The Netherlands has been screening certain investments, mergers and acquisitions for risks to national security since 1 June 2023. This is done through the Investment, Mergers and Acquisitions Security Screening Act, better known as the VIFO Act. For investors, entrepreneurs and their advisers, this changes an essential part of the transaction process. The law affects deal structure, planning, financing and contractual arrangements between buyer and seller. For growth capital and exits, a VIFO notification can become a decisive factor.
At the heart of the VIFO Act
The VIFO Act prescribes that certain transactions must be notified to the government in advance and may only be completed after the Minister of Economic Affairs has made a decision. The assessment focuses on risks to national security, such as the continuity of vital processes or the leakage of strategically important knowledge and technology. The Investment Review Agency (BTI), part of the ministry, carries out that assessment and can approve transactions, allow them with conditions or, in extreme cases, block them. The law covers three categories of companies: vital providers (think certain energy, port and financial companies), corporate campus operators and companies active in sensitive technology. In practice, the latter category is the broadest and will be greatly expanded in the near future.
Scope and announced expansion
The notification requirement is not limited to outright acquisitions. For vital providers and corporate campus operators, it concerns the acquisition of control, or decisive influence within the meaning of competition law. For companies with highly sensitive technology, the threshold is lower: there, the duty to notify already applies when acquiring or increasing significant influence, starting from an interest of 10% of the votes in the general meeting. Subsequent thresholds of 20% and 25% require a new notification.
Sensitive technology currently includes, among others, certain dual-use and military goods, quantum technology, photonics technology, semiconductor technology and High Assurance products. During 2025, the scope of application is expected to be expanded to include six new technology areas: biotechnology, artificial intelligence (for certain applications), advanced materials, nanotechnology, sensor and navigation technology and nuclear technology for medical use. All these newly designated technologies also qualify as highly sensitive, making the lower 10% notification threshold applicable. The BTI estimates that this will bring an additional 1015 to 1730 companies within the scope of the law.
Why this matters in growth capital and exits
The VIFO Act is thus explicitly broader than classic infrastructure and also affects innovative companies that need capital precisely to grow. An investor entering with preference shares often wants protection rights, such as veto rights or appointment rights. It is precisely these governance arrangements that can lead to significant influence or control within the meaning of the law. The same mechanism plays out with exits: a sale to a strategic buyer, a secondary buyout or a restructuring where control shifts can make reporting and waiting mandatory. Important: the nationality or domicile of the investor is not relevant for the notification requirement. An entirely domestic transaction may also be notifiable. The transaction value or turnover of the target company is also irrelevant. Once the activities of the target company fall within the scope and the relevant influence threshold is reached, the standstill obligation applies. Closing may then not take place before the BTI completes the assessment process. In most cases, this takes three to six months. Non-compliance can result in fines of up to 10% of turnover. On top of this, the VIFO Act is dynamic. The underlying regulations offer scope for further expansion. For your company, this means that a transaction that is out of scope today may still come into the picture in a subsequent investment round or exit because the qualification of activities or technology changes.
What you can do now
You can remove a lot of uncertainty by treating the VIFO Act as a regular part of your deal preparation from the start. Start with a targeted VIFO scan in the preparation phase. Map the activities of the target company or your own and test whether vital processes or sensitive technology may be involved. Then determine whether the target structure provides control or significant influence.
Translate that outcome into the transaction documentation. Lay down in an investment agreement or purchase agreement who makes the notification, what information is provided, what effort obligations apply towards the BTI and how parties deal with any conditions. Build the timeline realistically so that financing documents, escrow arrangements and closing mechanics are in line with the assessment process. Sellers and target companies would do well to investigate at an early stage the ownership structure of potential buyers or investors and the source of capital, and take those findings into account when selecting parties for further negotiations.
How does TK ensure that you can move forward?
TK supports companies, investors and advisers throughout this process. We assess whether and when a notification is appropriate, help shape governance and investment rights so that the commercial objective remains achievable, and supervise the notification and contact with the BTI. In the contracts, we ensure that risk and responsibility are divided in a workable way, with clear agreements on timing, information and remedies.
More information.
Are you working on an investment, a new financing round or an exit and want to know what the VIFO Act means for your transaction? Then contact Jan Willem or one of the other specialists from the Corporate/M&A team at TK. Then you will quickly get clarity on the VIFO impact and the steps needed to make your deal go off without any surprises.
