In brief: shareholder rights and powers in Netherlands

The rights and equitable treatment of shareholders and employees

What powers do shareholders have to appoint or remove directors or require the board to pursue a particular course of action? What shareholder vote is required to elect or remove directors?

In principle, an individual shareholder (not being the sole shareholder) does not have the power to appoint or remove directors as this requires a resolution by the general meeting (unless a separate class of shares is introduced for such shareholder). However, a shareholder who meets certain criteria can request that the management board add an item to replace managing and supervisory directors on the agenda of the general meeting. The power of the general meeting to appoint and remove managing and supervisory directors can be restricted. In addition, if the item that the shareholder wants to be put on the agenda may result in a change in the company’s strategy (eg, as a result of the dismissal of managing or supervisory directors) the management board should be given the opportunity to stipulate a reasonable period in which to respond (the response time). This follows from the Dutch Corporate Governance Code.

The Dutch Supreme Court has consistently ruled that the adoption of policies and strategy is, in principle, a matter for the management board. By extension, the Dutch Supreme Court has ruled that a shareholder cannot force the management board to bring an agenda item that falls within the competence of the management board to a vote in a general meeting. Therefore, it will be difficult for shareholders to require the board to pursue a particular course of action by requesting the change in strategy to be put to a vote in a general meeting.

Most listed companies have limited the rights of the general meeting to appoint and dismiss managing and supervisory directors in such a way that the resolution requires a (non-binding) nomination to be prepared by the supervisory board or, in some cases, by the meeting of holders of priority shares. A resolution to appoint a managing director or supervisory director nominated by the supervisory board must be adopted by an absolute majority of the votes cast. 

The general meeting of shareholders of a company not having statutory two-tier status may adopt a resolution to cancel the binding nature of a nomination for the appointment of a member of the management or supervisory board, or to dismiss a member of the management or supervisory board by an absolute majority of the votes cast, or both. It may be provided that this majority should represent a given proportion of the issued capital, which proportion must not be set higher than one-third. If this proportion of the capital is not represented at the meeting, but an absolute majority of the votes cast is in favour of a resolution to cancel the binding nature of a nomination, or to dismiss a board member, a new meeting may be convened at which the resolution may be adopted by an absolute majority of the votes cast, regardless of the proportion of the capital represented at the meeting.

A different appointment and removal system applies to structure regime companies. The Dutch structure regime applies to companies (irrespective whether these are listed or not) that meet the following criteria: total equity of at least €16 million; the presence of a works council; and at least 100 employees working in the Netherlands with the company and its group companies. In these companies, the involvement of the supervisory board and the works council in the appointment of supervisory directors is greater than in other companies.

What decisions must be reserved to the shareholders? What matters are required to be subject to a non-binding shareholder vote?

The following matters, among other things, are, in principle, reserved for general meetings:

• the appointment, suspension and dismissal of managing directors and supervisory directors;
• the determination of the general remuneration policy of the management board;
• the adoption of the annual accounts;
• the amendment of the articles of association;
• the issuing of shares and granting of rights to subscribe for shares, unless this authority has been delegated to another corporate body for a maximum period of five years;
• the restriction or exclusion of pre-emptive rights in relation to a share issuance, unless this authority has been delegated to another corporate body for a maximum period of five years;
• the delegation to another corporate body of the authority to issue shares, grant rights to subscribe for shares and restrict or exclude pre-emptive rights;
• the authorisation of the management board to repurchase shares (only for public limited companies (NVs));
• the reduction of the issued share capital;
• the approval for resolutions of the management board that result in changes of the identity or the character of the company or its enterprise;
• the distribution of dividends or distributable reserves;
• the dissolution of the company;
• the merger or demerger of the company;
• the appointment of auditors; and
• only applicable to an NV, resolutions of the management board regarding an important change in the identity or character of the company or the enterprise conducted by it, in any case:
  • the transfer of the entire business or almost the entire business to a third party;
  • starting or breaking up an important cooperation arrangement of the company itself or any of its subsidiaries insofar as this is of significant importance; and
  • invest or dispose of an interest with a value of at least one-third of the assets as shown on the balance sheet (or, insofar as applicable, the consolidated balance sheet) of the company.

Dutch law does not require matters to be subject to a non-binding shareholder vote, but the company’s articles of association may stipulate otherwise.

To what extent are disproportionate voting rights or limits on the exercise of voting rights allowed?

The starting point is that each shareholder may cast as many votes as he or she holds shares. If the authorised share capital was divided into shares of an unequal nominal amount, the number of votes that may be cast by each shareholder is equal to the total nominal amount of his or her shares divided by the nominal amount of the smallest share. Thus, disproportionate voting rights can be created by issuing two types of shares with different nominal values (eg, class A shares with a nominal value of 1 cent carrying one vote each for all matters, and class B shares with a nominal value of 10 cents each carrying 10 votes). The class B shares would be held by the founding shareholders, enabling them to maintain a controlling interest in the company while acquisitions are financed by the issuance of class A shares.

Disproportionate voting rights may undermine the interests of the minority shareholders, and some institutional investors prefer to limit this construction as far as possible.

