4.5.15 Formal documentation of functions in two-tier and one-tier boards

Because the roles and functions of the management board and the supervisory board in a two-tier system are described in the DCC and also in various articles of association, there has been little demand in practice for documentation on the functioning, powers and standards of management and supervisory board members in the Netherlands.1

At present, articles of association often list the decisions of the management board that need the prior approval of the supervisory board. Sometimes the articles of association state that the supervisory board can give instructions to the management board about general policy matters. The articles of association can also describe which director is authorised to sign on behalf of the company and whether two signatures are necessary and, if so, whose signatures. All of this should be public and is indeed public because the articles of association are filed in the trade register at the Chamber of Commerce. Article 2.129/239(a) DCC (Act) provides that the duties of board members should be described in the articles of association. This is a good addition because it will increase transparency.

It is, of course, important to record all the further details in board bye-laws and letters of appointment, as is the practice in the US and the UK.2 The detailed letters of appointment for NEDs in the UK are particularly good examples to follow. This is also of importance in connection with possible exculpation as described below in sub-section 4.7.1.