An investor or buyer facing the VIFO Act wants to know early on what to expect. How likely is it that the minister will intervene? What criteria apply? And how long will it all take? The honest message is that the law provides legal frameworks that are relatively clear, but the outcome for each transaction varies greatly depending on the facts. Yet there is more guidance than many parties think.
The legal assessment criteria
The assessment criteria are explicitly set out in the law. Article 19 sets out the general factors that are weighed in any assessment: the transparency of the acquirer's ownership structure, any links to sanctions, the security situation in the country of origin and any criminal history. If it is a company with sensitive technology, additional criteria under Article 21 apply. The Investment Testing Agency (BTI) then also looks at the acquirer's track record in export control and information security, any non-commercial motives behind the transaction and whether the acquirer's country has a clear separation between civil and military research and development programmes. In the absence of transparency in the chain of ownership, or if the acquirer's motives do not reflect customary business considerations, the likelihood of a deeper review increases significantly.
The profile of the acquirer as a determining factor
In practice, the profile of the acquirer is the most decisive factor. An investor from a country that is bound by relevant international treaties, has a clear export control policy and maintains a civil-military separation will usually follow a different path than an investor with ties to a state with an offensive technology programme. The nationality of the legal acquiring entity is not decisive here: what matters is the ultimate ownership structure and who actually exercises influence over the acquirer. High dependence on a state investor or client may be enough to trigger risk flags.
When and how does the minister intervene?
When the BTI identifies risks, the minister has a wide range of tools. A complete ban is the extreme remedy and is used only when mitigating measures are demonstrably insufficient. In most cases where risks are identified, the minister sets conditions. These can be relatively limited, such as setting up a security committee and establishing an integrity policy for key officials with access to sensitive information. At the heavier end is the requirement to house certain activities in a separate subsidiary established in the Netherlands, the imposition of a technology escrow obligation or the restriction of services to certain countries or parties. For technology companies, such conditions can dramatically affect business operations after closing.
Lead time and deadlines: how long does it take?
Legal deadlines provide parties with predictability about the process. After a notification, the minister has eight weeks to decide whether further investigation is needed. If that assessment leads to a formal review request, another eight weeks follow for the actual decision. Both deadlines can be extended: the review period by up to six months and, in the case of foreign direct investment within the meaning of the EU FDI regulation, by an additional three months. Parties should therefore take into account in their timeline a total processing time that may exceed one year in complex cases.
Legal certainty and transparency in the Netherlands
What sets the Dutch investment test apart from many other European systems is its emphasis on legal certainty and transparency. Individual decisions are not made public, but from 2024 the ministry will publish an annual report with aggregated data on completed tests, broken down by sector, country of origin and outcome. Over time, this will give market participants insight into the risk patterns recognised by the BTI. Moreover, the BTI offers the possibility to consult on an informal basis prior to a formal notification. This low-threshold access shortens uncertainty for parties seeking early clarity on the scope of the law or the expected assessment.
Netherlands in European perspective
In the European context, the Netherlands is certainly not the strictest assessment country. Investment screening mechanisms are in place or under preparation in 25 of the 27 EU member states. The Dutch law stands out in comparison because of its explicit focus on proportionality and legal protection. Parties from allied countries with transparent security policies will usually experience a smoother procedure than acquirers from countries with a less clear civil-military separation or an offensive technological programme.
This is how you strengthen your position in the review
Knowing how the review works also means you can actively strengthen your position. An acquirer that documents its ownership structure transparently, can substantiate the transaction from market-driven considerations and proactively provides information is in a more favourable position in the BTI than an acquirer that waits for the procedure. For the target company, good preparation for the notification process can significantly shorten the turnaround time.
How does TK ensure that you can move forward?
TK supports both acquirers and target companies in assessing the expected review process, preparing the notification and negotiating any conditions that the minister attaches to the transaction. Want insight into how a specific transaction is expected to be assessed? Then contact Jan Willem or one of our other specialists from the Corporate/M&A team.
