This newsletter provides a status update on the main Dutch and European legislative initiatives in the field of company law over the past year. The coalition agreement has been taken into account. We also look back at certain legislation that entered into force in 2021. Covid-19 and a caretaker government obviously slowed down legislative progress at the national level. However, many legislative initiatives were taken at the European level, which helps to explain the length of this update. A list of legislative initiatives on which no progress was made in 2021 can be found at the end of this newsletter.

UBO register for trusts and similar legal arrangements

In addition to a UBO register for companies and other legal entities, which entered into force in 2020 (see our newsletter of 28 September 2020), the Anti-money Laundering Directive (Directive 2018/843) requires the establishment of a UBO register for trusts and similar legal arrangements. To this end, the Implementing Act on Registration of the Ultimate Beneficial Owners of Trusts and Similar Legal Arrangements (35 819) was adopted by the Upper House on 23 November 2021. In the Netherlands, these are funds without legal personality established by way of an agreement, which do not qualify as companies within the meaning of the Trade Register Act 2007, and in which participants' assets are pooled and invested collectively or otherwise used for the benefit of the fund's ultimate beneficiaries. This description covers, in any case, both open-end and closed-end mutual funds. The deadline for implementation was 10 March 2020. We expect the law to enter into force in the first half of 2022. As a general rule, entities that fall within its scope of application will then have three months within which to ensure compliance with the new obligations.

BV with a social purpose

On 10 March 2021, an initiative for statutory provisions on the private limited-liability company with a social purpose (BVm) was published in the form of a consultation. The initiative did not contain a draft bill. The proposed statutory provisions aim to ensure the recognition and thus better identification of social enterprises. The idea is that a BV with a social enterprise may, if it meets the applicable requirements, add the abbreviation BVm to its name, so that the social enterprise can be better presented to suppliers, investors, purchasers and other involved or interested parties. Entrepreneurs are free to choose whether they wish to be bound by the proposed statutory provisions and thus by rules on, amongst other things, the allocation of profits, impact measurement and the inclusion of corporate social responsibility in the annual social report. No new legal entity or arrangements to this effect will be introduced. The BVm will remain a BV. The coalition agreement indicates that the BVm will indeed be introduced and that there will be a clear framework for reporting requirements by social enterprises, although the timing is still unknown.

Bill on security screening

On 30 June 2021, a bill on the security screening of investments, mergers and acquisitions (35 880) was submitted to the Lower House. The bill aims to protect national security by introducing a screening mechanism for activities that would lead to changes in control of or influence over companies deemed crucial to vital processes or that possess sensitive technology. The bill focuses on so-called acquisition activities, such as investments and mergers. It covers acquisition activities originating not only from abroad but also from within the Netherlands. The objective is to ensure that crucial suppliers and companies with sensitive technology are effectively protected against acquirers with a relevant criminal background, having regard to national security risks. It was previously announced that entry into force in 2021 would be possible, but considering that the bill is still pending before the Lower House, even 2022 would appear optimistic. The coalition agreement states that measures will be taken to prevent undesirable foreign influence insofar as possible. While the bill is not specifically mentioned, we believe this indicates that it is a priority.

Bill on transparency in civil society organisations

On 23 November 2020, a bill on transparency in civil society organisations (35 646) was submitted to the Lower House. A consultation had already been published on 22 December 2018, but based on the advice of the Council of State, the bill was substantially amended. The bill aims to prevent donations received by civil society organisations (in particular foundations, associations and religious organisations) from creating undesirable foreign influence. The bill provides for a system whereby mayors and the Public Prosecution Service can obtain information about foreign donations upon request. If substantial donations are found, more specific information can be requested, including about the donor, but only if necessary. Furthermore, foundations will be obliged to file their balance sheet and income statement with the trade register, although only certain authorities will be able to access these documents. On 8 June 2021, an amending bill was submitted for consultation. Amongst other things, it proposes extending the scope of the bill to include donations originating from both within and outside the EU/EEA. It is also proposed providing for the imposition of sanctions on board members who do not comply with a court-ordered reporting obligation in respect of certain transactions or an order allowing the inspection of books. No date of entry into force has been proposed thus far. The proposal is mentioned in the coalition agreement as a measure to prevent undesirable foreign influence, to the extent possible. It would appear unrealistic, however, to expect the bill to enter into force in 2022.

