Government ban on Kyndryl’s takeover of Solvinity: what does this mean for business owners?

When the government intervenes in a corporate takeover, the question immediately arises: how far does that authority actually extend? A recent ruling by the judge in preliminary relief proceedings at Rotterdam District Court (14 July 2026) provides a clear answer to this — with far-reaching consequences for the IT sector and anyone involved in takeovers in strategically sensitive markets.

The crux of the case

The case concerns the proposed takeover of Solvinity — an IT service provider with deep access to sensitive government information, including DigiD — by the US company Kyndryl. On 25 May 2026, the State Secretary for Economic Affairs imposed a takeover ban, based on the Telecommunications Act (Tw). The reasoning: if Kyndryl were to gain control of Solvinity, the US government could, under the so-called CLOUD Act, compel the transfer of confidential Dutch government information to US authorities. This includes sensitive personal data, data from the criminal justice system and information from major financial institutions.

The sellers — Host Lux and Solvinity itself — challenged this ban. They asked the court to suspend the decision so that the takeover could still be completed. That application was rejected.

Why is this ruling relevant for entrepreneurs?

Firstly, this case demonstrates that the Dutch government is actively exercising its powers under Chapter 14a of the Telecommunications Act to block foreign takeovers when national security interests are at stake. This is no longer a theoretical possibility — it is now standard practice. Entrepreneurs active in telecoms, IT infrastructure, data storage or the provision of services to government bodies must be aware of this legal landscape.

Secondly, the CLOUD Act plays a central role. This US extraterritorial legislation obliges US companies to hand over data to the US government, even if that data is stored on European servers. For any business owner collaborating with — or seeking to be acquired by — a US company, this is a real risk that must be addressed as part of due diligence.

Thirdly, the court found that the ban was not manifestly unlawful. The State Secretary had the power to intervene and exercised it on plausible grounds. At the same time, the court gave the State Secretary a clear instruction: to investigate whether less far-reaching measures are possible, such as data encryption or the compulsory divestment of specific services to a European party.

Litigation conduct under scrutiny

It is striking that the court ordered the State Secretary to pay the legal costs of all parties.

The reason: the State Secretary acted with procedural negligence by wrongfully withholding documents, refusing to comply with court orders and adopting an incorrect position regarding third-party access to case documents. This sends a signal that the government, too, must abide by the rules of a fair trial.

Possible further legal steps

The case is not yet over. The State Secretary has undertaken to issue a decision on the appeal by the end of September 2026. In that decision, she must — as the judge expressly stated — seriously examine whether less intrusive alternatives would suffice. These could include the mandatory encryption of data with key management outside Kyndryl’s control, or the compulsory divestment of specific government-focused services to a party based in the EU.

Should the decision on the objection once again be unfavourable to the sellers, an appeal to the administrative court remains an option. In parallel, the parties may — should the ban ultimately prove unlawful — claim damages. The court has explicitly left that avenue open.

For Kyndryl and Host Lux, the option also remains to propose mitigating measures that might persuade the State Secretary: an alternative transaction structure, binding contractual guarantees or technical security measures could sufficiently protect the public interest without a total ban being necessary.

Q&A — Frequently Asked Questions

What is the CLOUD Act and why is it relevant to takeovers?

The CLOUD Act is US legislation that obliges US companies to provide data at the request of the authorities, even if that data is stored outside the US. In the event of a takeover by a US company, this could mean that sensitive Dutch data becomes accessible to the US government — without the intervention of a Dutch court.

Can the Dutch government simply ban a company takeover?

No, not without good reason. Under Chapter 14a of the Telecommunications Act, the State Secretary for Economic Affairs has the power to impose a ban on a takeover if the takeover could pose a threat to the public interest in the telecoms sector. A court will assess whether that power has been correctly exercised.

What should an entrepreneur do if they wish to sell or acquire a business in a sensitive sector?

Carry out the required notification assessment in good time. Under the Telecommunications Act, there is an obligation to notify no later than eight weeks before the intended completion date. Ascertain at an early stage whether the target company provides services to government bodies or telecoms operators. Seek legal advice on national security assessments and the implications of foreign regulations such as the CLOUD Act.

What are the chances of a successful appeal?

They are not negligible. The court has explicitly instructed the State Secretary to investigate whether less far-reaching measures are possible. If the State Secretary fails to carry out that investigation adequately, the decision on the appeal is vulnerable to being quashed.

Can a seller claim compensation if the ban proves to be unlawful?

Yes. If it is established in subsequent proceedings that the prohibition decision was unlawful, the damage caused may, in principle, be recovered from the government. The court explicitly identified this as a realistic possibility in its judgment.

Questions

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