Corporate Approvals in Cross-Border Transactions: Who Must Approve What Before Closing?

Why the SPA, articles of association, shareholder consents and board resolutions must establish one consistent authority chain

A signed SPA does not prove that every party had the internal authority required to enter into and complete the transaction.

In a cross-border acquisition, approvals may be required at several levels: the foreign buyer, the seller, the Dutch target, its shareholders and, in some cases, investors, lenders or a works council. Each approval serves a different purpose. A board resolution may authorise the transaction, a shareholder resolution may approve a reserved matter and a power of attorney may authorise a person to execute the closing documents.

The practical risk is not usually the absence of all approvals. It is an incomplete authority chain: an approval is given by the wrong corporate body, a reserved matter is overlooked or the resolutions do not match the final SPA and notarial deed.

In my work alongside international lead counsel, I therefore treat corporate approvals as a separate closing workstream. The objective is to determine who must approve what, in which capacity and before which transaction step.

The wider execution process is covered in Buying a Dutch Company: Practical Insights for International Buyers and the Cross-Border Deal Checklist for Dutch BV Transactions.

Approval and signing authority are different questions

Corporate approval concerns whether the company has internally decided to enter into the transaction.

Signing authority concerns whether a particular person can legally represent the company when executing the SPA, power of attorney, notarial deed or another closing document.

A board may approve an acquisition and then authorise one or more directors to sign the transaction documents. Alternatively, the company may be represented under its articles by two directors acting jointly. A director may also grant a transaction-specific power of attorney to another person.

These steps should not be combined into one general statement that the transaction has been “duly authorised”.

For each party, the closing team should separately determine:

• which corporate body approves the transaction;
• which person can represent the entity;
• whether the representation authority is individual or joint;
• whether an additional power of attorney is needed; and
• whether any limitation or consent right applies.

The Dutch Business Register can show the registered directors and authorised representatives and whether a person is registered with individual, joint or limited signing authority. The articles of association and relevant corporate resolutions should still be reviewed to establish the complete authority position.

This distinction becomes particularly important where a foreign officer signs on behalf of a Dutch BV. A title such as CEO, CFO or president does not automatically create authority to represent the Dutch company.

The buyer must approve both the deal and its implementation

The buyer-side approval is often prepared under the law governing the acquisition vehicle. A US corporation, English company or investment fund may need board, shareholder, investment committee or general partner approval.

That approval should cover more than the headline acquisition.

Depending on the structure, the buyer may also need to approve:

• the SPA and ancillary documents;
• the purchase price and funds flow;
• acquisition financing;
• guarantees or security;
• the Dutch notarial deed;
• the appointment of Dutch directors;
• post-closing governance arrangements; and
• the persons authorised to sign or grant powers of attorney.

A common problem arises where the buyer’s resolution approves the SPA but does not clearly authorise the execution of the Dutch notarial deed or the acquisition of the specific class and number of Dutch shares.

The approval should correspond with the transaction actually being completed. If the acquisition vehicle, consideration, financing or share numbers change during negotiations, the buyer-side approvals should be checked again before closing.

Where the buyer signs the Dutch deed through an attorney, the underlying approval and the power of attorney should form one continuous authority chain. The practical requirements are discussed further in Dutch Powers of Attorney in Cross-Border Transactions.

The seller must have authority to sell the shares

The seller must approve the sale and validly authorise the execution of the transaction documents.

Where the seller is a corporate entity, its articles, board rules, shareholders’ agreement and financing documents may contain approval requirements. A board resolution may be sufficient in one structure, while another transaction may also require shareholder, supervisory board or investor consent.

The review should also determine whether the seller is legally able to transfer all shares shown in the SPA.

For a Dutch BV, the articles may contain transfer restrictions. Unless the articles provide otherwise, Dutch law contains a statutory offer mechanism under which a shareholder wishing to transfer shares must first offer them to the other shareholders. The articles may replace or modify that mechanism. A transfer in breach of a statutory restriction can be invalid.

The closing team should therefore check:

• whether the seller is the legal holder of the shares;
• whether the shares are pledged or otherwise encumbered;
• whether statutory or contractual transfer restrictions apply;
• whether shareholder or investor consent is required;
• whether pre-emption or first-offer rights have been waived; and
• whether the approvals cover the final transaction terms.

The SPA should not simply state that all approvals have been obtained. The required approvals and waivers should appear on the closing checklist and, where material, as conditions precedent or closing deliverables.

The Dutch target may require separate decisions

A sale of shares is principally a transaction between the seller and the buyer. The Dutch target is not automatically required to approve the transfer merely because its shares are being sold.

The target may nevertheless need to make several related decisions.

Its board or shareholders may need to approve:

• waiver or implementation of transfer restrictions;
• registration of the new shareholder;
• resignation and appointment of directors;
• changes to signing authority;
• termination or replacement of management arrangements;
• new intercompany agreements;
• repayment or refinancing of shareholder loans;
• releases of guarantees or security;
• a distribution or cash transfer connected with closing; or
• amendments to the articles of association.

The articles may also make specified board decisions subject to approval by the shareholders or another corporate body. Dutch law permits the articles to subject board resolutions to such approval requirements. The management responsibility itself remains with the board.

The practical point is that buyer approval, seller approval and target-level implementation are separate workstreams. A parent company’s approval of the overall deal does not automatically implement the required action at Dutch subsidiary level.

