting") have maintained its relevance as a key component of international capital market structuring and a mainstay of the European securitisation industry.
The Stichting is a highly appropriate choice for transactions that require an orphan vehicle, notably securitisations, in which the Netherlands has historically maintained a deep and liquid market, in particular for residential mortgage backed securities ("RMBS"). While prevalent in practically all Dutch RMBS deals, the appeal of the Stichting also spans the continent, with great familiarity in Luxembourg, the primary centre for German issuers, both for capital market structures and their use in the funds industry as the sole shareholder of a general partner. From the Maples Group's perspective, we regularly see these entities used as holding companies inserted into non-performing loans, real estate financing and healthcare transactions from Italy to Spain and as far afield as Lithuania.
In the typical Dutch RMBS, the use of a Stichting Ontvangsten as a collection foundation, acts as a structural enhancement where in the manner that homeowners make their monthly mortgage payments directly to the Stichting, which pools the receivables and distributes them to the various SPVs. This avoids payments being made to the originator and provides an additional layer of ring-fencing protection over the cash flows in the structure.
The Stichting is also widely used as the security trustee vehicle in structured finance transactions, as a separate legal entity to hold security for the secured parties, with the Maples Group routinely engaged to act as the agent on such deals. In many circumstances, this is preferable and a more efficient situation than having that role fulfilled by an investment bank as would typically be the case with other structures, as the assets are ring-fenced in a Stichting specifically incorporated for the particular transaction. Again, this arrangement has been replicated across Europe, with the insertion of a Dutch Stichting into German and Luxembourg deals with the Maples Group acting as security trustee in these civil law transactions. The Stichting is also comparable with the share trustee role in other jurisdictions and can provide an alternative structuring option, for example in common law jurisdictions, such as holding the shares for orphan purposes of Irish SPVs.
It is essentially this familiarity of the Stichting within the securitisation market – both in the Netherlands and across continental Europe – that really underpins its popularity. For a deal originating in Europe or where there is a preference to use a European structure, the use of a Stichting within the structure can be highly beneficial. Central to this view is the Stichting's characteristics as an orphan vehicle which is autonomous and not connected to any seller, originator or arranger of the transaction.
Unlike other entities, the Stichting itself has no actual owner, with its board of directors the only governing body. The ultimate beneficial owner will generally be the directors of the Stichting in their capacity as senior managing officials, who are in most cases the employees of the Maples Group where the firm is engaged as corporate services provider, with no association to the originator, which provides good independence of the structure. In this regard, the Stichting is a highly compelling option for structuring securitisation transactions that rely on the concept of bankruptcy remoteness, or for applications such as a bankruptcy proof depository of intellectual property rights or for retaining assets in trust for investment funds. Capital market participants also welcome the ability to form a Stichting in just one day, with an efficient establishment procedure that requires no approvals from government agencies.
With a strong presence in the Netherlands, the Maples Group's highly experienced fiduciary team provides a broad range of services, including registered office, directorship and corporate administration services to asset backed SPVs and Dutch holding companies. With particular expertise in the securitisation industry and wider capital markets, the team has deep experience in implementing Stichtings into a variety of structures, across asset classes and jurisdictions. Employing the highest standards of governance, leveraging on our institutional infrastructure and international network across all the major international financial centres, the Maples Group works with and alongside many of Europe's largest and most prominent originators and arrangers in this capacity, including acting as share trustee in common law.
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Senior Vice President, Head of Fiduciary Services – Netherlands Netherlands
T: +31 203 998 220
Vice President Netherlands
T: +31 203 998 233