Cross-border restructuring: How does the fraud check work?
28-10-2025
Cross-border restructurings (mergers, demergers and conversions) are extensive procedures that not only require intensive coordination with foreign counsels but also raise many questions about the possibilities and interpretation of Dutch law.
Since the implementation of the Mobility Directive in 2024, the so-called fraud test has been an integral part of the procedure. But what exactly does this test entail, when does it apply and how does the procedure work? In this fourth blog in the series on cross-border restructuring, we will take a closer look at these questions.
Fraud test as part of the legality assessment
The so-called “fraud test” was added to the legality assessment in Book 2 of the Dutch Civil Code in 2024 when the Mobility Directive was implemented. This test is carried out by the Dutch notary in the context of a cross-border transaction. The purpose of the fraud test is to investigate whether the cross-border transaction has been set up for fraudulent or unlawful purposes that lead to or are aimed at evading or circumventing Union or national law, or for criminal purposes. In addition to the fraud test, the notary also performs a formal test. This test relates to the legality of the procedure and the formal requirements of a cross-border transaction. Once both the fraud test and the formal test have been passed, the notary can issue the pre-transaction certificate.
When is the fraud test required for inbound and outbound transactions?
The fraud test is a requirement before the pre-transaction certificate can be issued. The Dutch notary only needs to issue this certificate at the request of a Dutch company. This applies to all outbound transactions and inbound mergers. No Dutch company is involved in inbound demergers or inbound conversions. The Dutch notary does draw up the deed of demerger/conversion but is not required to perform a fraud test. This is done in the country of origin. The competent foreign authority issues the certificate and the Dutch notary assesses this when executing the deed of demerger/conversion.
What does the fraud test procedure entail?
In principle, the notary issues the pre-transaction certificate within three months of receiving the request. If this is not possible because further investigation is required, this period may be extended twice by three months. If, after a maximum of nine months, the notary's serious doubts have not been dispelled or if he determines that the transaction has been set up for unlawful or fraudulent purposes, he must refuse to issue the pre-transaction certificate.
To perform the fraud test, the notary uses: (i) the information provided when applying for the pre-transaction certificate and (ii) the information obtained by the notary in his existing role as gatekeeper under Dutch law. This includes the merger, demerger or conversion proposal, the written explanation thereof and any comments submitted by the shareholders, creditors and works council. The notary must assess the content of these documents and ask the company any questions he may have. In doing so, he may rely on the accuracy of the documents and information.
If the notary has serious doubts, he must conduct further investigations and will not yet issue the pre-transaction certificate. He may request information and documents from the non-Dutch company concerned or relevant authorities in the Member State in question. In addition, if necessary, he may also call upon one or more independent experts. The costs of this are borne by the applicant for the pre-transaction certificate.
The notary does not have to take tax aspects into account in the fraud test.
Is the fraud test too much to ask to the notary?
The legislator indicates that the fraud test has the same purpose as the notary's gatekeeper role. After implementation of the Mobility Directive in Book 2 of the Dutch Civil Code, this test would not have become more burdensome, extensive or in-depth. However, the preamble to the Mobility Directive provides the following indicative factors for serious doubts:
The investment
The net turnover and profit or loss
The number of employees
The composition of the balance sheet
The tax residence
The assets and their location
The equipment
The usual place of work of the employees and of specific groups of employees
The place where social security contributions are payable
The commercial risks of the company or companies before and after the cross-border transaction
Most factors are difficult for a notary to assess, as they do not fall within his area of expertise. The notary may appoint one or more independent experts, but an investigation into all these indicative factors (if applicable) seems excessive and goes beyond the information that the notary must obtain in his role as gatekeeper. In our opinion, this is asking (too) much of the notary.
Conclusion
This fourth blog focused on the fraud test. The fraud test is required before the pre-transaction certificate can be issued. If the notary has serious doubts, he will not issue the pre-transaction certificate. The indicative factors mentioned in the preamble to the Mobility Directive appear to be difficult for the notary to assess. The legislator indicates that, in order to carry out the fraud test, the notary must use the information provided when applying for the pre-transaction certificate and the information obtained by the notary in his existing role as gatekeeper.
This blog was written by Pauline van Hecke and Julia van Reenen. If you have any questions about one of our blogs on cross-border restructuring, please feel free to contact Pauline van Hecke.
