This Corporate Update is our semi-annual newsletter regarding recent developments in Dutch corporate law. A number of important bills have recently been enacted. The Flex-BV Act (Wet vereenvoudiging en flexibilisering bv-recht), which significantly changed the rules and regulations applicable to Dutch limited liability companies, entered into force on 1 October 2012.
The Management and Supervision Act entered into force on 1 January 2013. The Act to amend the Right of Inquiry and (for the most part) the Act on the Accountancy Profession also entered into force on 1 January 2013.
This Corporate Update highlights the key Dutch corporate law changes as per 1 January 2013. In addition, we will touch upon certain amendments that result from the Financial Markets Amendment Act 2013. Furthermore, we will provide an overview of a number of pending legislative proposals.
For a comprehensive understanding of the amended legislation you will find the current wording (in Dutch) of Book 2 of the Dutch Civil Code as the provisions read since 1 January 2013 here. We will circulate a mark-up of Book 2 reflecting the changes vis-à-vis the previous legislative wording under separate cover shortly. Furthermore, we refer to the Stibbe Flex-BV webtool for an overview of the key changes and consequences of the Flex-BV Act and the Management and Supervision Act and our Corporate Alert (in Dutch) of 25 April 2012.
2. New legislation as per 1 January 2013
Management and Supervision Act
The Management and Supervision Act (Wet bestuur en toezicht) entered into force on 1 January 2013. The key changes are:
- Statutory basis one-tier board: the Act provides an explicit statutory basis for a one-tier board system within NVs or BVs, comprising both executive and non-executive members, as an alternative to the existing two-tier board system.
- Conflict of interest rules change: the provisions governing situations where there is a conflict of interest between members of the management board or the supervisory board and the company have been amended. Instead of a rule with external effect restricting the management board's authority to represent the company in case of a conflict of interest, there is now a rule with internal effect restricting only the authority of the respective member of the management board or the supervisory board to participate in the decision-making process.
- Limitation of the number of board positions: a maximum is imposed on the number of supervisory positions that a managing (or executive) director or supervisory (or non-executive) director of a 'large' company or 'large' foundation may hold with other 'large' companies or 'large' foundations. The appointment or re-appointment of a managing (or executive) director or supervisory (or non-executive) director that would result in such person holding more than the maximum number of supervisory positions permitted by law is null and void. However, the participation in the decision-making of a board member whose appointment was void does not affect the validity of the resolutions so adopted by the board.
- Gender diversity: 'large' NVs and BVs are required to strive for a balanced composition of their management and supervisory boards, to the effect that at least 30% of the positions on the management and supervisory boards are held by women and at least 30% by men. There is no legal sanction if the composition of a company's board is not balanced in accordance with the Act. An appointment contrary to these rules will therefore not be null and void. However, in such case, the company must explain any non-compliance with the 30% criteria in its annual report. The explanation must include the reasons for non-compliance and the actions the company intends to take in order to comply in the future. These rules will expire on 1 January 2016, but may be extended prior to this date.
- Managing directors of listed companies are no longer considered employees: the legal relationship between a managing director and a listed company  shall no longer qualify as an employment agreement. Instead, it will generally be considered an agreement for services. Existing agreements will be respected.
For more information on the Management and Supervision Act we refer to our Corporate Alert of 27 September 2012.
Amendments to Right of Inquiry Rules
The Act to amend the Right of Inquiry (Wet aanpassing enquêterecht) entered into force on 1 January 2013. These are the most important changes:
- The thresholds with respect to the authority to request the court for an inquiry proceeding have been amended. With respect to NVs and BVs with an issued share capital of not more than € 22.5 million, the threshold remains the same: shareholders or holders of depositary receipts must hold at least 10% of the issued share capital or shares or depositary receipts with a nominal value of € 225,000, or less if the articles of association of the company so determine. In addition, the Act now provides that if the issued share capital is higher than € 22.5 million, shareholders or holders of depositary receipts holding at least 1% of the issued share capital are authorized to request for an inquiry proceeding. In the event of a listed company, the stake should represent a market value of at least € 20 million, or less if the articles of association of the company so determine.
