The Management and Supervision Act ("the Act") will enter into force on 1 January 2013. As a result, the legal position of a director under the articles of association and a member of the supervisory board may change dramatically.
The most important changes are:
- statutory regime for one-tier board
- adjustment of internal liability, Section 2:9 of the Dutch Civil Code
- change of conflicting interest regime
- restriction of the number of supervisory positions per person
- target figures men/women representation within a board or supervisory board
- legal position of directors of listed companies
The changes mentioned above will be explained below.
Statutory Regime for One-Tier Board
The one-tier board model will become enshrined in law. This implies that companies will get to choose between the classic two-tier board model with a separate board and supervisory board under the articles of association, and the Anglo-Saxon one-tier board model. The latter board model is a choice for executive and non-executive directors who are part of the same administrative body. To establish a one-tier board model, a provision in the articles of association allowing this is required. It is expected that the legal position of a director or supervisory director in a one-tier board model will not differ much from that of a director in a two-tier board model. However, it cannot be excluded that this may lead to differences, also due to the differences in provision of information. Good advice is therefore in order.
Adjustment of Internal Liability, Section 2:9 of the Dutch Civil Code
Section 2:9 of the Dutch Civil Code ("DCC") will be amended, also with a view to the introduction of the one-tier board model. The collective responsibility and liability will continue to apply. This means that all directors are liable for mismanagement, even if the matter concerned was not among the tasks of a specific director. The division of tasks within the board does play an important role when it comes to the exculpation of an individual director. It may therefore be advisable for boards to determine a division of the tasks among themselves.
New Conflicting Interest Regime
Under the current regime, a director who has a conflicting interest does not have the authority to represent the company. The Act will change this. A conflicting interest will have no more consequences for representative authority, but only for the internal decision-making process within the company. This new regime will also apply to supervisory directors. If a director or supervisory director has a conflicting interest with the company, he will not be allowed to participate in the deliberations and decision-making. If this rule is not complied with, the decision concerned will be voidable. This regime cannot be deviated from.
The new regime will apply directly as of 1 January 2013. The old regime applies to legal acts that were performed before this date. The general meeting of shareholders may ratify transactions that were effected under the old regime. Provisions in articles of association will no longer apply; it is therefore advisable to amend the articles of association.
Restriction of Supervisory Positions per Person
A regulatory scheme will be introduced to restrict the number of supervisory positions of directors and supervisory directors of large legal entities. For example, a person may only be appointed as (executive) director if he holds no more than two supervisory positions within a large legal entity. In addition, a person may only be a supervisory director/non-executive director if he holds no more than four other supervisory positions at large legal entities. An appointment that is contrary to the restriction regime will be null and void. The nullity of the appointment will have no consequences for the validity of resolutions adopted.
For large companies, statutory provisions will be introduced to achieve a well-balanced participation of men and women in boards and supervisory boards. According to the new regulations, well-balanced participation implies that at least 30% of the seats are held by men and 30% by women. This provision is a so-called "apply or explain" provision, which means that if large corporations fail to comply with it, they must state the reason for this failure in their annual reports. This regulation will expire on 1 January 2016.
Legal Position of Directors of Listed Companies
Under the Act, it is no longer possible for a director to have an employment agreement with a listed company. As a rule, this relationship will be regarded as a contract for services in practice. Existing employment agreements, if any, between director and listed company will continue to apply.