In December 2020, the State Secretary of Finance (the State Secretary) informed the Lower House of the Dutch Parliament that an investigation would be carried out with respect to the question whether two of the non-fiscal tasks assigned to the Tax Administration (Belastingdienst) pursuant to the Registration Act 1970 (Registratiewet 1970) were still in keeping with its duties. These non-fiscal tasks are the registration of private deeds (onderhandse akten) and the supervision on the registration of notarial deeds (notariële akten).
With respect to the first non-fiscal task, the investigation has been finalised. On 21 March 2024, the State Secretary offered the investigation report ‘Digitalisation and reassignment of process Registration Private Deeds’ (the Report) to the Lower House. The Report discusses, inter alia, the possibility of digitalisation of the registration process and the possibility of reassigning the task of registering private deeds to the Dutch Chamber of Commerce (Kamer van Koophandel (the KvK)) or the Royal Dutch Association of Civil-law Notaries (Koninklijke Notariële Beroepsorganisatie (KNB)).
In this Insight, we will discuss the current situation and summarise the Report. Lastly, we will address the accompanying letter of the State Secretary.
Non-fiscal tasks
The Tax Administration wishes to concentrate on its core tasks. Since 2020, it assumes no new non-fiscal tasks, unless it possesses unique qualities suited to such tasks and rendering such services contribute to the solution of a social issue. Existing non-fiscal tasks are under review, inter alia, to see whether these tasks can be reassigned to other public organisations. One of the non-fiscal tasks up for reassignment is the registration of private deeds.
Current Process
Private deeds
The legal basis for the registration of private deeds by the Tax Administration is formed by the Registration Act 1970 and the Implementing Regulation Registration Act 1970 (Uitvoeringsregeling Registratiewet 1970).
The Tax Administration registers four types of private deeds, including private deeds that aim to vest a right of pledge on movables and receivables.
Relevance of registration
Registration with the Tax Administration is a constitutive requirement for the vesting of abovementioned rights of pledge. The moment the private deed is registered is the moment that the right of pledge is actually vested. The purpose of the current registration is to confirm and fixate in an unbiased manner the date of a private deed (inter alia in order to prevent antedating). In connection with the ranking of rights of pledge, the registration date is of great importance as it, in general, determines who is the highest ranking pledgee. In this respect it is noteworthy that the Netherlands (with the exception of mortgages on real estate) does not have a public register of security rights, and that ranking is determined by date of vesting, pursuant to which the highest ranking pledgee may execute the right of pledge in the event of a defaulting pledgor.
In view hereof, most (private) deeds of pledge contain provisions relating to the registration process. It is often determined that the pledgor must submit the (private) deed of pledge for registration as soon as possible after it has been entered into. It is also standard practice to agree that a pledgor is obligated to provide the pledgee with a copy of the letter by which the deed of pledge has been offered for registration. Once available, a pledgor must provide the pledgee with evidence of the registration within a certain (short) timeframe. Usually, the pledgee is also given the right to effectuate the registration itself.
Stakeholders
In the registration process of private deeds, the following stakeholders are involved: (i) enterprises, in their role as pledgor; (ii) lenders, in their role as pledgee; (iii)) the Tax Administration, as registrar; (iv) the Ministry of Finance, the Ministry of Justice and Security and the Ministry of Economic Affairs and Climate Policy, as policy makers and legislators; (v) the KvK and KNB, as possible parties to carry out the registration in the future.
Registration
Currently, private deeds are submitted in hard copy by mail, courier or in person to the Rotterdam office of the Tax Administration. Upon receipt, a date stamp is applied (onto the envelope), indicating that the private deed has been received in good order. Subsequently, the private deed is entered into a specific application, and a check is carried out as to the correctness of the data entered. If the details are correct, the private deed is approved and a formal delivery receipt is prepared. Following this, the private deed is registered and labelled. Finally, the Tax Administration returns the private deed by mail to the party that submitted it.
If the private deeds are submitted by mail or courier, the day of receipt by the Tax Administration is the registration date. If the deed is submitted in person, the day of delivery is the registration date.
