On 1 July 2016 four important new laws applicable to businesses and directors will enter into effect. Two of these relate to the combatting of bankruptcy fraud: the Directors Disqualification Act and the Bankruptcy Fraud Criminalisation Act. Another new law is the "House for Whistleblowers" Act, which creates a new government agency for the investigation of suspected wrongdoings in an organisation at a whistleblower's request, increases the legal protection of whistleblowers and requires organisations with at least 50 employees to establish a "speak up" procedure. The fourth new law requires certain enterprises to file their annual accounts with the trade register electronically.
Disqualification of directors
The Directors Disqualification Act (Wet civielrechtelijk bestuursverbod) will amend the Bankruptcy Act to make it possible for a court to ban a current or former managing director (or de facto director) of a legal entity that goes bankrupt after 1 July 2016 from acting as a managing or supervisory director. The ban may be imposed if, in the three years preceding the bankruptcy:
- the director has been held liable for clear mismanagement that was an important cause of the bankruptcy;
- the director has performed a voluntary juristic act (such as the sale of assets for less than their market value or the granting of security to creditors) which has been set aside by a court on the grounds that it has harmed creditors;
- the director has fallen seriously short in the performance of his obligation to provide information to and cooperate with the bankruptcy trustee;
- the director has been involved in two other bankruptcies in which his conduct was culpable; or
- an irrevocable penalty has been imposed on the legal entity or director for acts constituting intentional misconduct or gross negligence in violation of the tax return rules.
A request to the court to impose such a ban can be filed by the bankruptcy trustee or the Public Prosecutors' Office. For a maximum period of five years, the director may not be appointed/re-appointed as either managing or supervisory director of the legal entity in question or any other legal entity. The ban in principle also applies to all current positions as managing or supervisory director. The director's name will be put on a public list to be maintained as part of the Trade Register; a bill providing for this is expected to be submitted to the lower house of Parliament (Tweede Kamer) this autumn. If all goes according to plan, the list will have been established by the time bans begin to be imposed.
The new law underlines the importance of complying with the rules on proper management, such as the requirement to maintain proper corporate books and records and to publish the annual accounts before the statutory deadline. If a legal entity is in financial trouble, any proposed transaction should be examined to determine whether it will unlawfully harm creditors. Appointments in violation of the new law will be null and void. As stated in the legislative history, the Chamber of Commerce has a monitoring role when it comes to the registration of new managing directors and supervisory directors. Nevertheless, it is important to check the Trade Register as a standard part of the selection procedure for new directors.
Bankruptcy Fraud Criminalisation Act (Wet herziening strafbaarstelling faillissementsfraude)
Effective 1 July 2016, amendments to the Criminal Code, Code of Criminal Procedure and Economic Offences Act will improve the tools available under Dutch criminal law to combat bankruptcy fraud. The provisions imposing criminal liability for failing to make and retain proper records and furnish them to the bankruptcy trustee have been clarified and strengthened. Even in the absence of intent, an individual, managing director, supervisory director or de facto managing director now risks criminal sanctions for non-compliance with the record-keeping obligations. If, for example, record-keeping activities are outsourced and a managing or supervisory director does not exercise the requisite supervision, his conduct will be culpable. The amendments include new provisions under which a managing director or supervisory director is punishable if he unduly uses, spends or transfers the legal entity's resources, thereby seriously harming the entity and endangering its continuity. These provisions apply even if bankruptcy proceedings do not in fact ensue.
"House for Whistleblowers" Act (Wet huis voor klokkenluiders)
Effective 1 July 2016 every organisation in the Netherlands with at least 50 employees is required to establish a procedure for dealing with whistleblowers. For the purpose of determining whether an organisation is subject to this obligation, "employee" includes all individuals who have an employment contract (within the meaning of the Dutch Civil Code) with the organisation and perform work either in the organisation or elsewhere (on secondment). Under the Act, the procedure for reporting suspected wrongdoing must be available to anyone who performs work for the organisation, whether as an employee or otherwise. This therefore includes independent contractors and others who perform work other than on the basis of an employment contract. The procedure must, at a minimum, cover the following subjects:
- how internal reports of suspected wrongdoing will be handled;
- the criteria for a "suspicion of wrongdoing";
- the identity of the person(s) within the organisation to whom suspected wrongdoing can be reported;
- the organisation's obligation to handle reports confidentially if the whistleblower so requests;
- the whistleblower's right to consult an internal or external adviser in confidence, such as a designated confidential counsellor, a company doctor or a member of the advisory division of the "House for Whistleblowers" (see below);
- information about the legal protection afforded to whistleblowers; and
- the circumstances under which suspected wrongdoing may be reported to an external authority.
The Act does not lay down specific sanctions but it is possible that non-compliance will in certain circumstances be interpreted as evidence of improper management. Non-compliance may possibly also play a role in conflicts with employees who have made an external report.
One of the external authorities to which suspected wrongdoing can be reported is the "House for Whistleblowers". This is a government agency which, at the whistleblower's request, will con-duct an investigation into the suspected wrongdoing and, if desired, into the employer's treatment of the whistleblower in connection with the report. Under the Act, the same individuals who are entitled to make an internal report may also ask the House for advice or request an investigation. The whistleblower is also free to report the suspected wrongdoing elsewhere. The House will initiate an investigation only if there are reasonable grounds for the suspected wrongdoing, taking into account the organisation's interests as well. During the investigation, the whistleblower, witnesses and experts can be summoned to appear and testify but they retain the right to assert a legal privilege. As confidentiality is essential for the whistleblower and other involved parties, their testimony will not be made public or disclosed to third parties and all parties have a duty of confidentiality.
Following an investigation the House will publish an anonymised report containing its conclusions regarding the nature, causes and consequences of the wrongdoing and its recommendations. Nothing in the report will constitute legally binding findings as to civil liability or the commission of a criminal offence.
Private-sector and government employees who have acted properly and in good faith are protected against retaliation: under the Act their legal position may not be adversely affected as a result of having "spoken up". For example, they may not be denied a raise or promotion and their employment may not be terminated. This protection applies from the time they report the suspected wrongdoing. When the Act was passed, a motion was adopted asking the government to extend this protection to workers other than employees (e.g. independent contractors) as soon as possible.
Electronic filing of documents in Trade Register
Starting 2017, enterprises that are required to file their annual accounts in the Trade Register will have to do so in electronic form. The main category of enterprises to which this will apply are legal entities incorporated under Dutch law: BVs, NVs, cooperatives and mutual insurance associations, as well as associations and foundations with a minimum annual turnover of EUR 6 million in two consecutive financial years. The electronic-filing obligation will also apply to "formally foreign" companies under the Companies Formally Registered Abroad Act (Wet op de formeel buitenlandse vennootschappen), to foreign legal entities that operate in the Netherlands and are under an obligation in their home country to file annual accounts, and to organisations in a number of specific sectors (such as pensions and housing).
The obligation will be phased in based on the size of the enterprise in question. For microenterprises and small enterprises, their annual accounts will have to be filed in electronic form as from their 2016 financial year. Medium-sized and large enterprises will be subject to the obligation as from their 2017 and 2019 financial years, respectively. The obligation will not apply to listed companies as they are already subject to EU-level rules on the filing of their annual accounts and other reports. With regard to the method of filing, the Standard Business Reporting programme must be used. This is a system-to-system reporting method making it possible for financial information to be compiled and sent to the tax authorities, the Central Bureau of Statistics and various banks.