On 10 December 2013, the Dutch Upper Chamber adopted the Claw back Act. The Claw back Act shall enter into force as per 1 January 2014 and applies particularly to public limited companies ("N.V.'s").
We will shortly give a more extensive overview on the Claw back Act in our bi-annual Update. This Alert merely reflects the main features of the Claw back Act.
2. Main features Claw back Act
The two most important elements of the Claw back Act are:
(1) The adjustment or reclamation of bonuses
The possibility is introduced that bonuses granted to a managing director can in retrospect be:
- adjusted, if the amount of the bonus would under the circumstances be unacceptable according to principles of reasonableness and fairness; and
- reclaimed, if the bonus was granted on the basis of incorrect information regarding the achievement of targets on which the bonus was based, or regarding the circumstances subject to which the bonus was granted.
(2) The "Corporate Event" provision
The obligation to set off the amount of the increase in value (during a reference period) of shares, depositary receipts or rights to claim or acquire shares that were granted by way of remuneration to a managing director, with his remuneration, in the event of a public offer on the shares in the company, a proposal as referred to in certain provisions included in article 2:107a DCC, or a proposal for a legal merger or demerger.
3. Additional obligations annual report
Virtually all NV-companies must include a statement in the explanation to the annual accounts regarding the amount of the adjustment or the reclamation of any remuneration.
4. Additional item on the agenda for the general meeting
In the general meeting for the adoption of the annual accounts, account must be given for the implementation of the remuneration policy during the past financial year.
This must be included in the convocation for the agenda of the meeting as a separate item for discussion. The item must be discussed prior to the adoption of the annual accounts.
5. Scope of the Claw back Act
Although the Claw back Act was particularly intended for N.V.'s, the Claw back Act also applies to certain so-called financial enterprises.
However, the applicability of the provisions of the Claw back Act is different for the various parts of the Claw back Act. For instance, the Corporate Event provision applies to NV's listed on Euronext Amsterdam, and the provisions regarding the adjustment and reclamation of bonuses apply equally to private companies with limited liability (B.V.'s) and co-operatives that qualify as a bank, as well as to mutual societies that qualify as an insurance company.
6. Immediate Effect
The Claw back Act does not contain a transitional clause and will have immediate effect as from 1 January 2014.
As a consequence, the obligation arises for "open N.V.'s" to give account for the implementation of the remuneration policy in 2013 in the annual report over the financial year 2013.
Furthermore, the account for the implementation of the remuneration policy must as a separate item be included in the convocation to and placed on the agenda of the general meeting that will be held in 2014.
7. Financial Institutions
A further tightening of the rules is under preparation for Dutch financial institutions and other legal entities related thereto. In November 2013, a consultation version of the "Act remuneration policies of financial institutions" was made public. This consultation will be open until 31 December 2013. We will send a further update on this subject as soon as the actual legislative proposal is made public.
For more information and further advice, please do not hesitate to contact one of Stibbe's contact persons.