Corporate Update: Recent Developments Dutch Corporate Law

Corporate Update: Recent Developments Dutch Corporate Law

Corporate Update: Recent Developments Dutch Corporate Law

17.01.2014 NL law

1.  Introduction 
This Corporate Update is our semi-annual newsletter in which we present an overview of key Dutch corporate law changes that came into effect on 1 January 2014 and also highlight certain other recent developments in Dutch corporate law.

The number of Dutch corporate law bills that came into effect on 1 January was comparatively limited this year. The most important changes relate to the Claw Back Act, which is discussed in detail below. We also highlight certain other rules and regulations that entered into force on 1 January 2014. Finally, we briefly discuss the White List of activities relating to acting in concert, a public statement that was recently published by ESMA in the context of takeover situations. 
2.  New legislation as per 1 January 2014 
The Dutch Claw Back Act

The Claw Back Act (available in the Dutch language only) came into effect on 1 January 2014 and applies particularly to public limited companies organized under the laws of the Netherlands ("NVs"). The two most important elements of the Claw Back Act are the ‘bonus rule’ and the ‘corporate transaction rule’, each of which we discuss in further detail below.

The Bonus Rule

In short
The Claw Back Act provides that bonuses granted to directors can retrospectively be:

  • Adjusted if the amount of the bonus is unacceptable in a given case on the basis of the principle of reasonableness and fairness; and
  • Reclaimed if the bonus was paid on the basis of incorrect information regarding the targets underlying the bonus having been reached or regarding the conditions for granting such bonus.

The bonus rule applies to executive and non-executive directors of NVs, cooperatives and private companies with limited liability, where such entities qualify as banks, financial institutions (regardless of their legal form) and mutual insurance associations.


In the context of the Claw Back Act, "bonus" means the variable part of a director's remuneration. Remuneration is considered as a bonus for these purposes when the award is either in whole or in part subject to reaching certain objectives or the occurrence of certain circumstances, including payments in cash, shares or options, sign-on payments or severance payments (irrespective of whether these severance payments are agreed at the moment of appointment or departure).

Authority to adjust bonuses

The authority to adjust a bonus granted (but not yet paid) to directors is vested in the corporate body that is authorized to determine the individual remuneration of directors. This is usually the general meeting, unless the articles of association provide otherwise. Adjustment of a bonus is only allowed if the amount of that bonus is unacceptable in the given case on the basis of the principle of reasonableness and fairness. This is expected to be determined by the courts on the basis of all the relevant facts and circumstances, such as a material deterioration of the financial situation of the company or an excessive increase of the original bonus due to certain developments in the underlying components on which the bonus is based.

Authority to reclaim bonuses

The company is authorized to claw back bonuses that have already been paid to directors. Interestingly, this claim can be initiated on behalf of the company not only by the management board, but also by the supervisory board (in a two-tier management structure) or the non-executive directors (in a one-tier structure), as well as by a representative appointed by the general meeting for such purpose.

Claw-back is only allowed if the bonus was paid on the basis of incorrect information regarding the targets underlying the bonus having been reached or regarding the conditions for granting such bonus. The period during which the claw back can be initiated is five years from the moment it transpires that the bonus was paid on the basis of incorrect information.

The Corporate Transaction Rule

In short

The Claw Back Act imposes an obligation on a company (effective during the reference period, as described further below) to deduct from a director's remuneration an amount equal to the value increase of shares, depositary receipts for shares or options, granted as remuneration to that director, in the event of (i) a public takeover bid, (ii) a resolution of the board of directors regarding a transformational transaction that requires the approval of the general meeting of shareholders pursuant to Section 2:107a subsection 1 under (a), (b) and (c) of the Dutch Civil Code (a “2:107a Resolution”), or (iii) a proposal for a legal merger or demerger.


The scope of the corporate transaction rule differs from the scope of the bonus rule. The corporate transaction rule applies to NVs whose shares are traded on Euronext Amsterdam. However, it is not entirely clear if this rule also applies if the relevant NV shares are only admitted to trading on a multilateral trading facility, a regulated market within the EU or EEA but outside the Netherlands, or a trading system comparable to Euronext outside the EEA. It is generally considered that the rule does not apply in case the shares of the NV are only traded on a multilateral trading facility such as Alternext or a system comparable to Euronext outside the EEA, such as the New York Stock Exchange or NASDAQ.

The corporate transaction rule does not apply to shares personally acquired or inherited by a director. The rule also does not apply to purely contractual rights related to the price increase of shares or options (such as phantom shares and share appreciation rights).