The Report
The Report describes three options for a fully digital registration process in the future: (i) a general one; (ii) one designed and to be carried out by the KvK; and (iii) one designed and to be carried out by the KNB.
Each of the options contain, more or less, the same steps, which boil down to: (i) submission; (ii) identification of the party submitting the private deed; (iii) registration and confirmation of receipt; (iv) registration of the private deed; (v) providing feedback that the private deed has been registered. Each step is to be performed fully digitally.
The current designs of both the KvK and the KNB are lean and mean processes: it is assumed that each step will be carried out digitally (no submission of hard copies) and that the process is cost-covering. The content of the private deeds will not be checked. It is also assumed that there will be neither an archive nor a generally accessible register. However, for the KvK and the KNB this is not the obvious scenario. They have both indicated that an adjustment of the functionality of the registration process will have added value for the stakeholders. For example, the KvK has indicated that it envisages possibilities to add value to the registration process by keeping a copy of the private deed and making such registration accessible to certain authorised parties.
Specifics KvK
The KvK has certain considerations and has set certain preconditions that it wishes to see addressed before carrying out the digital registration process. For example, will the registration process remain free of charge?
There are also points of attention on a tactical level. For instance, the role as registrar must fit in with the other tasks of the KvK. A more practical issue is that there must be sufficient budget available to assume the role of registrar and to manage the registration process.
Specifics KNB
The KNB has made two reservations with respect to carrying out the digital registration process of private deeds in the future: (i) all relevant bodies within the KNB must approve this new role on the part of the KNVB; and (ii) the set-up, management and exploitation must be cost-covering, also in the long run.
Further, the KNB has indicated that in order to carry out the role as registrar, limited adjustments will need to be made within its organisation. According to the KNB, from a tactical point of view, it is prepared to be responsible for an additional registration process.
From a strategic perspective, it is important to the KNB that a clear distinction is made between the KNB and the notarial practice (notariaat). Both entities must be able to perform their respective roles and responsibilities in a responsible manner and should, where possible, mutually reinforce each other.
Conclusions in the Report
The first conclusion is that digitalisation of the registration process is feasible and will increase the efficiency of the process. The second conclusion is that both the KvK and the KNB are deemed suitable to take over the registration process of private deeds.
According to the Report, an educated choice between the KvK and the KNB is preceded by policy choices on questions such as:
- who will ‘own’ the registration process?
- (a very essential issue) what is the raison d 'être of the registration process?
- what is the scope of the digital registration process? This includes decisions on:
- the criteria for registration, verification and validation of private deeds;
- the possibility of inspection of private deeds (as a stakeholder, the Ministry of Economic Affairs and Climate Policy has indicated to be interested in the value of the collateral that is pledged pursuant to the private deeds); and
- the filing of private deeds and the transfer of the current archive.
- who will finance the digital registration process?
The policy choices made will have an effect on the design, possibilities and costs.
Recommendations
Five recommendations conclude the Report; we will highlight two of them. The first being that the Ministry of Finance and the Ministry of Justice and Safety must determine who will ‘own’ the digital registration process in the future. Currently, the Ministry of Finance is responsible for the policy and is the relevant legislator.
The last recommendation relates to the changes that will need to be made in the legislation. Bearing in mind that this tends to be a time-consuming process, it is recommended to start the legislation process early and simultaneously with the preparation of the digitalisation and the reassignment itself.
Letter of the State Secretary
The State Secretary has indicated that the Report contains sufficient leads to come to a weighed policy choice. He intends to discuss the outcome of the investigation and the recommendations with both the Minister of Legal Protection (on behalf of the Ministry of Justice and Security) and the State Secretary of Economic Affairs. The State Secretary envisages to inform the Lower House of the outcome of these discussions before the end of the year.
The digital registration of private deeds is a welcome development. We endorse the conclusion that both KvK and KNB would be suitable parties to handle this assignment. With respect to the future possibility to inspect the registered private deeds in a broader manner, we trust that the legislator will carefully consider which parties would be allowed to inspect the registered private deeds, and for what purposes.
