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The Netherlands

The regulations applicable to finance companies in the Netherlands have changed again as of July 1 2002. The existing exemption regulation is revoked with effect from that date. This exemption was itself recently amended and stated that Dutch finance companies could be exempt from being qualified as a credit institution (kredietinstelling) within the meaning of the Act on the Supervision of Credit Institutions 1992, as a consequence of which the finance company would not fall under the scope of this Act. In addition to the new regulation, a policy guideline of the Dutch Central Bank (DCB) in respect of the terms used in the regulation has become effective.

Under the new regulation, finance companies will qualify as credit institutions but in certain circumstances can be exempt from the prohibition on conducting the business of a credit institution without having obtained a permit from the DCB. Such an exemption will apply if the finance company attracts funds either from "professional market parties" or within a "restricted circle". These terms are partly defined in the regulation and will partly have to be interpreted based on the policy guideline of the DCB. The policy guideline sets out the criteria of a restricted circle. These criteria, which need to be met during the full term of the funding, relate to the description of the group of persons from whom the funding is attracted, the accession criteria to form part of this group of persons and the existence of a "certain relationship" between these persons and the finance company (for example, employees, group companies and family members). It is possible to attract funds from both professional market parties and within a restricted circle (such as group companies).

The new regulation also exempts the attracting of funds from the public (that is not being professional market parties or a restricted circle), provided that:

  1. the funds are obtained against the issuance of securities in compliance with the Act on the Supervision of Securities Trade 1995;
  2. at least 95% of the finance company's balance sheet total will be on-lent within the group to which it belongs; and
  3. an entity of which the finance company is a subsidiary either grants an irrevocable guarantee or executes a keep-well agreement in respect of all obligations of the finance company, provided that this entity has positive consolidated equity capital during the full term of the funding. Alternatively, a bank guarantee may be issued for this purpose by a registered credit institution in the Netherlands or in certain other jurisdictions. Under this exemption, a finance company may also attract funds from professional market parties and/or within a restricted circle; in that case the requirements under (i) and (iii) do not apply.

The new regulation partly expands and partly tightens the conditions under which finance companies may attract funds in or from the Netherlands. On the one hand, it is no longer necessary for the funding obtained from professional market parties to be non-repayable during the first two years. Also, in principle, no restrictions apply in respect of the use of the funds and the instruments issued. On the other hand, the rules on which parties can qualify as professional market parties are tightened and certain additional requirements apply for the obtaining of funds from the public.

Certain filing requirements continue to apply for finance companies in order for them to be exempt from the obligation to have a permit, that is a written notification must be submitted to the DCB within two weeks after the commencement of activities as a finance company. The provisions which were introduced on January 1 2002 on (i) the filing of information with regard to directors, policy makers and qualified shareholders with a view to test their trustworthiness, and (ii) the administrative organization, have been cancelled as of July 1 2002. Also, the prohibition to issue unlisted or unregistered bearer notes will no longer apply from July 1 2002.

The new regulation will have immediate effect. It does not apply to existing funding arrangements with professional market parties. Finance companies which have attracted funds from the public will be granted a two-year term in which to either comply with the amended legislation or wind-down their funding arrangements.

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