Short Reads

Act implementing the Directive and Regulation statutory audits of annual accounts

Act implementing the Directive and Regulation statutory audits of annu

Act implementing the Directive and Regulation statutory audits of annual accounts

10.04.2017 NL law

The EU Audit Regulation (EU) nr. 537/2014 and the EU Audit Directive (2014/56/EU) came into effect on 17 June 2016. The Act implementing the Amending Directive and Regulation on statutory audits of annual accounts ("Implementation Act") and the ancillary Decree implementing the Directive and Regulation ("Implementation Decree") entered into force (for the most part) on 1 January 2017.

The Implementation Act comprises amendments to the Audit Firms Supervision Act (Wet toezicht accountantskantoren, "Wta"), the Accountancy Profession Act (Wet op het accountantsberoep), Disciplinary Proceedings Auditors Act (Wet tuchtrechtspraak accountants), article 2:393(5) of the Dutch Civil Code and the Financial Supervision Funding Act (Wet bekostiging financieel toezicht). The Implementation Decree includes changes to the Audit Firms Supervision Decree (Besluit toezicht accountantsorganisaties) and the Audit Committee Decree (Besluit Audit Commissie). The new rules and regulations for audit committees are discussed below.

The Audit Directive and Audit Regulation tighten up the requirements with regard to the structure and duties of the audit committee, which should reinforce the independence and technical competence of the audit committee. Audit committees are not supervised by the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten - "AFM") directly, but their performance will be monitored by the AFM under the Regulation.

In the Netherlands, the new rules applicable to audit committees are included in the Decree Establishing Audit Committees. Under this Decree, public interest entities ("PIEs"), such as listed companies, non-listed banks and (certain) insurance companies, are required to have an audit committee. The Decree imposes, in line with the Directive, new requirements with respect to the composition of the audit committee. The committee members as a whole must have competence relevant to the sector in which the legal entity is operating. Instead of one member of the audit committee, the majority of the members, including the chairman, must be independent of the legal entity. It follows from the explanatory memorandum to the Implementation Decree that the independence requirements for the supervisory board in the Dutch Corporate Governance Code ("Code") can be followed in order to determine who is independent. In the explanatory notes the legislator refers to the 2008 Code, which is the designated code of conduct by Decree of 10 December 2009 (best practice provision III.2.2). At least one member of the audit committee must have competence in accounting and/or auditing. The chairman of the audit committee will be appointed by the supervisory board, or by the members of the management board that are not executive members, or the members of the audit committee.

As regards the allocation of duties of the audit committee, reference is no longer made to the provisions of the Code because the duties are now set out in the Decree Establishing Audit Committees as follows:

  • inform the management board or supervisory board of the outcome of the statutory audit and explain how the statutory audit contributed to the integrity of financial reporting and what the role of the audit committee was in that process;
  • submit recommendations or proposals to ensure the integrity of the financial reporting process; and
  • be responsible for the selection procedure of statutory auditor(s). The manner in which the audit committee must implement this procedure is set out in the Regulation.

The audit committee's existing duty to monitor the effectiveness of the internal systems is in line with the Directive limited to monitoring the effectiveness of such systems regarding the financial reporting. Under the Decree Establishing Audit Committees, the audit committee when performing its existing duty to monitor the audit of the (consolidated) annual accounts must also take into account the findings of the AFM in accordance with article 26(6) of the Regulation. Under this article of the Regulation the AFM assesses the design of the internal quality control system of the audit firms (article 48a of the Wta).

There is still an option for PIEs to have a body that performs equivalent functions to an audit committee (article 39(4) of the Audit Directive). The requirements on the composition of the audit committee apply mutatis mutandis to this body. The directors’ report must disclose which body carries out those functions and how that body is composed.

Team

Related news

03.04.2020 NL law
Volledig virtuele AVA of ledenvergadering wordt mogelijk; instellen van noodwet goedgekeurd door Ministerraad

Short Reads - Vandaag heeft de Ministerraad ingestemd met toezending naar de Raad van State van een noodwet. Deze noodwet zal het voor alle rechtspersonen mogelijk maken om een volledig virtuele algemene vergadering of ledenvergadering te houden. Nederland volgt daarmee andere Europese landen zoals Italië, Frankrijk, Duitsland en Luxemburg.

Read more

25.03.2020 NL law
Key considerations for management and owners of Dutch privately held companies in distress due to COVID-19

Short Reads - The COVID-19 pandemic has a significant and immediate adverse effect on many companies in different industries. Many PE portfolio companies are particularly vulnerable given the typical high leverage finance structure and inherent need to maintain cash flow. To meet these challenges and mitigate liability risks, management and owners may need to take clear and immediate action (and refrain from certain other actions) in the interest of all stakeholders. The following sets out some key legal guidelines for management and owners when dealing with a Dutch subsidiary in distress.

Read more

31.03.2020 NL law
How to meet (Dutch) substance requirements during the COVID-19 pandemic?

Short Reads - Measures taken by multiple jurisdictions in an attempt to stop the spread of the corona virus (COVID-19) affect many people and businesses. Organizing and attending physical board meetings in the Netherlands or elsewhere may be challenging in these times and this may affect a company’s (Dutch) tax position. Below we discuss the potential impact of the measures and provide some preliminary practical guidance.

Read more

23.03.2020 LU law
Luxembourg adopts measures to facilitate holding of meetings in companies and other legal entities during “Covid-19”

Short Reads - Luxembourg adopted a Grand-Ducal Regulation on March 20th, 2020 introducing emergency measures relating to the holding of meetings in companies and other legal entities. The relevant provisions, which are effective immediately, pertain to general meetings of shareholders and to other deliberating bodies of companies.

Read more

27.03.2020 NL law
Actuele ontwikkelingen rondom de AVA’s van beursvennootschappen en corona

Short Reads - Op 23 maart 2020 heeft het Nederlandse kabinet aanvullende overheidsmaatregelen genomen in het kader van de bestrijding van het coronavirus. Deze maatregelen zijn onder meer gericht op evenementen en samenkomsten. In een nieuwsbericht van het kabinet van 24 maart 2020 zijn deze maatregelen nader geduid (zie ook de Q&A die eveneens door het kabinet is gepubliceerd).

Read more

23.03.2020 NL law
Onzeker ondernemingsrecht – het coronavirus and beyond

Articles - It is a world of change in which we live, and a world of uncertainty”  Het bovenstaande citaat is van de Amerikaanse econoom Frank H. Knight en afkomstig uit zijn in 1921 verschenen boek.1 Knight beschrijft daarin wat het belang is van het concept “onzekerheid” in economische theorievorming. Onzekerheid, zo leert Knight ons, moet worden onderscheiden van risico.

Read more

This website uses cookies. Some of these cookies are essential for the technical functioning of our website and you cannot disable these cookies if you want to read our website. We also use functional cookies to ensure the website functions properly and analytical cookies to personalise content and to analyse our traffic. You can either accept or refuse these functional and analytical cookies.

Privacy – en cookieverklaring