On 7 March 2019, a private member's bill on equal pay for men and women was submitted to the Lower House. Further to the opinion of the Council of State, an amended bill (35 157) was submitted on 5 October 2020. Employers with, in general, at least 250 employees on average will be obliged to obtain a certificate attesting to the fact that they ensure equal pay for equal work. In addition, every employer with more than 50 employees will be required to provide information in its annual report on any differences in remuneration between female and male employees. Unequal pay will have to be explained and accounted for in the annual report, which will also have to indicate how the differences in remuneration will be reduced. The proposal is currently pending before the Lower House, but very little progress was made in 2021. We do not expect the bill to enter into force before 2023.

Amendments to the Whistleblowers Service Act

On 1 June 2021, a legislative proposal amending the Whistleblowers Service Act to implement the European directive on the protection of persons who report breaches of Union law (35 851) was submitted to the Lower House. The bill amends the current Whistleblowers Service Act (Huis voor Klokkenluiders), which will henceforth be known as the Whistleblower Protection Act. The protection afforded whistleblowers who report suspicions of wrongdoing will be extended, with the employer bearing the burden of proving no wrongdoing. Furthermore, the definition of protected persons will be extended to include volunteers, interns, freelancers, contractors and subcontractors, shareholders and job applicants. Moreover, employers' internal reporting procedures will have to meet stricter requirements. The bill also designates the authorities competent to receive reports and carry out investigations or take action, including the Whistleblowers Service. The deadline for implementation of the directive is 17 December 2022. Due to the large number of concerns expressed about the content of the bill during discussions before the Lower House, it appears unlikely that this deadline will be met.

Implementation of the EU directive on the online incorporation of private limited companies

On 15 June 2021, a preliminary legislative proposal on the online incorporation of private limited companies was released for consultation. The proposal implements Directive (EU) 2019/1151 as regards the use of digital tools and processes in company law and facilitates the online incorporation of private limited companies by, amongst other things, enabling the instrument of incorporation to be executed electronically, at a distance from the notary. It will thus be possible to appear before the notary via a remote connection rather than in person, unless there is a suspicion of identity fraud or doubt as to the founder's legal capacity. It has been decided to facilitate at first only the online incorporation of private limited companies (BVs), to see whether the process runs smoothly. This possibility could then be extended to the public limited company (NV). It should be noted that, in this context, incorporation means the process of setting up a company before a notary. The deadline for implementation of the directive is 1 August 2022. However, since the legislative proposal has not yet been submitted to the Lower House, this does not appear feasible.

On 21 April 2021, the European Commission adopted an ambitious and comprehensive package of measures to encourage the flow of funds to sustainable activities across the EU. The package includes a proposal for a Corporate Sustainability Reporting Directive (CSRD). The proposed directive revises and strengthens the existing rules, introduced by the Non-financial Reporting Directive (NFRD: Directive 2014/95/EU). The intention is to create a legal framework that - in time - will bring sustainability reporting to the same level as financial reporting. The EU rules on sustainability reporting will be extended to all large companies and all listed companies. It is also proposed that the directive be applicable to all companies that are, in short, listed in the EU, regardless of their size and whether they are incorporated under the laws of a Member State. An exception is provided for micro-enterprises. All parent companies of large groups will also have to comply with the new directive. The Commission proposes that standards be developed for large companies as well as separate - proportionate - standards for small and medium-sized enterprises (SMEs), which unlisted SMEs can apply on a voluntary basis. The objective is for large listed companies and other large corporations, banks and insurers to be compliant with the CSRD as from FY 2023 and small and medium-sized listed companies as from FY 2026. However, there is still much discussion about this proposed directive, both with regard to its scope and its entry into force.

From 26 October 2020 to 8 February 2021, a European Commission questionnaire on a proposed directive on sustainable corporate governance was subject to consultation. The aim is to improve the EU regulatory framework on company law and corporate governance in order to allow and encourage companies to focus on creating sustainable long-term value rather than short-term benefits. The proposal indicates that, in this way, the interests of companies, shareholders, managers, stakeholders and society can be better aligned. Companies should better manage the sustainability aspects of their activities and value chains, such as social and human rights, climate change and environmental issues (ESG). The European Parliament called on the Commission to take this initiative in the European Parliament Resolution of 17 December 2020 on sustainable corporate governance. The Commission had planned to publish the proposed directive in the second quarter of 2021, but this date was pushed back, in part due to strong opposition to certain provisions, particular in business circles. The proposed directive is now expected in March 2022 at the earliest.

