Holding: What Is It and How Do You Set It Up?

A holding company, also known as a holding entity, is a company primarily established to manage and control other companies. It usually does not have its own operational activities but holds shares in one or more other companies. This can offer significant benefits in terms of taxation, risk diversification, and business structure. In this article, we explain exactly what a holding is, why you might want to establish one, and how to do it step by step.

What is a Holding?

A holding is a corporation whose sole or main purpose is to manage stakes in other enterprises. This involves holding shares of other companies, also known as subsidiaries. The holding can have majority or minority interests in these companies, but it often holds a majority interest to have control over the subsidiaries.

Advantages of a Holding:

Tax Benefits: By shifting profits between subsidiaries and the holding, the overall tax burden can be reduced. This is often done by utilizing tax facilities such as the participation exemption.

Risk Diversification: Separating different business activities into separate subsidiaries can spread risks. If one subsidiary goes bankrupt, it has less impact on the other parts of the company.

Structuring and Acquisition: It is easier to sell parts of the company or acquire new businesses without having to adjust the entire structure.

Continuity: A holding can help with business continuity, for instance in business succession or when selling shares to third parties.

How to Set Up a Holding:

Establishing a holding is a process that must be carefully planned and executed. Here are the key steps:

Before setting up a holding, it is important to seek advice from an accountant, tax advisor, or legal expert. They can help optimize tax benefits and avoid legal pitfalls.

A holding can take various legal forms, such as a private limited company (BV) or a public limited company (NV). In the Netherlands, the BV is the most common form for a holding.

The articles of association form the basis of the holding and must be carefully drafted. They include the name, registered office, objectives, and capital of the holding. This document must be prepared by a notary.

After drafting the articles of association, the holding must be registered with the Chamber of Commerce. This is a legal requirement and ensures that the holding is officially recognized. Upon registration, you will receive a KvK number and a VAT number.

The deed of incorporation is drawn up and signed by the notary. It specifies who the founders are and how many shares they hold. The initial capital of the holding must also be deposited into a business bank account.

To make the holding function as a holding entity, the shares of the subsidiaries must be transferred to the holding. This can be done by entering into a share purchase agreement between the current owners of the subsidiaries and the holding.

Ensure that the tax structuring of the holding is optimal. This includes utilizing the participation exemption and other tax benefits. This can be quite complex, so it is advisable to involve a tax advisor.

From the moment the holding is operational, proper administration and accounting must be maintained. This is not only a legal requirement but also essential for efficient management of the participations and optimizing tax benefits.

Conclusion

A holding can be a powerful structure for companies looking to benefit from tax advantages, risk diversification, and strategic flexibility. However, setting up a holding is no simple task and requires careful planning and expert advice. By following the steps outlined above, you can lay a solid foundation for a successful holding structure that contributes to the growth and stability of your business.

More Questions?

If your curiosity is piqued and you want to know more, we are ready to answer all your questions. For example, you can participate in our free webinar, where you can ask us all your questions!