Establishing a STAK: the Legal Structure of a Foundation Administrative Office

A STAK, or Foundation Administrative Office, is a widely used instrument in the business world in the Netherlands. But what exactly is a STAK and how does it work? In this blog, we dive deep into the legal structure of a STAK, its advantages, disadvantages, and practical applications. Whether you are an entrepreneur, investor, or just curious, this article provides a comprehensive overview.

What is a STAK?

A STAK, also known as a Foundation Administrative Office, is a legal entity often used for managing shares in a company. The STAK aims to separate the voting rights of shares from the profit rights. This means that the foundation owns the shares while the economic rights such as dividend payouts are passed on to the certificate holders.

The origin of the STAK lies in the need for protection of ownership rights and business continuity. By using a STAK, shareholders can concentrate their voting rights, while the economic benefits lie with others.

See below the organizational chart of a STAK

Legal Structure of a STAK and Establishing a STAK

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Establishing a STAK

Setting up a STAK requires a notarial deed and registration with the Chamber of Commerce. This deed contains the articles of association of the foundation, in which the objectives and procedures are laid down. The process is relatively straightforward but requires accuracy and legal advice to ensure everything is arranged according to the law.

Board Structure

A STAK is governed by a board, which is responsible for managing the shares and issuing certificates. The composition of the board can vary, but usually consists of a chairman, a secretary, and a treasurer. The board's tasks include maintaining records and preparing annual reports.

Administration and Annual Reports

A STAK is required to maintain accurate bookkeeping and prepare a report annually. This report must be audited by an accountant and can provide insights into the financial health and management of the foundation. By maintaining good records, the STAK ensures transparency and trust among certificate holders and other stakeholders.

Function of Share Certificates

What are share certificates?

Share certificates represent the profit rights of the shares managed by the STAK. They give entitlement to dividends and other economic benefits but not to voting rights in the shareholders' meeting. This separation of ownership from control can contribute to a more stable business operation. You can read everything about share certificates here

Issuance and Management of Certificates

The issuance of certificates occurs when shares are transferred. The foundation manages these certificates and ensures that the economic rights are correctly passed on to the certificate holders. This process requires accuracy and transparency to ensure all parties are adequately informed and treated.

Rights and Obligations of Certificate Holders

Certificate holders have the right to dividend payouts and other economic benefits. However, they usually do not have voting rights in shareholders' meetings unless otherwise specified in the articles of association of the STAK. This can lead to a separation between economic interests and administrative decisions, which is often desirable.

Advantages of a STAK

Protection of Ownership Rights

A STAK ensures that control over the company remains in the right hands. By separating ownership from control, a STAK can contribute to the continuity and stability of the business.

Flexibility and Continuity

A STAK ensures continuity in operations, even when shares are transferred. This facilitates long-term planning and succession. Moreover, business successors can be better prepared and trained without jeopardizing control over the business.

Anonymity of Shareholders

The STAK can protect the anonymity of shareholders, which can be desirable in certain situations. This can be particularly important for investors who prefer not to publicly disclose their identity. It provides an extra layer of privacy and security for shareholders.

Disadvantages and Considerations

Complexity of the Structure

The structure of a STAK can be complex and requires precise administration and legal knowledge. This can lead to higher costs and administrative burdens. It is important to consider these factors when deciding to establish a STAK. For example, setting up a STAK involves notary costs. This is in contrast to, for instance, a Stock Appreciation Right (SAR), where that is not the case.

Limited Influence of Certificate Holders

Certificate holders often do not have voting rights, which can lead to conflicts with the board of the STAK. This separation can sometimes cause tensions between economic and administrative interests. Good communication and clear agreements can help minimize these conflicts.

Legal and Tax Aspects

There may be legal risks and tax implications associated with establishing and managing a STAK. It is important to seek expert advice to minimize these risks. Through thorough preparation and legal advice, most potential problems can be effectively addressed.

Examples and Applications

Case Studies of Successful STAKs

Many well-known companies use a STAK to structure their ownership and operations. Examples include family businesses that want to distribute their shares over several generations without losing control. But also many startups and scale-ups that want to raise investments without relinquishing control. These cases illustrate how a STAK can be effectively used to achieve business goals and protect ownership rights.

Sectors and Situations where a STAK can be Useful

A STAK is particularly useful in sectors where protection of ownership and business continuity are important, such as in the agricultural sector, in family businesses, and in the real estate sector. In these sectors, a STAK can help ensure business continuity and protect ownership rights against external threats.

Conclusion

A STAK offers numerous advantages, including protection of ownership rights, business continuity, and anonymity of shareholders. However, the complexity and potential legal and fiscal challenges must be carefully considered. By seeking expert advice and following the right steps, a STAK can be a valuable instrument for many businesses.

Would you like to know more about establishing a STAK or do you need specific advice? Then contact us or check out our other blogs for more information about business structures and legal issues. By establishing a STAK, you can better protect your business and prepare for the future.

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