Legislative initiative on responsible and sustainable international business practices

On 11 March 2021, a legislative initiative on responsible and sustainable international business practices (35 761) was submitted to the Lower House. The purpose of this initiative is to establish a threshold for corporate social responsibility in international business practices that ensures (Dutch) companies comply more fully with international standards on human rights, employment and industrial relations as well as OECD guidelines. The idea is to prevent and counteract the potential adverse effects of economic activity. It has been proposed that compliance with these guidelines be enshrined in law as there is still no legislation clarifying the responsibility of companies in these areas in the context of their international activities. The drafters deliberately chose not to await the aforementioned proposal for a European directive on sustainable corporate governance. By submitting a national proposal now, they hope to accelerate the adoption of the European proposal and to influence its content. The coalition agreement states that the Netherlands should promote international corporate social responsibility (ICSR) legislation in the EU and introduce national ICSR legislation that assumes a level playing field with neighbouring countries and the possible implementation of EU rules. It is not clear if this refers to the current legislative initiative or if a new bill will be submitted for this purpose.

Proposal for an EU directive to improve reporting by listed companies

On 12 November 2021, the European Commission launched a consultation on improving the quality and reliability of public reporting by listed companies. The Commission is considering firm measures to strengthen the quality and oversight of financial reporting. These measures stem from the Wirecard accounting scandal in 2020 and are intended to better protect investors against misreporting, increase confidence in the financial markets and help prevent bankruptcies. They could also support the EU's climate and environmental targets and sustainable finance agenda by helping to make information on sustainability more reliable and tackling greenwashing. This could in turn lead to increased investment in sustainable activities and projects. The Commission is also considering measures in the areas of internal governance, auditing and the external oversight of financial reporting and auditors. The consultation runs until 4 February 2022.

EU consultation on shares with multiple voting rights

On 19 November 2021, the European Commission launched a consultation on ways to make IPOs more attractive for small and medium-sized enterprises in particular. The Commission is considering legislation to allow all European listed companies to issue shares with multiple voting rights. It is also considering certain restrictions on the issuance of such dual-class shares, such as a maximum ratio between high- and low-voting shares and the inclusion of a so-called sunset clause. The consultation also mentions a series of other measures to make IPOs more attractive, such as:

  • a reduction in the minimum percentage of shares that must be offered during an initial public offering;
  • facilitation of the procedure to have shares listed on several stock exchanges; and
  • the introduction of minimum EU corporate governance standards for small companies listed on "SME growth markets".

The Commission is also interested in stakeholders' views on special purpose acquisition companies (SPACs). The consultation runs until 11 February 2022.

On 21 December 2021, the European Commission launched a consultation on upgrading digital company law. According to the Commission, the COVID-19 pandemic has shown the importance of digital tools and processes in EU company law. Therefore, this EU company law initiative aims to:

  • improve transparency on EU companies by making more information available on a cross-border basis;
  • enable the cross-border use of trustworthy company data;
  • further modernise EU company law rules, including virtual registered office.

With regard to the last topic - the modernisation of company law - the questionnaire seeks stakeholders' opinion of virtual registered offices and the full online incorporation and registration of companies other than capital companies, for example partnerships. The consultation runs until 8 April 2022. Publication of the draft directive is planned for the fourth quarter of 2022.

On 1 January 2022, the Act on a balanced ratio of men and women on management and supervisory boards (Stb. 2021, 495) entered into force (Stb. 2021, 537). The Act provides for:

  • a gender quota (at least 1/3 men and 1/3 women) for the supervisory board or non-executive directors of NVs and BVs listed on a regulated market in the Netherlands; and
  • a self-imposed appropriate and ambitious target for the supervisory board, management board and sub-senior management of large NVs and BVs, with an obligation to draw up a plan and to report on this in their management report and to the SER.

For large listed companies, both the supervisory board (or non-executive directors) quota and the target for the management board and sub-senior management apply. More information can be found in our newsletter of 30 September 2021.

