Netherlands: Corporate Group Decision Making And Employee Participation

Last Updated: 2 March 2018
Article by Eugenie Nunes

In the management structure of global companies, the de facto management of a Dutch subsidiary may, in practice, be in the hands of the (ultimate) shareholder. This business practice is often part of a matrix organization, in which the decision-making process is determined by the specific business activity, irrespective of location or country. Certain decisions made by a shareholder, even if they are not made as such by the management of the subsidiary for which a works council has been set up, may nevertheless be deemed to have been made by that subsidiary. A clear understanding of the effective decision-making process in global organizations—and the effect of that process on requirements in the field of employee participation—is critical for steering that process in the right legal direction.

'Attribution' and 'co-management'

In Dutch employee consultation processes, the concepts of "attribution" and "co management" are distinguished in connection with intergroup relations.

The concept of attribution does not directly relate to the employee participation/works council structure at a Dutch company. Rather, attribution of shareholders' decisions relates to the management of the subsidiary and the de facto interference by the shareholder in the Dutch business activities.

The concept of attribution applies to a situation in which the decision that has been made by a group company interferes with the business of the Dutch subsidiary for which the works council has been set up in such a way that—for the purpose of employee consultation rights—it is deemed to have been made by the subsidiary. In that case, the subsidiary is required under the Dutch Works Councils Act to present the proposed decision to the works council for its advice or consent.

The concept of co-management applies to a situation in which the group company has, in practice, a systematic (ongoing) influence on the decision-making process regarding the business of the Dutch subsidiary such that it can be deemed to co-manage the company. In the case of co-management, the works council may claim its right to be informed and its right to be consulted at both the co-managing company and the Dutch company. Notably, case law on this concept often relates to circumstances in which the Dutch management has been involved in the decision-making process to a certain extent. But legal authors generally assume that the works council can claim its right to be consulted even if the Dutch management was not involved in the decision-making process. In that case, the shareholder and the Dutch subsidiary must jointly present the proposed decision to the works council for advice or consent.

Intergroup relations

In business practice, no agreements between works councils and the management of shareholders of the related companies create the right of advice or consent for the works council regarding decisions that are made or proposed by the shareholder, but are nevertheless attributed to the subsidiary. It is possible to enter into a discussion with the shareholder in an attempt to reach an agreement within the meaning of Section 32 of the Works Councils Act and to agree that certain proposed decisions will be presented to the works council for (i) its advice (Section 25 of the Works Councils Act) or (ii) its consent (Section 27 of the Works Councils Act). If so, the shareholders agree that certain decisions they make which affect the Dutch subsidiaries will be attributed to the Dutch subsidiaries and will be subject to the Works Councils Act.

Works councils' rights in the case of attribution or co-management

Case law shows that, in practice, works councils do claim attribution of shareholders' decisions to the company for which they were set up—and therefore the right of advice or consent.

Claiming this right starts with a letter to the shareholder that the works council is aware of a proposed decision that, in its view, is subject to its advice or consent. The works council may state that its advice must be (or should have been) requested at such a time that it can substantively influence the decision that will ultimately be made. If so, the request for advice must include: (i) the reasons for the intended decision; (ii) the anticipated consequences for the employees of the Dutch business; and (iii) the proposed measures in light of those consequences. Before the works council gives its advice, at least one consultation meeting must take place. After the works council's advice has been given, the board may make a final decision. The board must notify the works council of its decision in writing and, if applicable, must explain why it has not followed all or part of the works council's advice.

If the shareholder refuses to observe these rights, the works council may take legal action, in which case the following applies.

If the decision is made without the works council's advice being requested in accordance with Section 25 of the Works Councils Act, the works council may inform the shareholder in writing that:

  • The shareholder's proposed decision and its imposition on the Dutch subsidiary, being subject to the works council's advice, cannot be implemented.
  • If the shareholder denies the works council its rights, the works council has one month from the day it was informed, or otherwise became aware, of the decision to apply to the court for injunctive relief.
  • The court procedure implies that the works council may appeal the board's decision to the Enterprise Court at the Amsterdam Court of Appeal.
  • The Enterprise Court then determines whether the shareholder's decision is indeed attributable to the Dutch company; or whether co-management by a group company is involved, and whether the decision is manifestly unreasonable. A distinction is generally made between procedural requirements and the merits of the decision itself. The procedural requirements require strict compliance. With regard to the merits of the decision, due to the managerial prerogative, an injunction will follow only if the decision is manifestly unreasonable.
  • If the decision is considered manifestly unreasonable, the Enterprise Court may order the company to withdraw its decision in whole or in part or, in the event of noncompliance, may prohibit the company from implementing its decision and impose a penalty. In the case of co-management, the Dutch company and the co-managing group company are both subject to the court order.

If a decision subject to Section 27 of the Works Council Act and taken without the consent of the works council, the decision is null and void if the works council invokes this nullity within one month after being notified or otherwise made aware of such decision.


Under Dutch law, the consequences of noncompliance with the rules on employee participation may be drastic and may include the obligation to withdraw a company's decision, in whole or in part, or a ban on implementing such a decision—quite unique outcomes in the global legal landscape. It is worth keeping a close eye on the decision-making process in group structures and, at an early stage, addressing any discussions related to employee participation. Transparency and effective communication are key. The general counsel will play an important role in steering this process in the right legal direction.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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