For these purposes, it is unclear how shares or options awarded as part of the remuneration of directors should be identified. The Minister has recommended that directors should maintain a separate securities account. The Minister also suggested that shares acquired by a director with a loan provided by the company should be regarded as part of the remuneration of that director when the loan is not on arms’ length terms. Separating the two categories can be quite complicated in practice.

If and when a corporate transaction occurs the burden is on the director to demonstrate that any shares held by him do not fall within the scope of the corporate transaction rule.

Reference date and claw back

The claw back obligation under the corporate transaction rule is triggered when a director disposes of his shares or options or when his appointment terminates in any of the following circumstances:

  • following the announcement of a public takeover bid;
  • following the submission of a 2:107a Resolution to the general meeting of shareholders for its approval; or
  • following the announcement by the company of a merger or demerger proposal but prior to the moment the merger of demerger comes into effect.

Upon the occurrence of one of these corporate events, the company is under an obligation to determine the value of the shares or options on three different reference dates, being:

  • four weeks prior to (a) the date the public takeover bid is announced, (b) the date the 2:107a Resolution is submitted to the general meeting of shareholders for its approval, or (c) the date the merger or demerger proposal is announced (“Reference Date I”);
  • four weeks after (a) the date the public takeover bid expires (beëindiging), (b) approval of the 2:107a Resolution, or (c) the date on which it is resolved to merge or demerge or one day prior to the date on which the merger or demerger comes into effect if this date is earlier than four weeks after the date on which it was resolved to merge or demerge (“Reference Date II”);
  • the date the director disposes of his shares or options or the date his appointment terminates (“Reference Date III”).

Determination of the value of the shares or options shall be carried out on the basis of the closing price of the shares. If the director disposes of his shares or options or his appointment terminates and the value of his shares or options on Reference Date III exceeds the value of his shares or options on Reference Date I, then the company is under an obligation to withhold the difference from the director’s remuneration. However, the amount that is so withheld shall not exceed an amount equal to the difference in value on Reference Date I and Reference Date II.

Other corporate transaction rule considerations

  • The corporate transaction rule also applies in case the public takeover bid is announced but not launched or in case the launched public takeover bid is withdrawn or not declared unconditional. It is likely that this would not be the case in circumstances involving a 2:107a Resolution or a merger or demerger which must be approved by the general meeting. However, the wording of the regulation is ambiguous and not entirely clear on this point. In a scenario where a general meeting is convened but the relevant proposal is not put to a vote, the rule arguably cannot be applied. The same applies if the proposal is rejected by the shareholders.
  • The legislator assumes that the company should also claw back the value increase if such amount exceeds the remuneration amount still payable to a director.
  • The rule does not take into account the possibility of multiple corporate transactions, each resulting in a claw back claim on a director.
  • NVs (also in the event they are not listed) must include a statement in the explanatory notes to their annual accounts about the amount of any bonuses adjusted or reclaimed.

The corporate transaction rule expires on 1 July 2017 by operation of law, unless extended by the legislator prior to such date. The rule will be reviewed in 2016. Other Corporate Law Developments – Financial Markets Amendment Act 2014

Supervision financial reporting listed companies

On 1 January 2014, the Financial Markets Amendment Act 2014 came into force. The act, amongst others, provides for changes to the Dutch Financial Supervision Act and the Dutch Financial Reporting Supervision Act. The Dutch Financial Markets Supervision Authority (Autoriteit Financiële Markten, the “AFM”) supervises the financial reporting by listed companies. In this context, it should be noted that the scope of the definition of listed companies is extensive: it also applies to Dutch companies whose securities are traded on a system comparable to a regulated market outside the EU/EEA (e.g. the New York Stock Exchange or NASDAQ). Please refer to the Corporate Update of 11 July 2013 for an overview of the key changes.

Publication annual accounts listed BVs

Private limited liability companies whose securities are admitted to trading on a regulated market as referred to in Section 5:25c of the Financial Supervision Act are required to make their financial statements generally available within four months (was: five months) following the end of a financial year. Furthermore, this period can no longer be extended with respect to such companies.

Consolidation exemption intermediate holding companies

As of 1 January 2015, the exemption for intermediate holding companies excusing them from requirements to draw up consolidated financial statements in the event that the (ultimate) holding company has included the consolidated financial information in its own financial statements no longer applies to legal entities whose securities are admitted to trading on a regulated market or a comparable system in a State that is not a Member State of the European Union. Consequently, such intermediate holding companies are required to prepare not only corporate accounts but also consolidated accounts meeting the requirements of IFRS as approved by the European Commission. 
3.  Other Developments - ESMA White List Acting in Concert 

A person who acquires, alone or acting in concert with others, directly or indirectly, a controlling interest in a public limited liability company with its registered office in the Netherlands, of which shares are admitted to trading on an EU regulated market (e.g. Euronext Amsterdam), must make a public offer for all such shares or depositary receipts. For purposes of the Dutch bidding rules, a "controlling interest" means at least 30% of the voting rights in the general meeting of shareholders of the company.

