The entry into effect of the 'Flex BV' Act in October 2012 brought about major changes in Dutch company law. On 1 January 2013 several other important laws will enter into effect. These are:
- the One-Tier Board Act;
- the Inquiry Proceedings Reform Act;
- the Top Managers in the Public and Semi-Public Sectors (Remuneration Standards) Act;
- the Financial Markets Amendment Act 2013.
In addition, the Corporate Governance Act has been approved by the upper house of the Dutch Parliament but is not expected to enter into effect until 1 July 2013.
Changes are also underway at European level. The European Commission recently launched the long-awaited Corporate Governance Action Plan, which announces EU initiatives in the area of company law for 2013.
This newsletter briefly outlines the changes. If you would like more detailed information, just click on the link to the NautaDutilh newsletter on the specific law in which you are interested.
One-Tier Board Act
The One-Tier Board Act and the accompanying Remedial Act will enter into effect on 1 January 2013. The main features of the new legislation are:
- the creation of a statutory basis for the one-tier board system;
- the imposition of limitations on the holding of multiple board memberships;
- amendment of the conflict of interest rules;
- the introduction of target figures for achieving gender diversity on management and supervisory boards;
- a change in the employment-law status of management board members of listed companies.
These features are explained further in our newsletter on this subject.
Inquiry Proceedings Reform Act
The Inquiry Proceedings Reform Act will also enter into effect on 1 January 2013. The main changes are:
- the criteria for initiating inquiry proceedings will be made stricter: shareholders of companies with an issued capital of more than EUR 22.5 million will be required to have a larger shareholding than is currently the case in order to qualify. This applies to both public limited liability companies (NVs) and private limited liability companies (BVs);
- companies and other legal entities will be allowed to request an inquiry into their own affairs;
- the rules on immediate measures will be supplemented;
- the procedural safeguards (due process protections) will be strengthened;
- the liability of investigators will be limited and additional rules on costs will apply.
See our newsletter on this subject for additional information.
Top Managers in the Public and Semi-Public Sectors (Remuneration Standards) Act
This Act contains rules relating to the remuneration of top managers in the public and semi-public sectors. The Act sets out three different regimes. The closer an institution is to the public sector, the stricter the applicable regime. The three regimes are as follows:
- remuneration ceiling applicable in the public sector and certain parts of the semi-public sector: remuneration of top managers is subject to a ceiling equal to 130% of a minister's salary (the 'Balkenende norm': presently € 187,340); severance pay is limited to one year's salary, subject to a maximum of € 75,000. In principle, bonuses are prohibited. The institutions falling under this regime include not only ministries, provinces and municipalities but also, for example, autonomous administrative bodies (private and public), educational institutions and housing associations;
- remuneration ceiling applicable to other – designated – parts of the semi-public sector: remuneration of top managers is subject to a ceiling set by the relevant minister based upon a proposal from or on behalf of the institutions in question. The ceiling may be higher than the ceiling referred to in the previous bullet point. Here too, severance pay is limited to one year's salary, subject to a maximum of € 75,000, and bonuses are in principle prohibited. At present, this regime is limited to health insurers;
- publication requirement applicable to institutions subject to either of the above regimes: all such institutions must annually publish the remuneration of all employees (by job level) who earn an amount in excess of the remuneration ceiling referred to in the first bullet point. In addition, the remuneration of each top manager must be published together with his/her name. This obligation can be made applicable to other designated institutions that are financed in whole or part by public funds.
The Act enters into effect on 1 January 2013 but contains transitional rules: remuneration agreements entered into before 1 January 2013 will be respected until 1 January 2017.
Financial Markets Amendment Act 2013
The Financial Markets Amendment Act 2013 and the Financial Markets Decree 2013 will also enter into effect on 1 January 2013. The changes are as follows:
- restriction of the exemption (under the public offer rules) from the mandatory offer obligation where 'predominant control' is acquired through a voluntary offer: the exemption will henceforth only apply if, pursuant to the voluntary offer, the offeror can exercise more than 50% (instead of 30%) of the voting rights in the general meeting of shareholders of the relevant listed company;
- a new obligation to make a public announcement in the event of, among other things, the acquisition or loss of 'predominant control' (30%) of a listed company;
- a new obligation for a shareholder in a listed company to disclose his/its full economic interest (long and short) when exercising the right to have items put on the agenda of a general meeting. This rule will probably enter into effect on 1 July 2013, together with the Corporate Governance Act.
