How does a Dutch trust office foundation (STAK) work?

The essence of a STAK (stichting administratiekantoor, or trust office foundation) lies in the principle of legal separation. When a STAK is used, the structure is set up in three consecutive steps:

1. Incorporation: the STAK is incorporated as a foundation (stichting) by notarial deed. The foundation has its own board and articles of association. In addition, the terms of administration are drawn up; these are the operational ground rules between the STAK and the depositary receipt holders.
2. Transfer of shares: some or all of the shares in the underlying private limited company (B.V.) are transferred to the STAK. From that moment, the STAK is the legal owner of its shares, alongside any other shareholders. The shareholders’ register lists the STAK, alongside any other shareholders, rather than the (legal) persons behind it.
3. Issue of depositary receipts: the STAK issues depositary receipts for shares to, for example, investors or employees.

This structure decouples the traditional shareholder rights. Control (the right to vote at the general meeting of the B.V.) lies with the shareholders and therefore, where all shares have been transferred to the STAK, exclusively with the board of the STAK. The economic rights (the right to dividends, liquidation proceeds and increases in value) lie with the shareholders and therefore also with the depositary receipt holders. When the B.V. pays a dividend, the STAK receives it and passes it on directly to the depositary receipt holders.

The advantages of a STAK: control, continuity and privacy

For entrepreneurs and investors, the STAK structure offers considerable advantages:

• Control while raising capital: if you need growth capital but want to keep full control of the strategic direction, you can issue depositary receipts to investors. They share in the profits, but have no voting rights and cannot dismiss the company’s management.
• Controlled business succession:in family businesses, the STAK is an excellent means of transferring wealth to the next generation (the depositary receipt holders) without jeopardising the stability of the business through inexperienced or divided successors. The board of the STAK remains in the hands of capable directors.
• Employee participation:you can tie employees to the business by giving them depositary receipts. This stimulates intrinsic motivation through profit sharing, without vital decisions being delayed by formalities or veto rights of minority shareholders.
• Privacy and anonymity: although the STAK itself is registered in the Trade Register of the Netherlands Chamber of Commerce (KVK), the individual depositary receipt holders (as long as they do not hold a UBO interest of more than 25%) are not publicly visible in the shareholders’ register. This provides an extra layer of discretion.

The disadvantages of a STAK: complexity, costs and governance risks

Despite its advantages, the STAK has a number of significant drawbacks:

• Governance friction and agency problems: because depositary receipt holders have no direct voting rights, a gap can arise between the board of the STAK and the economic stakeholders. If the board takes decisions that harm profitability, the depositary receipt holders have limited direct remedies, which can lead to costly disputes over mismanagement.
• Meeting rights and obstruction:depositary receipt holders with meeting rights are entitled to attend the general meeting of the B.V. and to speak there. Although they do not vote, their presence and formal position can still delay or complicate decision-making.
• Operational and administrative overhead:a STAK requires its own administration, annual meetings of depositary receipt holders and strict compliance with the terms of administration. This increases the administrative burden.

What does a STAK cost?

The costs of a STAK consist of initial set-up costs and ongoing operational costs:

• Set-up costs (one-off): a STAK must be incorporated by notarial deed. The costs of drafting the STAK’s articles of association and terms of administration and of formally transferring the shares generally range from €1,500 to €5,000, depending in part on the complexity of the terms of administration and the notary’s fees.
• KVK registration: registration in the Trade Register involves a small one-off fixed fee (approximately €80).
• Annual costs: as a rule, the STAK does not need to file separate annual accounts with the KVK if it does not run an active business (it is purely an administrative office). There are, however, costs for administrative management, any bank accounts and periodic fees for the STAK’s directors (if they are external).

When should you use a STAK?

A STAK is particularly suitable in the following scenarios:

• You want to set up an employee participation plan in which employees actually build up economic rights, while avoiding operational deadlock.
• You are going through a generational transition (family business) in which wealth needs to be transferred in a tax-efficient way now, while operational management remains with the founder or an external management team.
• You are bringing in investors who are in it purely for the financial return and do not seek any operational or strategic involvement.

When should you not use a STAK?

In the following situations, a STAK defeats its purpose:

• If you start a business with two or more equal partners, a STAK causes unnecessary delay. Any protection against departing shareholders is more efficiently arranged in a shareholders’ agreement with good leaver and/or bad leaver provisions.
• For small businesses, the notarial and administrative costs simply do not outweigh the benefits.
• Professional investors such as venture capital funds almost always require direct voting rights and often a seat on the board and/or the supervisory board. They will rarely agree to depositary receipts without control.

Conclusion

The STAK is a precision instrument for corporate governance. It allows you to separate capital and control seamlessly. Where the dynamics between founders, investors or family members call for robust protection of the strategic direction, a STAK is well worth the investment in time and money. If, however, the governance structure is inherently symmetrical or the interests are aligned, a flexible shareholders’ agreement will suffice.