On 12 November 2013, the European Securities Markets Authority ("ESMA") issued a public statement on shareholder cooperation and acting in concert under the EU Takeovers Directive. The statement was issued as a result of the evaluation of the EU Takeovers Directive published by the European Commission in June 2012 (six years after the implementation of the Directive). The European Commission argued that the notion of acting in concert should be clarified for the purpose of providing more certainty to investors as to the extent to which they can cooperate with each other without being regarded as acting in concert (and thereby running the risk of having to make a mandatory bid).

The Dutch bidding rules define "persons acting in concert" as persons cooperating pursuant to an agreement with the objective to acquire a controlling interest in the target company.

There is considerable uncertainty regarding what exactly constitutes "acting in concert". Shareholders involved in a takeover scenario or other corporate transaction involving listed entities who wish to cooperate for such transactions are often disinclined to do so due to the perceived risk that the mandatory bid obligation is triggered.

White list

The statement provides for a 'White List' of activities that shareholders may engage in when cooperating with each other without the presumption of acting in concert.

The White List contains the following activities:

  • Entering into discussions with each other about possible matters to be raised with the company's board.
  • Making representations to the company's board about company policies, practices or particular actions that the company should take.
  • Other than in relation to the appointment of board members, exercising shareholders' statutory rights to: (i) add items on the agenda of a general meeting, (ii) table draft resolutions for items included or to be included on the agenda of a general meeting, (iii) call a general meeting other than the annual general meeting; and
  • Other than in relation to a resolution for the appointment of board members, and insofar as such a resolution is provided for under national company law, agreeing to vote the same way on a particular resolution put to a general meeting (the White List contains a number of examples, such as proposals regarding directors' remuneration or an acquisition or disposal of assets).
    Board appointments

Shareholders cooperating in the context of board appointments remains potentially sensitive in the context of applying the mandatory bid rule. This is because, if shareholders cooperate in the appointment of board members, they may be in a position to control the operational management of the company.

In the Netherlands parties can opt for a one-tier or two-tier management structure. In a two-tier structure there are two separate corporate bodies: a management board (responsible for the day-to-day management of the company) and a supervisory board (responsible for supervising the management board). The one-tier board consists of executive directors (responsible for day-to-day management of the company) and non-executive directors (responsible for at least the supervision of the executive directors) The general course of affairs of the company is the responsibility of all board members. In a two-tier structure, the members of the supervisory board will not be operationally involved and generally have less influence on the decision-making process and the question arises whether the guidance provided by ESMA (see below) is also aimed at the members of the supervisory board in a two-tier management structure.

The White List does not include any activities with respect to board appointments. This is a result of different approaches taken in the various Member States in determining whether shareholders cooperating in relation to board appointments are acting in concert (the statement contains an appendix with an overview of the various approaches towards this topic in the Member States). ESMA does provide some guidance for national supervisory authorities on the topic in that they may consider the following facts:

  • the nature of the relationship between the shareholders and the proposed board members;
  • the number of proposed board members being voted for pursuant to a shareholders voting agreement;
  • whether the shareholders have cooperated in relation to the appointment of board members on more than one occasion;
  • whether the shareholders are not simply voting but are also jointly proposing a resolution for the appointment of certain board members; and
  • whether the appointment of the proposed board members will lead to a shift in the balance of power on the board.
    On or not on the White List

Where shareholders engage in any activity listed on the White List, such cooperation will not in itself mean that such shareholders are not acting in concert. According to ESMA the shareholders should have the aim of acquiring control of or exercising control over the company. Similarly, if shareholders engage in an activity which is not included on the White List, that fact will not of itself mean that those shareholders should be deemed to be acting in concert. Each case will have to be assessed by the competent authorities (in the Member States) on the basis of all the relevant facts and circumstances.

Enterprise Chamber

In the Netherlands, the enforcement of the mandatory public bid rule is, unlike in other Member States, not carried out by the AFM but by an independent court: the Enterprise Chamber of the Amsterdam Court (the “Enterprise Chamber”). Although it can be expected that the Enterprise Chamber will take the ESMA guidance into consideration, the Enterprise Chamber is not obliged to do so. This means that, as far as the Netherlands is concerned, the aim of creating more legal clarity is only partly achieved. It also means that in the Netherlands, shareholders and investors do not have access to a regulatory authority they can consult on the question whether or not certain activities qualify as acting in concert.

For more information please contact any of the Stibbe contact persons.


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