Vesting of shares in the Netherlands

Published on 28 August 2018 categories 

In recent years, I have increasingly been asked whether I could also include a “standard vesting clause” in a shareholders agreement. Sounds nice, but what is it, and why would you want that?


Vesting is a principle that has its origins in the United States, and it means that the percentage of shares to which a shareholder (often one of the company’s founders) is entitled builds up during a certain period of time. Thus, the shareholder does not immediately receive the full interest, but builds it up in exchange for his work. The reason for this is that external investors want the full commitment of the founders for at least a certain period of time. Certainly during the start-up phase of a company, the founders are of course essential for the success of a company, so it is only logical that the investor wants security in exchange for his financing.

In the US, this is easily regulated in many states. Shares there are issued directly by the company itself, without the intervention of a civil law notary. All that is needed, therefore, is an agreement between the shareholders and the company on the basis of which the shareholder vests, and the shareholders gradually build up their shareholdings. This includes voting rights in the shareholders’ meeting and the right to a share in the profits.

Vesting issues in the Netherlands

In the Netherlands this is not so easy. Shares are issued and transferred here by means of a notarial deed. As long as that deed has not been passed by the notary, the shareholder has nothing, except a contractual agreement with the other shareholders and the company. So if you want a founder to build up one percent each month, you will have to go to the notary every month to actually get the shares delivered. And you will have to pay the notary every month to pass another deed.

Another problem is of a fiscal nature: in the Netherlands, a vesting provision is very similar to an option right, and that option right can in turn be seen as a reward for the work of the shareholder. The tax authorities see this as income from work, and can therefore levy income tax on it, although of course this was never the intention of founders or investors.

Alternative possibilities

Fortunately, there are possibilities to guarantee the commitment of the founders in a Dutch company as well. If you want to stay close to the American practice, you can opt for a reverse-vestment clause. This is a provision that stipulates that a shareholder must surrender part of his shares if he no longer works for the company before the end of a certain period of time. This therefore amounts to a contractual obligation to (re)deliver the shares. If necessary you can, support this with a power of attorney granted in advance to carry out all the actions necessary to effect the transfer.

Alternatively, you can work with an extensive good leaver / bad leaver provision, which includes the situations in which there is an obligation to return the shares. In short: there are plenty of ways in the Netherlands to guarantee the commitment of the founders, and a vesting provision is certainly not always the most obvious option.

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