NEW LEGISLATION

Bill on management and supervision – one-tier board

The one-tier board bill has been approved by the First Chamber of Parliament and is expected to take effect on 1 January 2012. The Bill enables NVs and BVs to opt for a one-tier or two-tier board. In addition, the Bill amends the conflict of interest rules and changes the legal position of directors at listed companies. It also limits the number of non-executive positions held by managing or supervisory directors. The Bill will not apply to foundations with primarily religious, charitable or cultural objectives. The Minister of Justice will evaluate the new management and supervision provisions thee years after their entry into force.

Legal Alert

Implementation of EU directive on holdings in the financial sector - Minister's role minimised

A bill implementing the EU directive on holdings in the financial sector (Antonveneta Directive) took effect on 7 May 2011. The directive is aimed at ensuring that EU member states apply the same test when assessing takeovers of or participations in financial institutions. The Dutch Central Bank (DNB) will assess foreign takeovers of Dutch banks on the basis of a number of prudential criteria, including solvency and liquidity. The role of the Minister of Finance in the assessment process will be minimised.

Abolition of 'statement of no objection' requirement for incorporation of companies

From 1 July 2011, a statement of no objection will no longer be required for the incorporation of a Dutch company or the amendment of its articles. The current system of preventive supervision has proven to be ineffective in countering misuse, and places an administrative burden on incorporators. It will be replaced by a system of continuous monitoring by the Ministry of Justice to prevent misuse of legal entities.

PENDING BILLS

Bill on claw back of bonuses

Discussions in the Second Chamber about a bill on the revision and claw back of bonuses have led to the following amendments:

  • The right to claw back and revise bonuses is no longer limited to variable payments but extends to "non-fixed" remuneration. This means that incidental payments of a fixed amount, such as guaranteed bonuses, may be subject to claw back or revision. The amendment also applies to severance payments agreed on between the company and a departing director.
  • The duty to revise "non-fixed" remuneration to an appropriate level if payment would be unreasonable and unfair has been extended: not only public offers but also, for example, legal mergers can result in a change of control and lead to revision of a "non-fixed" remuneration.

Bill on Corporate Governance  

The Minister of Finance has answered a number of questions raised during the debate in parliament on the Corporate Governance Bill. These included questions about a proposed obligation for shareholders to notify the AFM of their intentions with regard to the company. The Minister has responded that:

  • if a shareholder notifies the AFM that he or she has no objections to the company's strategy, and makes a subsequent takeover bid for the company without the strategy being changed at the same time, the shareholder will have met the notification requirement. If a change of strategy is implemented three months later, the shareholder must notify the AFM again if his views have changed as a result of the change of strategy.
  • if a shareholder notifies the AFM that he or she has no objections to the company's strategy, and makes a subsequent takeover bid for the company while the strategy of the company is being changed at the same time, the shareholder has not met the obligation to immediately notify the AFM of his changed viewpoint with regard to the company's strategy.

Bill on changes to corporate inquiry procedure

A bill that was recently approved by the Cabinet and is now awaiting the Council of State's advice,  proposes a number of changes to corporate inquiry proceedings (enquête) before the Enterprise Chamber in Amsterdam.

The proposed changes are:

  • Where the company that forms the subject of the proposed inquiry has an issued share capital of EUR 22.5 million or more, the shareholder filing the request must hold at least 1% of the issued share capital or have an interest in the company that represents a market value of at least EUR 20 million
  • The company will have the right to request an inquiry into the policy of the shareholders' meeting or the conduct of individual shareholders
  • Procedural improvements will be made regarding the immediate measures that the Enterprise Chamber can order and the investigation phase

Bill introducing suitability test and reinforcing cooperation between supervisors

The Minister of Finance has submitted a bill to parliament which introduces a suitability test for managing and supervisory directors of financial undertakings. The bill also contains provisions on the cooperation between the Dutch financial market supervisors (DNB and the AFM) in assessing the integrity and suitability of managing and supervisory directors of financial undertakings. To improve cooperation, a measure is proposed to the effect that where the supervisors fail to reach a unanimous view on the integrity and suitability of a director, the negative view will prevail.