Management and Supervision of Legal Entities Act

On 1 July 2021, the Management and Supervision of Legal Entities Act (Stb. 2020, 507) entered into force. The Act standardises the rules on the management and supervision of legal entities and has consequences for, amongst others, foundations, associations, cooperatives and mutual societies (OWM). For example, associations and foundations can now establish a supervisory board, and a one-tier management system is possible for all legal entities. There are also more uniform conflict-of-interest rules, extended rules on the liability of directors and supervisory board members of informal associations and non-commercial foundations and associations, and uniform requirements for provisions in the articles of association on the absence or incapacitation of directors and supervisory board members. Multiple voting rights have been restricted, and the grounds for the removal of directors and supervisory board members of foundations have been expanded. More information - including on the transitional law - can be found in our newsletter of 12 November 2020.

On 1 May 2021, the Act on recourse to a cooling-off period by the management of listed companies (Stb. 2021, 185) entered into force (Stb. 2021, 210). A listed company may now impose a cooling-off period of up to 250 days in two cases, namely if the management board deems one of the following situations to be substantially contrary to the interests of the company and its affiliates:

  1. shareholders request consideration of a proposal to appoint, suspend or remove one or more directors or supervisory board members or a proposal to amend a provision in the articles of association relating thereto; or
  2. a public offer for the company's shares is made or announced without an agreement having been reached with the company on the offer.

During the cooling-off period, the board gathers information and must in any case consult with shareholders representing at least 3% of the capital as well as with the works council. The authority of the general meeting to appoint, suspend or remove directors or supervisory board members (or to amend the relevant provisions of the articles of association) is suspended for the duration of the cooling-off period. Shareholders with the right to add items to the agenda can request the green light to end the cooling-off period. Only one cooling-off period can be running at any given time so if, for example, a request to remove a director or supervisory board member is submitted and shortly afterwards a hostile takeover bid is made, it is up to the company's management to determine for which case to call a cooling-off period. The bill does not stipulate a minimum time period within which management must call the cooling-off period. More information can be found in our newsletter of 25 March 2021.

Greater possibilities to ban certain legal entities persons

On 1 January 2022, the Act to extend the possibilities to ban legal entities (Stb. 2021, 310) entered into force (Stb. 2021, 346). This legislation elaborates on Article 2:20 of the Dutch Civil Code, which provides a statutory basis for the banning of legal entities, and makes it easier for the Public Prosecution Service to prove that an organisation should be banned. The definition of what is deemed contrary to public policy in the Netherlands is also clarified. In addition, the act provides that managers can be barred from engaging in management activity for three years or more when the legal entity they manage is banned. The courts can also order an organisation to cease activity during the course of proceedings. Failure to comply with such a court order may be sanctioned.

On 12 July 2020, the Taxonomy Regulation (Regulation (EU) 2020/852) entered into force. The regulation provides for a uniform classification system (or taxonomy) to determine the degree of sustainability of an investment. The system elaborates on the concept of "environmentally sustainable economic activity", linked to six environmental objectives. The regulation has implications for financial market participants and public-interest entities (PIEs) and, in time, will also affect listed companies. If financial market participants describe their products as sustainable, they must indicate to which extent the products meet the Taxonomy Regulation's criteria. These criteria are set out in detailed, technical delegated rules with annexes, which entered into force on 1 January 2022. The regulation also contains obligations linked to other European regulations; for example, parties that fall under the scope of the NFRD (currently PIEs but in future, pursuant to the CSRD, other parties, namely all companies listed in the EU) must report on the extent to which their investments and activities comply with the classification system. This should be assessed with reference to the abovementioned delegated rules. Mandatory reporting under the Taxonomy Regulation is applicable as from January 2022 (for FY 2021) for climate mitigation and adaptation targets and as from January 2023 (for FY 2022) for the other four environmental targets.

No inroads were made in the following legislative processes in 2021:

  • Modernisation of partnerships - a new consultation was announced at the end of 2020 but there have been no further developments;
  • Act on the adaptation of dispute resolution and clarification of the admissibility requirements for inquiry procedures – a consultation took place in 2019 but there have been no further developments since;
  • Act on the extension of shareholder notification obligations – a consultation took place in 2019 but there have been no further developments;
  • EU directive on cross-border restructuring - no national legislative process has started yet;
  • CAHR - pending before the Lower House;
  • Fair Sharing Act - pending before the Lower House;
  • Fair Decision-making Act – a consultation took place in 2020, but there have been no further developments since;
  • Act on further remuneration measures for the financial sector – pending before the Lower House.