Brexit and exemption for group companiesGroup exemption pursuant to article 2:403 NCC still applicable for 2019 financial statementsProfessional Practice Department, February 2020

02

Brexit and exemption for group companies

A Dutch group company is exempt from the Title 9 presentation, disclosure, publication and audit requirements relating to its financial statements if it meets all of the conditions of article 2:403 NCC. Group companies meeting these conditions only have to prepare an abridged balance sheet and profit and loss account. These abridged financial statements must be adopted by the general meeting, but no audit and publication of such financial statements are required. Article 2:403 NCC does not apply to Public Interest Entities (OOBs) as referred to in article 2:398-7 NCC

One of these conditions (article 2:403-1c NCC) is that the financial data of the group company is consolidated by a parent company into its consolidated financial statements to which, pursuant to the applicable law, one of the relevant EU Directives1 for financial statements applies. This means that for the group company to be able to use the exemption, the consolidating (ultimate or intermediate) parent company in principle must be established in an EU member state.

1 Relevant EU Directives for financial statements are (1) the Regulation of the European Parliament and the Council regarding the application of international financial reporting standards, (2) Directive 2013/34/EU or (3) the applicable Directive for banks and other financial institutions or insurance companies.

As from 31 January 2020, the United Kingdom of Great Britain and Northern Ireland (UK) is no longer an EU member state. However, pursuant to the agreement on the withdrawal of the UK from the EU (2019/C 384 I/01), during the transition period ending 31 December 2020 all EU law shall be applicable to and in the UK (article 127 agreement 2019/C 384 I/01). This means that when consolidated financial statements of the UK tparent have been prepared and authorised for issue under UK law before the end of 2020, the above mentioned condition will be met. Of course, all other conditions also have to be met. Among others,

this requires the consolidated financial statements to be published at the Dutch Chamber of Commerce within six months after the balance sheet date of the group company, or within one month after a legally allowed later publication of the consolidated financial statements.

For financial statements for a reporting period ending on or after 31 December 2020 it will probably no longer be possible to apply the group exemption based on the consolidated financial statements of a UK parent company. However, this will depend on the terms that the UK and the EU will agree for that period in the upcoming transition period. Companies are advised to anticipate the situation that the group exemption will no longer be applicable. If a Dutch group company no longer can use the exemption, that company will have to prepare and publish financial statements in accordance with Title 9 Book 2 NCC. Depending on the size of the group company these financial statements also will have to be audited.

We stress that the UK parent company shall consider to withdraw the joint and several liability it has assumed as a consequence of applying the group exemption (article 2:404 NCC). Otherwise this liability will remain, despite the fact that the group exemption can no longer be applied.

RecapA Dutch group company of a UK parent can apply the exemption for group companies based on the consolidated financial statements of that parent for financial statements for a reporting period ending 31 December 2019 and for financial statements for a reporting period ending during 2020 provided:

• The consolidated financial statements of the UK parent have been prepared and authorised for issue in 2020; and

• All other conditions of article 2:403-1 NCC have been met.

03

The conditions of article 2:403-1 NCC (except for banks for which specific conditions apply) are:

a. The balance sheet in any event states the total amount of the fixed assets as well as the current assets and the amount of shareholders’ equity, provisions and liabilities, and the profit and loss account in any event mentions the result from normal business operations and the balance of the other income and expenses, all after taxation;

b. The members or shareholders have stated in writing, after the start of the financial year and prior to the adoption (‘vaststelling’) of the financial statements, to agree with a derogation from these requirements;

c. The financial data of the legal person is consolidated by another legal person or partnership into its consolidated financial statements to which, pursuant to the applicable law, the Regulation of the European Parliament and the Council regarding the application of international financial reporting standards, Directive 2013/34/EU or the applicable Directive for banks and other financial institutions or insurance companies applies;

d. The consolidated financial statements, as far as these are not prepared in or translated into Dutch, are prepared in or translated into French, German or English;

e. The auditor’s report and management board’s report are prepared in or translated into the same language as the consolidated financial statements;

f. The legal entity or partnership referred to under (c) has stated in writing that it assumes joint and several liability for obligations arising from juridical acts of the legal entity; and

g. The statements referred to under (b) and (f) have been filed with the Trade Register at the Chamber of Commerce where the legal person is registered as well as, annually within six months after the balance sheet date or within one month after a legally allowed later publication, the documents or translations listed under (d) and (e), or a reference to the Trade Office of the Chamber of Commerce where they are filed.

Brexit and exemption for group companies

Contact informationFor questions, comments or suggestions: Corné Kimenai (ckimenai@deloitte.nl).

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited (“DTTL”), its global network of member firms, and their related entities. DTTL (also referred to as “Deloitte Global”) and each of its member firms are legally separate and independent entities. DTTL does not provide services to clients. Please see www.deloitte.nl/about to learn more.

This communication is for internal distribution and use only among personnel of Deloitte Touche Tohmatsu Limited, its member firms and their related entities (collectively, the “Deloitte network”). None of the Deloitte network shall be responsible for any loss whatsoever sustained by any person who relies on this communication.

© 2020 Deloitte The Netherlands

Created by CoRe Creative Services. RITM0402111