NAV Facilities Through Dutch Holdcos: Governance and Enforcement Issues to Fix Early

Governance and enforcement issues to fix early

A NAV facility is a financing arrangement where borrowing capacity is linked to the net asset value of a portfolio rather than the cash flows of a single operating company. In private equity, private credit and continuation vehicle structures, NAV facilities are increasingly used to create liquidity, support portfolio companies, refinance existing debt or bridge timing gaps before exits.

This article forms part of the Continuation Vehicles & Dutch PE Governance Insights series, which focuses on practical Dutch implementation issues in continuation vehicles, GP-led secondaries, structured liquidity solutions and Dutch portfolio company governance.

Where Dutch holdcos are used in a fund or acquisition structure, a NAV facility is not only a fund finance product. It can affect Dutch BV governance, shareholder approvals, security rights, intercompany flows, board authority and enforcement strategy. That is where local implementation becomes important.

NAV financing is moving deeper into private capital structures

NAV facilities used to be viewed as specialist liquidity tools. They are now becoming part of mainstream private capital structuring, especially where sponsors want more flexibility without selling portfolio assets immediately.

That makes the Dutch implementation layer more relevant. Many Dutch holding companies were originally set up for acquisition structuring, co-investment, management rollover or tax and governance separation. They were not always designed for portfolio-level leverage, lender controls or security packages linked to fund-level borrowing.

The result is a practical mismatch. The fund-level financing may be negotiated under English or New York law, while the enforceability and governance consequences still run through Dutch entities lower in the structure.

The governance issue is often underestimated

The main issue is not whether a NAV facility can be documented. It usually can. The more important question is whether the financing works within the existing Dutch governance framework.

A Dutch holdco may already be subject to shareholder reserved matters, management participation rights, co-investor protections, distribution restrictions or consent requirements in the shareholders’ agreement and articles of association. A NAV lender may then require additional controls over distributions, disposals, further debt, reporting or collateral. If these layers are not aligned, the structure may become difficult to operate after closing.

This is particularly relevant in continuation vehicle transactions. The sponsor may be seeking liquidity or additional time for value creation, while rolling investors, exiting investors, lenders and management do not always have identical interests. Dutch governance documents should be reviewed before the NAV facility is finalised, not after the financing package has already been agreed.

Enforcement should be analysed before there is stress

In many transactions, Dutch enforcement issues receive too little attention because the financing is agreed at fund level. That can be risky. If the structure includes Dutch shares, Dutch bank accounts, intercompany receivables or Dutch holding companies, the local security and enforcement mechanics should be checked early.

This is not only a technical finance-law point. It can become a governance issue. Enforcement or lender control may conflict with shareholder arrangements, board authority, existing consent rights or management incentive structures. Those conflicts are easiest to solve before signing. They are much harder to solve when portfolio values are under pressure or distributions have been restricted.

LP transparency and Dutch governance are becoming connected

NAV facilities also create transparency questions. Investors increasingly focus on why leverage is being used, how proceeds are applied, how valuations are determined and what happens if the facility limits future distributions or exits.

Where Dutch entities sit in the structure, that scrutiny can translate into practical governance work: board approvals, shareholder consents, information flows, conflict management and amendments to existing arrangements. A structure that is technically financeable may still create friction if investor expectations and Dutch governance mechanics are not aligned.

Practical conclusion

NAV facilities can be useful tools for sponsors and private capital investors, but they should not be treated as purely fund-level financing. Where Dutch holdcos are involved, the real issues often sit in the implementation layer: governance authority, security, enforcement, shareholder rights and intercompany arrangements.

For that reason, Dutch implementation should be reviewed early in the process. The objective is not to make the structure more complicated. It is to prevent a financing solution from becoming a governance problem later.

FAQ

What is a NAV facility?

A NAV facility is a financing arrangement where borrowing capacity is linked to the net asset value of a portfolio rather than the cash flows of one operating company.

Why do NAV facilities matter for Dutch holdcos?

Because Dutch holding companies may be part of the collateral, governance or cash-flow structure. That can trigger Dutch board approvals, shareholder consents, security documentation and enforcement questions.

Are NAV facilities only a fund-level issue?

No. Even if the facility is negotiated at fund level, Dutch entities lower in the structure may still be affected through security, reporting, distributions, intercompany arrangements or governance restrictions.

When should Dutch implementation be reviewed?

Early, before the financing documents are finalised. Governance and enforcement conflicts are much easier to solve before signing than during a stressed enforcement or refinancing scenario.

Practical Dutch implementation of NAV financing structures

NAV facilities can provide sponsors and investors with important liquidity and flexibility, but only if the financing structure works coherently within the Dutch BV governance framework.

Dirk de Waard, partner at Venture M&A Lawyers, advises sponsors, investors, management teams and companies on Dutch private equity, governance and cross-border transaction implementation involving Dutch BV structures. Having studied at Cornell Law School, Dirk is familiar with how international private capital structures are designed, while focusing on their practical implementation and governance consequences in the Netherlands.

For support with NAV financing structures, Dutch holdco governance or cross-border private capital implementation, contact Dirk de Waard.