- The legal entity itself now has the authority to request the court for an inquiry proceeding. Such request can be submitted on behalf of the legal entity by both the management board and/or the supervisory board (in case of one-tier boards both the executive and non-executive directors) – as well as the liquidator in the event of a bankruptcy; and
- The liability risk of court appointed examiners is restricted and the company may be charged for the legal costs incurred by court appointed examiners and interim directors in defending legal action taken against them.
For more information we refer to our Corporate Alert of 4 October 2011 (Dutch only).
Amendments to the Act on the Accountancy Profession
The Act on the Accountancy Profession (Wet op het accountantsberoep) entered into force on 1 January 2013, with the exception of the compulsory rotation rule that will enter into force on 1 January 2016. The most important changes affecting companies are:
- Compulsory rotation of accountancy firms: starting 1 January 2016, organizations of public interest, which include at this point in time listed companies listed and non-listed banks and insurers (the so-called ‘PIOs’), are required to rotate their accountancy firm every eight years. The same firm may perform the statutory audits again only after the expiry of a two-year cooling-off period. Please note that the obligation to rotate the accountancy firm every eight years should be distinguished from the rule that the same auditor cannot ultimately be responsible for performing the statutory audits of the relevant client for more than seven years.
- Separation of audit services and advisory services: accountancy firms performing audits for PIOs may no longer also perform other services for such organizations. Please note that only the following services qualify as audit services: (i) performing the statutory audit of the financial statements; (ii) auditing the semi-annual and quarterly reports; (iii) certifying the monthly statements for regulatory authorities; and (iv) providing assurance in relation to the report of the management board, the report on corporate governance, the report on risk management and the report on corporate social responsibility.
- Compulsory notification to the AFM: a PIO is required to inform the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten, the ‘AFM’) in advance of its intention to appoint an accountancy firm for the purpose of auditing its financial statements.
- Chinese walls: the so-called Chinese walls within the AFM between the department responsible for supervision of accountancy firms and the supervision of financial reporting by issuers have been abolished.
- Changes to the Act on the Supervision of Financial Reporting: the amended Act no longer requires the AFM to have doubts about the correctness of the relevant issuer's financial statements in order to ask the issuer for further clarification.
For more information we refer to our Corporate Alert of 11 December 2012.
Amendments to Dutch bidding rules and transparency requirements
The Financial Markets Amendment Act 2013 (Wijzigingswet financiële markten 2013) contains both technical and substantive amendments of the Dutch Financial Supervision Act (Wet of het financieel toezicht), including amendments with respect to the Dutch public bid rules and transparency requirements.
Dutch bidding rules
A number of changes in relation to the Dutch bidding rules entered into force on 1 January 2013. The most important changes are:
- The exemption to make a mandatory public bid following a voluntary public bid has been tightened and will now only apply in case the bidder, as a result of declaring its voluntary public bid unconditional, is entitled to exercise more than 50 per cent of the voting rights in the general meeting of the target company.
- A new obligation to promptly and without delay make a public statement for bidders acquiring a controlling stake. Public statements are also required when: (i) the acquired controlling interest (as defined in the EU Take-over Directive) is lost or reduced within the 30 days grace period; (ii) a request is submitted with the Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal to be relieved from the obligation to make a mandatory bid; or (iii) the Enterprise Chamber rules on such request.
The Act also changes certain provisions of the Dutch Financial Supervision Act regarding the transparency requirements for issuers. One of the changes concerns the introduction of an obligation for shareholders in listed companies to disclose their full legal and economic interest (both long and short) in the event of a request to have an item placed on the agenda of the general meeting. Such disclosed economic interest needs to be published on the website of the company from the moment the general meeting is convened. This rule will enter into force on 1 July 2013.
3. Update Other Legislation and Pending Bills
Corporate Governance Act
The Corporate Governance Act (Wet corporate governance) was adopted by the Dutch Senate on 13 November 2012. This Act will enter into force on 1 July 2013 because the required Implementation Act is not yet ready. The most important changes will be:
- Reduction of minimum disclosure threshold: the Act introduces a new minimum threshold of 3% (instead of the current 5%) for the disclosure of capital interests in listed companies. The 5% threshold (as well as all the other applicable disclosure thresholds) will continue to exist.