Are there any special requirements for shareholders to participate in general meetings of shareholders or to vote? Can shareholders act by written consent without a meeting? Are virtual meetings of shareholders permitted?

For each general meeting of a listed company, the statutory record date will be applied to determine the shareholders in which voting rights and meeting rights are vested. The record date is 28 days before the date of the meeting. A shareholder who intends to attend the general meeting and who intends to vote should be a shareholder on this record date. In order to exercise its meeting and voting rights, a shareholder should submit at the meeting a deposit receipt that has been issued by his or her bank. Shareholders of listed companies in practice cannot act by written consent without holding a formal meeting as this would require the unanimous vote of all shareholders. However, shareholders of private companies can, in principle, act with written consent, provided all shareholders have consented; the articles of association may contain additional provisions for such procedure.

Current Dutch law offers the option of holding a ‘hybrid’ general meeting, whereby shareholders or members are authorised to participate in the general meeting and exercise their voting rights through an electronic means of communication. This is only possible if the articles of association contain this possibility and the shareholder or member can be identified via electronic communication, directly take note of the proceedings at the meeting and exercise the voting right. The articles of association cannot oblige the shareholder or member to participate digitally in the meeting and the company must therefore offer the shareholders and members the opportunity to physically appear at the meeting.

Pursuant to the Dutch Corporate Governance Code the company should, as far as possible, give shareholders the opportunity to vote by proxy and to communicate with all other shareholders. Pursuant to the Temporary Act governing COVID-19 Measures, a general meeting could be held through livestream or audio, but this act is no longer in force.

After the implementation of the Digital General Meeting of Private Law Legal Entities Bill (expected in 2025 (see the website of the Dutch government)), it will be possible for Dutch legal entities under private law (private companies, NVs, associations, cooperatives and home owners’ associations) to hold a general meeting that is exclusively virtually accessible, provided there is a basis in the articles of association of the company. This means that for a company to make use of the option to hold a general meeting that is exclusively virtually accessible, its articles of association must be amended first. There is some liberty to add specific conditions; for example, it is possible to include in the articles of association that it is not possible to hold a virtual meeting if certain (important) decisions are tabled for voting.

Are shareholders able to require meetings of shareholders to be convened, resolutions and director nominations to be put to a shareholder vote against the wishes of the board, or the board to circulate statements by dissident shareholders?

Shareholders who jointly represent at least 10 per cent (for NVs) (unless the NV’s articles of association contain a lower percentage) or 1 per cent (for private limited companies (BVs)) of the company’s issued capital may request the management board to convene a general meeting, stating specifically the business to be discussed. In addition, shareholders who jointly represent at least 10 per cent (for NVs) or 1 per cent (for BVs) of the issued share capital may be authorised by the provisional relief judge of a district court, upon their application, to convene a general meeting. This request will be rejected if the shareholder has not already requested the management board in writing to convene a general meeting, with a precise description of the matters to be discussed at this meeting, and the management board has not taken the necessary measures to ensure that the general meeting could be held within six weeks after the request was made to one of them.

Further, if a general meeting is convened by the company, shareholders who, alone or jointly, represent at least 3 per cent (for NVs) or at least 1 per cent (for BVs) of the company’s issued share capital will have the right to request the management board to place items on the agenda of this general meeting, provided that the reasons for the request are stated therein and the request is received by the company in writing at least 60 days before the date of the general meeting.

The convocation right and the right to place items on the agenda are limited by the response time and the statutory reflection period.

Shareholders will be able to put resolutions and director nominations to a shareholder vote if the general meeting is authorised to resolve upon these resolutions. If the company’s articles of association state that certain resolutions by the general meeting require approval or nomination by the supervisory board, it is doubtful whether without this approval the item could be put to a vote in the general meeting.

Do controlling shareholders owe duties to the company or to non-controlling shareholders? If so, can an enforcement action be brought against controlling shareholders for breach of these duties?

Shareholders may, in principle, be primarily guided by their own interests. However, this does not release them from the obligation to act reasonably and fairly, which could mean that they should take into account the interests of minority shareholders and the interests of other stakeholders, such as employees and creditors. As a general rule, one could argue that the bigger the stake the shareholder holds in the company, the bigger his or her responsiveness towards other shareholders will be. Enforcement actions can be brought against controlling shareholders for the breach of these duties on the basis of a breach of reasonableness and fairness. In addition, the company or minority shareholders who meet certain thresholds may request the Enterprise Chamber of the Amsterdam Court of Appeal to start an inquiry into the company affairs, and the Enterprise Chamber may order immediate relief.

Can shareholders ever be held responsible for the acts or omissions of the company?

Under Dutch law, shareholders can, in principle, not be held responsible for acts or omissions of the company. This may be different if a shareholder was acting as a policymaker of the company (ie, acting as if he or she was a managing director). In this case, a shareholder can be held liable as if he or she was a managing director. Further, it is conceivable that a shareholder could be held responsible if he or she violates a statutory duty or does not act reasonably and fairly towards those who, pursuant to the law and the articles of association, are involved in the company’s organisation.