In addition, the Act and Decree contain new rules for financial enterprises, for example with respect to the banker's oath, the product approval process and the ban on inducements.
See our newsletter on this subject for additional information.
Corporate Governance Act
The Corporate Governance Act was approved by the upper house of the Dutch Parliament on 13 November 2012. It is not expected to enter into effect until 1 July 2013 because the necessary implementing legislation is not yet ready. The Act contains the following changes to the corporate governance rules:
- the threshold for the right of shareholders of both listed and unlisted NVs to have items placed on the agenda of the general meeting of shareholders will be raised from 1% to 3%;
- a new lower minimum threshold of 3% will be introduced for the disclosure of capital interests and/or voting rights in a listed company;
- besides having to disclose capital interests and/or voting rights, investors in listed companies will be required to disclose gross short positions, as from a minimum threshold of 3%;
- an arrangement will be introduced enabling listed companies to trace the identity of their 'ultimate investors'.
The changes are explained further in our newsletter on this subject.
Short Selling Regulation
An obligation to disclose short positions is set out not only in the Corporate Governance Act but also in the EU Regulation on Short Selling (236/2012). This Regulation has direct effect in the Netherlands and has been in force since 1 November 2012. The disclosure rules under the Regulation differ from those under the Corporate Governance Act. Firstly, the Regulation relates to net short positions. Secondly, different thresholds apply.
Under the Regulation, the obligation to disclose net short positions in companies whose shares have been admitted to trading on a regulated market or multilateral trading facility in the EU is as follows:
- net short positions as from 0.2% of the issued share capital of the relevant company and each 0.1% above must be notified to the AFM (or to the competent regulatory authority in the relevant EU Member State). Such notifications remain confidential;
- notifications as from 0.5% of the issued share capital of the relevant company and each 0.1% above are included in the AFM register (or the register of the competent regulatory authority in the relevant EU Member State) and are therefore public.
For an explanation by the AFM, see: http://www.afm.nl/nl/consumenten/actueel/nieuws/2012/okt/short-selling-regels-01112011.aspx.
Corporate Governance Action Plan
On 12 December 2012 the European Commission published a new action plan for 2013. In that plan the Commission announced its intention to introduce initiatives aimed at:
- Increasing the level of transparency between companies and shareholders in order to improve corporate governance. This will include in particular:
- Increased disclosure requirements as regards board diversity and risk management policies;
- Improving corporate governance reporting, in particular as regards the quality of the explanation in the case of deviations from corporate governance codes;
- Better identification of shareholders by listed companies;
- Strengthening transparency rules for institutional investors on their voting and engagement policies.
- Encouraging and facilitating long-term shareholder engagement, such as:
- More transparency on remuneration policies and individual remuneration of directors, as well as a shareholders' right to vote on remuneration policy and the remuneration report;
- Better shareholders' oversight on related party transactions, i.e. dealings between the company and its directors or controlling shareholders;
- Creating appropriate operational rules for proxy advisors (i.e. firms providing services to shareholders, notably voting advice), especially as regards transparency and preventing conflicts of interests;
- Clarification of the 'acting in concert' concept to make shareholder cooperation on corporate governance issues easier;
- Investigating whether employee share ownership can be encouraged.
- Supporting cross-border activities of European businesses:
- Further investigation on a possible initiative on the cross-border transfer of seats for companies;
- Possible amendments to rules on cross-border mergers and divisions;
- Follow-up of the European Private Company statute proposal with a view to enhancing cross-border opportunities for SMEs;
- An information campaign on the European Company/European Cooperative Society Statute;
- Targeted measures on groups of companies, i.e. recognition of the concept of the interest of the group and more transparency regarding the group structure.
In addition, the action plan foresees the merging of all major company law directives into a single instrument. This would make EU company law more accessible, and reduce the risk of future inconsistencies.
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.