- Disclosure requirement for gross short positions: the Act introduces an obligation to report gross short positions in listed companies. The applicable minimum disclosure threshold is 3%. Set-off against possible long positions will not be permitted. Both positions are required to be disclosed.
- Higher threshold for items to be put on the agenda of the shareholders' meeting: the threshold for the right of shareholders to have items placed on the agenda of the general meeting will be increased from 1% to 3% of the issued share capital. The current alternative threshold that applies to shareholders of listed companies having a share ownership with a market value of at least € 50 million will be abolished.
- Identification of shareholders: the Act enables listed companies to keep track of its investor base with respect to a certain period preceding the shareholders' meeting. To secure the privacy of small investors, the procedure can only be used to identify investors with an interest of at least 0.5% of the issued share capital. The term investor includes: (i) shareholders within the meaning of the Dutch Securities Act (Wet giraal effectenverkeer); (ii) the custodian of an investment institution; (iii) persons holding equity securities for their own account with foreign institutions that are not affiliated institutions or intermediaries within the meaning of the Dutch Securities Act. The listed company is required to run the investor identification procedure on the basis of a request to that end submitted by one or more shareholders who, either individually or jointly with other shareholders, have a share capital interest of at least 10% of the issued share capital.
- Information exchange shareholders: a shareholder who, either individually or jointly with other shareholders, holds at least 1% of the shares or holds shares with a market value of at least € 250,000, will have the right, prior to the shareholders' meeting, to request the listed company to pass on the information that it has made available to the company also to the other shareholders. The information must be related to an item on the agenda of the shareholders' meeting. Unless there is a statutory ground for refusal, the company must pass on the information or publish it on its website, within three working days. If the company decides to pass on the information, then it must also publish such information on its website.
For more information we refer to our Corporate Alert of 23 November 2012.
Simplification of Procedure under Collection of Mass Claims Act
A Bill to amend the Collection of Mass Claims Act (wetsvoorstel ter vereenvoudiging van de Wet collectieve afwikkeling massaschade) was submitted, which aims to simplify the settlement procedures of mass claims. The Bill, inter alia, introduces a pre-procedural hearing that fosters collective settlements and improves the possibilities to use the procedure in the context of insolvency proceedings. It is unclear when the Bill will be discussed in Parliament.
For more information we refer to our Corporate Update of 16 July 2012.
Implementation of the Alternative Investment Fund Managers Directive
The Alternative Investment Fund Managers Directive (the ‘AIFMD’) entered into force on 21 July 2011 and contains rules and regulations for the authorization, ongoing operation and transparency of the managers of alternative investment funds (the ‘AIFM’) other than collective investment undertakings (the ‘CIUs’). The AIFMD should have been implemented into domestic rules and regulations by the Member States by 22 July 2013. A legislative proposal to that effect was submitted by the Dutch government to Parliament on 19 April 2012. The proposal is currently pending with the Dutch Senate.
The AIFMD will result in a number of substantial changes with respect to the regulatory regime for collective investment undertakings other than CIUs, such as private equity funds, hedge funds, property funds and other types of collective investment undertakings. As a result of the AIFMD entering into force, a large number of investment institutions, as well as their managers, that have not been subject to any form of regulatory supervision to date will become subject to regulatory supervision and will have to comply with the obligation to obtain a permit.
For more information we refer to our Corporate Update of 16 July 2012.
On 19 December 2012 the European Commission adopted the so-called Level II Regulation with respect to the AIFMD. This Regulation completes a number of open standards included in the AIFMD. With the Regulation, the European Commission provides further clarity as to the substantiation of permit requirements and continuous requirements set out in the AIFMD. The European Council and the European Parliament could potentially raise objections against the proposed Regulation as a whole. For more information we refer to our Corporate Alert of 28 December 2012.
For more information please contact one of the Stibbe contact persons.
 Dutch law contains a number of different regulations containing definitions of what qualifies as a ‘listed company’ for the purpose of the respective regulation and these definitions are not necessarily the same. Where reference is made to ‘listed companies’ in this newsletter, this should be construed as a reference to ‘listed companies’ as this term is defined in the relevant regulation involved. While some of the definitions also include other companies, all definitions include Dutch companies that have issued shares that are traded on Euronext Amsterdam.