The Dutch 403-declaration: A hidden risk in cross-border M&A

What is a 403-declaration?

Under Section 2:403 of the Dutch Civil Code (DCC), a Dutch subsidiary that is part of a consolidated group may be exempt from the obligation to prepare and publish full individual financial statements provided certain cumulative conditions are met. The most significant condition is that the parent company files a written declaration at the Dutch Chamber of Commerce, accepting joint and several liability for all debts arising from the legal acts of the subsidiary. That declaration is the 403-declaration.

The rationale is straightforward: since the subsidiary's finances are already visible through the parent's consolidated accounts, individual publication adds limited informational value. Creditors are instead protected by the parent's unlimited liability. As the Dutch Supreme Court confirmed in its Akzo Nobel/ING ruling of 28 June 2002, the 403-declaration is a unilateral legal act (not a guarantee or surety) that creates direct, independent liability for the parent alongside the subsidiary.

Why this matters in M&A

In a mergers and acquisitions (M&A) context, the 403-declaration creates two distinct risk exposures:

1. For the buyer: After closing, the buyer may discover the acquired subsidiary carries undisclosed or difficult-to-quantify liabilities. Liabilities that were previously absorbed into the parent's consolidated picture now belong to a standalone entity for the first time.

2. For the seller (the former parent): The 403-declaration does not automatically terminate upon a share sale. Unless properly withdrawn, the seller remains jointly and severally liable for all debts arising from legal acts the subsidiary performed while the declaration was in force, including debts that crystallise years after closing.

Terminating the declaration

Withdrawal of a 403-declaration requires strict compliance with Section 2:404 DCC. The seller must: 

1. File a notice of withdrawal at the Dutch Chamber of Commerce; 
2. Publish the notice in a nationally distributed daily newspaper; and 
3. Allow a two-month opposition period to expire. Any creditor whose claim is still covered by the declaration may file opposition within that period and demand adequate security before the residual liability can be extinguished.

The Dutch Supreme Court clarified in its SNS Bank ruling of 31 March 2017 that even creditors with disputed (not merely established) claims may file valid opposition, making the termination process genuinely uncertain in contentious situations.

Practical guidance for transactions

Several measures reduce 403-declaration-related exposure in cross-border deals. Buyers should verify during due diligence whether any 403-declaration has been filed, and ensure that withdrawal is initiated at or before closing, with adequate seller indemnities covering the opposition period. Sellers should begin the withdrawal process well in advance of closing, and consider offering security to known creditors to pre-empt opposition.

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Marilène Grauss has four years of experience in M&A and rejoined Poelmann van den Broek this year. In addition to her experience in M&A across various sectors, she also specialises in corporate litigation and governance issues, which gives her a broad knowledge of corporate law.