Bill on notification of cash settled instruments

A bill has been submitted introducing a notification requirement under the Financial Markets Supervision Acts for certain cash settled instruments. Existing notification requirements include shares and/or votes which are at the disposal of others. The bill would extend the notification requirement to holders of financial instruments where the increase in value of the instruments is partly dependent on the increase in value of the (underlying) shares or related dividends. Examples are contracts for difference and total equity return swaps. The use of these types of instrument can cause the holder to have an influence on the way in which the rights attached to the shares are exercised.  

Consultation on intervention in financial undertakings

A bill introducing special measures with regard to financial undertakings (Intervention Bill) has been published for consultation. The bill would extend government powers to intervene in financial undertakings which are in serious difficulties. Under the bill the Dutch Central Bank (DNB) could draw up a plan for the transfer of financial undertakings which are experiencing irreversible financial problems. DNB could submit the transfer plan to the courts and request an order to implement the transfer scheme. In addition, if a serious and immediate risk to the stability of the financial system is imminent, the Minister of Finance could:

  1. intervene in the internal governance mechanism of a financial undertaking
  2. as a last resort, take over ownership of a financial undertaking

The consultation period closed on 6 May 2011.

Possible legislation on loyalty rights

The Minister of Justice has sent a letter to parliament in which he describes the features of possible statutory provisions regarding long-term shareholding and loyalty rights. These provisions would allow listed companies to award extra voting rights or dividend to shareholders who have held their shares for a longer period, as specified in the companys articles of association. The loyalty rights would lapse on transfer of the shares.

The Minister wants to exchange views with experts on this issue in the near future.

CASE LAW

Duty to report price-sensitive information in view of increased trading

In a recent decision, the District Court in Utrecht ordered the Dutch company Super de Boer to compensate shareholders because it had failed to make price-sensitive information public in a timely manner. According to the District Court, the prejudiced shareholders sold their shares on the basis of incomplete information during the period that Super de Boer and Jumbo were negotiating about a takeover. When, during that period, the volume of trading in Super de Boer shares increased significantly, the information should have been published.

Supreme Court allows dilution of majority stake in Inter Access inquiry proceedings

In the corporate inquiry (enquête) procedure of Inter Access the Supreme Court recently confirmed a decision by the Enterprise Chamber where immediate measures were ordered which led to the dilution of a majority shareholder's stake. The managing board of the company was allowed to issue shares without a resolution of the AGM.

Given Inter Access's serious financial situation, the Enterprise Chamber had issued an immediate measure that allowed Inter Access's managing board to issue shares to a minority shareholder who was willing to provide financial backing that would rescue the company.

In its decision, the Supreme Court ruled that if the need for the immediate measures is evident and a less drastic measure would not be effective, the Enterprise Chamber may set aside mandatory company law provisions.

OTHER

AFM imposes fine on CEO for disclosure of inside information during a closed meeting

The AFM has imposed a EUR 200,000 fine on the CEO of Schuitema for disclosing inside information in violation of the Financial Markets Supervision Act. At the company's corporate day, the CEO had made various statements which, in the AFM's view, related to inside information. The AFM dismissed the CEO's arguments in defence – i.e. that the statements did not contain concrete information and had been made during a closed meeting – and rejected the request to reduce the amount of the fine.

EUROPE

European Commission consults public on European corporate governance framework

The European Commission has published a green paper launching a public consultation on the effectiveness of the existing European corporate governance framework. The consultation aims to conduct a debate on ways to improve the existing framework. The green paper - The EU Corporate Governance Framework - focuses on listed companies and on the following issues:

  • board of directors – areas of scrutiny include the managing board's and supervisory board's effective functioning, diversity of expertise and background, and transparency of the remuneration policy
  • shareholders – the main focus is on improving shareholders' engagement

The consultation is open until 22 July 2011. The Commission has agreed to issue a feedback statement in Autumn 2011, summarising the results of the consultation.

EC consultation EU corporate governance framework

Report of the Reflection Group on the future of European Company Law

On 16 and 17 May, the future of European company law was discussed at a conference organised by the European Commission in Brussels. A Reflection Group, set up by the Commission in 2010, and comprised of company law experts from various member states, presented its report on the future of EU Company Law at the conference.

Conference on European Company Law: The way forward
Report of the Reflection Group

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