A 403 declaration is a statement by which a Dutch parent company accepts joint and several liability for the debts of a group subsidiary, in return for which that subsidiary is exempt from preparing and publishing its own annual accounts. The declaration takes its name from article 2:403 of the Dutch Civil Code. Our Dutch corporate lawyers explain how it works, what it means for liability, and how to withdraw it safely.
What is a 403 declaration under Dutch law?
A 403 declaration (403-verklaring) is a written statement, filed with the Trade Register, in which a parent company assumes joint and several liability for debts of a subsidiary that arise from legal acts. In return, the subsidiary can be exempted from drawing up and filing separate annual accounts under article 2:403 of the Dutch Civil Code, provided its figures are consolidated in the group accounts. It is often used to reduce the reporting burden within a group.
When is the parent company liable under a 403 declaration?
Creditors of the exempted subsidiary can claim payment directly from the parent company once the subsidiary can no longer meet its obligations. This liability covers debts arising from legal acts of the subsidiary, such as contracts, but not every debt. The liability is joint and several, so a creditor may pursue the parent for the full amount rather than only a share.
Can the directors be held personally liable?
Yes, if the exemption is applied incorrectly. If a subsidiary wrongly relies on the 403 exemption and fails to publish its annual accounts, that failure counts as improper management. In a later bankruptcy Dutch law then presumes that improper management contributed to the bankruptcy, which can make the directors liable for the shortfall. Careful, correct compliance is therefore important.
How do you withdraw a 403 declaration?
A parent company withdraws a 403 declaration by filing a withdrawal statement with the Trade Register under article 2:404 of the Dutch Civil Code. Withdrawal only ends liability for debts from legal acts performed after the withdrawal. For earlier debts — the so-called residual liability — the parent remains liable, and ending that residual liability requires a further procedure, including a notice and a two-month period in which creditors can object.
How did Brexit affect the 403 declaration?
Since 1 January 2021 the United Kingdom is outside the EU framework, so a Dutch subsidiary can generally no longer rely on the annual-accounts exemption through the consolidated accounts of a parent governed by UK law. Groups with a UK parent that want to keep the exemption need an alternative structure or a different consolidating entity.
A practical example of parent-company liability
Suppose a Dutch subsidiary that has filed a 403 declaration cannot pay a supplier for goods it ordered. Because that debt arises from a contract — a legal act — the supplier can claim the full amount directly from the parent company under the declaration, even though it never contracted with the parent. That is precisely the protection the 403 declaration is designed to give creditors, and the reason a parent should weigh the exposure before filing one.
Speak to a Dutch corporate lawyer
Whether a 403 declaration fits your group, and how to file or withdraw one safely, depends on your structure and your creditors. Our Dutch corporate lawyers set up, review and withdraw 403 declarations and advise on the liability that follows. Contact us for advice on your group structure.
Frequently asked questions about the 403 declaration
Does a 403 declaration replace the subsidiary’s annual accounts?
It exempts the subsidiary from preparing and filing its own annual accounts under article 2:403 of the Dutch Civil Code, provided the parent consolidates the subsidiary’s figures in the group accounts and files the declaration with the Trade Register.
Does withdrawing a 403 declaration end all liability?
No. Withdrawal under article 2:404 of the Dutch Civil Code only ends liability for debts arising after it. Residual liability for earlier debts continues until a separate procedure, including a two-month objection period for creditors, has been completed.
Which debts does the parent become liable for?
Only debts of the subsidiary arising from legal acts, such as contracts. The liability is joint and several, so a creditor can claim the full amount from the parent company.
