New corporate legislation comes into effect in the Netherlands on 1 October 2012 and 1 January 2013. It is important to be aware of this as it concerns, amongst other things, corporate governance issues.
The new management and supervision act (including the one tier board!)
As of 1 January 2013 there will be a new corporate governance and supervision act. It affects public companies (“NVs”) and private companies with limited liability (“BVs”); some clauses are also applicable to foundations.
The most important changes are:
- One tier board versus two tier board: in addition to the two tier board, the one tier board is now established. Until today, only a two tier board, with the management board and the supervisory board as a separate body, was laid down in Dutch law. This new law brings the possibility, with certain limitations, to create a board with executive management board members and non executive (supervisory) management board members, both with their own duties. We are coming closer to the US and the UK! The one tier board differs from the two tier board in that the non-executive members in a one-tier board system are part of the management board and are therefore subject to director’s liability.
- Conflict of Interest: the members of the management board and the supervisory board who have an (in)direct conflict of interest can no longer be part of the decision-making process regarding the underlying specific subject.
- Composition: for so called large entities there are new rules relating to the composition of the management and supervisory board. The number of permitted positions is limited. Furthermore, in large NVs and BVs (and structure regimes) at least 30% of the positions on the management board and supervisory board must be held by women and at least 30% by men. This is done to stimulate the appointment of women on the company boards. It is, initially, a temporary rule (up to 1 January 2016).
- Responsibility: on the basis of the new legislation reference can be made to allocation of tasks in the articles of association. Although under Dutch law a division of tasks does not prejudice the joint responsibility of all members of the management board, it might under circumstances help by the so called individual exculpation possibility.
- Employment: management board members of listed companies will no longer be protected against dismissals or in case of illness, as the relationship between a board member and a listed company can no longer be based upon an employment agreement (but only on a management (service) agreement).
There are transitional provisions, but some clauses will apply immediately.
A Dutch BV is much more flexible as per 1 October 2012
On 1 October 2012 theFlex BV act entered into force. ThisFlex BV act brings major changes for BVs. Some corporate provisions have changed while other have been deleted.
Amongst other things, amendments relate to the introduction of non-voting shares, capital requirements, the appointment of directors and supervisory board members, distributions, capital reduction, repurchase, vacancy of managing directors, financial assistance and convening general meetings.
The new legislation applies to all BV’s as of 1 October 2012.
Please review the current articles and decision making arrangements of your Dutch BV/NV in light of the possible consequences, and consider bringing the articles of association in line with new (coming) Dutch law.