Shareholders’ agreements and reserved matters can create additional consent requirements

The articles are not the only source of approval rights.

A shareholders’ agreement may require investor consent for a transfer, sale of the company, change of control, amendment of the articles, issue of shares or alteration of the board. Financing documents may restrict disposals, distributions or changes to the group structure.

These contractual rights do not always affect the legal validity of a corporate action in the same way as an articles-level restriction. They can nevertheless create contractual liability, a default or a right to block the transaction.

International deal teams should therefore review the full governance and financing document set:

• articles of association;
• shareholders’ agreement;
• investment agreement;
• board rules;
• financing and security documents;
• option or incentive arrangements; and
• side letters containing investor rights.

A frequent mistake is checking only the articles and assuming that no further consent is required.

Another is obtaining a general investor consent that does not cover all related actions, such as director changes, repayment of shareholder debt or termination of existing rights at closing.

Works council advice is not a corporate approval, but it can affect the decision

Where the Dutch target has a works council, the transaction may require a prior advice process.

Under article 25 of the Dutch Works Councils Act, the works council has advisory rights in relation to certain contemplated decisions, including a transfer of control over the business or the acquisition or disposal of control over another business.

The works council does not replace the board or shareholder as the decision-making body. Its role is nevertheless relevant to the validity and timing of the decision-making process.

The relevant Dutch entity should normally seek advice while the decision is still contemplated and the advice can still influence the outcome. The SPA timetable should reflect whether consultation is required and whether signing or closing must remain conditional on completion of the process.

The mistake is treating the works council process as an employee communication exercise after the transaction has already become irreversible.

Written resolutions must comply with the Dutch decision-making rules

Dutch board and shareholder resolutions are often signed in writing rather than adopted during a physical meeting.

That is usually workable, but the correct process depends on the articles and Dutch statutory rules.

For shareholder decisions outside a meeting, all persons with meeting rights must generally consent to the use of written decision-making, and directors and supervisory directors must be given an opportunity to provide advice before the decision is adopted. The votes themselves must be recorded in writing or electronically.

Board resolutions should similarly comply with the articles and board rules, including any notice requirements, quorum rules, voting arrangements and conflict-of-interest provisions.

A document labelled “unanimous written resolution” is not necessarily valid merely because all signature blocks have been completed. The process and the persons entitled to participate must also be correct.

The approvals must match the final closing documents

Corporate approvals are often prepared before the SPA and notarial deed are final.

This is efficient, provided the documents are checked again when the deal changes.

A revised purchase price, different acquisition vehicle, changed financing structure or new closing condition may mean that an earlier approval no longer accurately describes the transaction.

Before closing, the authority matrix should be reconciled against:

• the final SPA;
• the disclosure letter and ancillary agreements;
• the funds flow;
• the corporate resolutions;
• the powers of attorney;
• the notarial deed;
• director appointment and resignation documents; and
• the closing agenda.

The Dutch civil-law notary will conduct its own authority review for the notarial deed. That review should be coordinated with the broader transaction process rather than treated as a substitute for it.

The notarial workstream is explained in more detail in Dutch Notarial Mechanics in Cross-Border M&A.

Conclusion

Corporate approval is not one closing item. It is a chain of decisions and authorities across the buyer, seller, Dutch target and other relevant stakeholders.

The SPA records the commercial agreement. The articles, shareholders’ agreement and financing documents determine which approvals are required. The resolutions record the decisions. The powers of attorney and representation rules determine who can execute the documents. The Dutch notarial deed completes the legal transfer of the shares.

International deal teams should prepare an approvals matrix before the final closing week. It should identify each entity, the required decision, the approving corporate body, the authorised signatory and the relevant closing document.

The practical question is not whether a resolution exists. It is whether every approval and authority document supports the transaction that will actually close.

FAQ

Does the Dutch target always need to approve a sale of its shares?

No. The share sale is generally between the seller and buyer. The target may still need to take related corporate actions or implement transfer restrictions, board changes or ancillary arrangements.

Is a board resolution the same as signing authority?

No. A board resolution approves the transaction internally. Signing authority determines who can legally represent the company when executing the documents.

Can shareholder approval replace a Dutch board decision?

Not automatically. Shareholder approval may be required for a reserved matter, but the Dutch board may still need to adopt the relevant management decision.

Can approvals be obtained by written resolution?

Often yes, provided that the statutory rules, articles and any board rules governing written decision-making are followed.

When should the approvals matrix be prepared?

Once the structure and principal documents are sufficiently clear, and before foreign powers of attorney and final closing documents are executed.

About Dirk de Waard

Dirk de Waard is a Dutch corporate and M&A lawyer, a dual Dutch-US national and partner at Venture Lawyers in Amsterdam. He works alongside international law firms, buyers, sellers and investors on Dutch corporate approvals, authority reviews, transaction documents and notarial closing.

Are all corporate approvals ready for the Dutch closing?

The buyer, seller and Dutch target may each require different approvals, resolutions and signing authorities. Those documents should be reconciled with the final SPA, powers of attorney, funds flow and notarial deed.

Dirk de Waard acts as Dutch counsel in cross-border M&A, private equity and venture capital transactions. He can prepare the Dutch approvals matrix, draft the relevant corporate resolutions and coordinate the authority and notarial workstreams through Venture Lawyers. Contact Dirk at dirk.dewaard@viottalaw.com before approval gaps become a closing issue.