4.4.2.4 Act on One-tier Boards

On 8 December 2009 the second house of parliament, "Tweede Kamer", and subsequently the first house of parliament, "Eerste Kamer" on 6 June 2011 accepted the One-tier Board Act, which is called "Wijziging van Boek 2 van het Burgerlijk Wetboek in verband met de aanpassing van regels over bestuur en toezicht in naamloze en besloten vennootschappen", freely translated as "changes of Book 2 of DCC in connection with directing and supervising NVs and BVs", hereafter referred to as the "Act" or "the One-tier Board Act".

The reasons for the Dutch government to introduce this Act were the desire for more flexibility of Dutch company law, adaptability to foreign business practices and the European Law on the European Company.1 An important ground was the admission of the fact that the majority of shareholders of Dutch listed companies are from the US and the UK. An important reason of the Act is the improvement of the investment climate.2 Here we see a continuation of the Dutch trader's tradition adapting to foreign commercial opportunities.

The English summarized translation of the Act and the text of the Act in Dutch are attached hereto as Annexes 6.4 and 6.5.

The Act proposes that as an alternative to the two-tier system a one-tier system can be laid down in the articles of association by describing the different functions of the members of the board of a one-tier company (executive and non-executive members). The tasks of monitoring and nominating board members, the remuneration of the executive members and the position of the chairman can be fulfilled only by the non-executive directors. Under the Act, in companies with a one-tier structure the positions of CEO and chairman must be separate.3 The special two-tier board rules which are mandatory in the Netherlands for large companies falling under the structure regime with substantial powers for supervisory board members and the way they are nominated and appointed are applicable mutatis mutandis to the non-executive directors of a one-tier board of a Structure Regime company. This last point has the support of the unions.4

When the Tweede Kamer accepted the Bill on 8 December 2009 a few last minute amendments were added upon the proposal of members of parliament who wanted to "score" popular points. They are the non-cumulation article (not more than 5 supervisory or non-executive directorships per person, where being chairman counts as double) and the diversity article (at least 30% ladies in the board as a comply or explain basis). These two points are discussed below at the end of 4.4.3. Also an amendment was added to the effect that a managing director may not have an employment contract, thereby limiting their right to demand large amounts in indemnities if they are dismissed. At first this seemed to cause administrative problems because of extra social security formalities for non-employees who work fulltime. This problem is being solved by the Ministry of Social Affairs, which has determined that non-employee fulltime workers fall under the social premium and pension regulations as if they were employees.5

The Act was pending in the Senate for one and a half year. The main point of discussion was the non-cumulative article. The Act was accepted on 6 June 2011 and will probably become effective on 1 July 2012.

A point that is rarely discussed is that the Act on Financial Supervision (Wft) determines explicitly in article 3.19 that the baraks and insurance companies must have a supervisory board of at least three members and that the Netherlands Bank may only give dispensation for cases of a missing supervisory director or so. Theoretically one could argue that the Netherlands Bank could give dispensation for a one-tier board with three monitoring non-executive directors, but because the Ministry of Finance knowingly maintained article 3.19 Wft6 I am of the view that the Netherlands Bank cannot do this in practice. The maintaining of article 3.19 Wft is remarkable, because on 5 December 2008 the then Minister of Finance publicly declared that he would prefer the financial institutions to have one-tier boards.7 There are a number of other relevant people who think that banks should have a one-tier board, because of the requirement for banks to have knowledgeable and well involved outside directors.

For this reason I propose that this article 3.19 Wft should be changed to the effect that banks and insurance companies should at least have a supervisory board with 3 members or a one-tier board with at least 3 non-executive board members.