In December 2020, the State Secretary of Finance (the State Secretary) informed the Lower House of the Dutch Parliament that an investigation would be carried out with respect to the question whether two of the non-fiscal tasks assigned to the Tax Administration (Belastingdienst) pursuant to the Registration Act 1970 (Registratiewet 1970) were still in keeping with its duties. These non-fiscal tasks are the registration of private deeds (onderhandse akten) and the supervision on the registration of notarial deeds (notariële akten).
With respect to the first non-fiscal task, the investigation has been finalised. On 21 March 2024, the State Secretary offered the investigation report ‘Digitalisation and reassignment of process Registration Private Deeds’ (the Report) to the Lower House. The Report discusses, inter alia, the possibility of digitalisation of the registration process and the possibility of reassigning the task of registering private deeds to the Dutch Chamber of Commerce (Kamer van Koophandel (the KvK)) or the Royal Dutch Association of Civil-law Notaries (Koninklijke Notariële Beroepsorganisatie (KNB)).
In this Insight, we will discuss the current situation and summarise the Report. Lastly, we will address the accompanying letter of the State Secretary.
Non-fiscal tasks
The Tax Administration wishes to concentrate on its core tasks. Since 2020, it assumes no new non-fiscal tasks, unless it possesses unique qualities suited to such tasks and rendering such services contribute to the solution of a social issue. Existing non-fiscal tasks are under review, inter alia, to see whether these tasks can be reassigned to other public organisations. One of the non-fiscal tasks up for reassignment is the registration of private deeds.
Current Process
Private deeds
The legal basis for the registration of private deeds by the Tax Administration is formed by the Registration Act 1970 and the Implementing Regulation Registration Act 1970 (Uitvoeringsregeling Registratiewet 1970).
The Tax Administration registers four types of private deeds, including private deeds that aim to vest a right of pledge on movables and receivables.
Relevance of registration
Registration with the Tax Administration is a constitutive requirement for the vesting of abovementioned rights of pledge. The moment the private deed is registered is the moment that the right of pledge is actually vested. The purpose of the current registration is to confirm and fixate in an unbiased manner the date of a private deed (inter alia in order to prevent antedating). In connection with the ranking of rights of pledge, the registration date is of great importance as it, in general, determines who is the highest ranking pledgee. In this respect it is noteworthy that the Netherlands (with the exception of mortgages on real estate) does not have a public register of security rights, and that ranking is determined by date of vesting, pursuant to which the highest ranking pledgee may execute the right of pledge in the event of a defaulting pledgor.
In view hereof, most (private) deeds of pledge contain provisions relating to the registration process. It is often determined that the pledgor must submit the (private) deed of pledge for registration as soon as possible after it has been entered into. It is also standard practice to agree that a pledgor is obligated to provide the pledgee with a copy of the letter by which the deed of pledge has been offered for registration. Once available, a pledgor must provide the pledgee with evidence of the registration within a certain (short) timeframe. Usually, the pledgee is also given the right to effectuate the registration itself.
Stakeholders
In the registration process of private deeds, the following stakeholders are involved: (i) enterprises, in their role as pledgor; (ii) lenders, in their role as pledgee; (iii)) the Tax Administration, as registrar; (iv) the Ministry of Finance, the Ministry of Justice and Security and the Ministry of Economic Affairs and Climate Policy, as policy makers and legislators; (v) the KvK and KNB, as possible parties to carry out the registration in the future.
Registration
Currently, private deeds are submitted in hard copy by mail, courier or in person to the Rotterdam office of the Tax Administration. Upon receipt, a date stamp is applied (onto the envelope), indicating that the private deed has been received in good order. Subsequently, the private deed is entered into a specific application, and a check is carried out as to the correctness of the data entered. If the details are correct, the private deed is approved and a formal delivery receipt is prepared. Following this, the private deed is registered and labelled. Finally, the Tax Administration returns the private deed by mail to the party that submitted it.
If the private deeds are submitted by mail or courier, the day of receipt by the Tax Administration is the registration date. If the deed is submitted in person, the day of delivery is the registration date.
The Report
The Report describes three options for a fully digital registration process in the future: (i) a general one; (ii) one designed and to be carried out by the KvK; and (iii) one designed and to be carried out by the KNB.
Each of the options contain, more or less, the same steps, which boil down to: (i) submission; (ii) identification of the party submitting the private deed; (iii) registration and confirmation of receipt; (iv) registration of the private deed; (v) providing feedback that the private deed has been registered. Each step is to be performed fully digitally.
The current designs of both the KvK and the KNB are lean and mean processes: it is assumed that each step will be carried out digitally (no submission of hard copies) and that the process is cost-covering. The content of the private deeds will not be checked. It is also assumed that there will be neither an archive nor a generally accessible register. However, for the KvK and the KNB this is not the obvious scenario. They have both indicated that an adjustment of the functionality of the registration process will have added value for the stakeholders. For example, the KvK has indicated that it envisages possibilities to add value to the registration process by keeping a copy of the private deed and making such registration accessible to certain authorised parties.
Specifics KvK
The KvK has certain considerations and has set certain preconditions that it wishes to see addressed before carrying out the digital registration process. For example, will the registration process remain free of charge?
There are also points of attention on a tactical level. For instance, the role as registrar must fit in with the other tasks of the KvK. A more practical issue is that there must be sufficient budget available to assume the role of registrar and to manage the registration process.
Specifics KNB
The KNB has made two reservations with respect to carrying out the digital registration process of private deeds in the future: (i) all relevant bodies within the KNB must approve this new role on the part of the KNVB; and (ii) the set-up, management and exploitation must be cost-covering, also in the long run.
Further, the KNB has indicated that in order to carry out the role as registrar, limited adjustments will need to be made within its organisation. According to the KNB, from a tactical point of view, it is prepared to be responsible for an additional registration process.
From a strategic perspective, it is important to the KNB that a clear distinction is made between the KNB and the notarial practice (notariaat). Both entities must be able to perform their respective roles and responsibilities in a responsible manner and should, where possible, mutually reinforce each other.
Conclusions in the Report
The first conclusion is that digitalisation of the registration process is feasible and will increase the efficiency of the process. The second conclusion is that both the KvK and the KNB are deemed suitable to take over the registration process of private deeds.
According to the Report, an educated choice between the KvK and the KNB is preceded by policy choices on questions such as:
- who will ‘own’ the registration process?
- (a very essential issue) what is the raison d 'être of the registration process?
- what is the scope of the digital registration process? This includes decisions on:
- the criteria for registration, verification and validation of private deeds;
- the possibility of inspection of private deeds (as a stakeholder, the Ministry of Economic Affairs and Climate Policy has indicated to be interested in the value of the collateral that is pledged pursuant to the private deeds); and
- the filing of private deeds and the transfer of the current archive.
- who will finance the digital registration process?
The policy choices made will have an effect on the design, possibilities and costs.
Recommendations
Five recommendations conclude the Report; we will highlight two of them. The first being that the Ministry of Finance and the Ministry of Justice and Safety must determine who will ‘own’ the digital registration process in the future. Currently, the Ministry of Finance is responsible for the policy and is the relevant legislator.
The last recommendation relates to the changes that will need to be made in the legislation. Bearing in mind that this tends to be a time-consuming process, it is recommended to start the legislation process early and simultaneously with the preparation of the digitalisation and the reassignment itself.
Letter of the State Secretary
The State Secretary has indicated that the Report contains sufficient leads to come to a weighed policy choice. He intends to discuss the outcome of the investigation and the recommendations with both the Minister of Legal Protection (on behalf of the Ministry of Justice and Security) and the State Secretary of Economic Affairs. The State Secretary envisages to inform the Lower House of the outcome of these discussions before the end of the year.
The digital registration of private deeds is a welcome development. We endorse the conclusion that both KvK and KNB would be suitable parties to handle this assignment. With respect to the future possibility to inspect the registered private deeds in a broader manner, we trust that the legislator will carefully consider which parties would be allowed to inspect the registered private deeds, and for what purposes.