Einde inhoudsopgave
Corporate Social Responsibility (IVOR nr. 77) 2010/5.2.4
5.2.4 The Dutch Corporate Governance Code — ' in-control'statement
Mr. T.E. Lambooy, datum 17-11-2010
- Datum
17-11-2010
- Auteur
Mr. T.E. Lambooy
- JCDI
JCDI:ADS371857:1
- Vakgebied(en)
Ondernemingsrecht (V)
Voetnoten
Voetnoten
Frijns Code, note 19 supra, Preamble, p. 5: 'whose shares or depositary receipts for shares have been admitted to listing on a stock exchange, or more specifically to trading on a regulated market or a comparable system', and large companies with a registered office in the Netherlands (i.e. balance sheet value > 500 million euro) 'whose shares or depositary receipts for shares have been admitted to trading on a multilateral trading facility or a comparable system'.
By Royal Decree of 10 December 2009, published on 21 December 2009 (Bulletin of Acts and Decrees 2009/545), the Frijns Code was designated in accordance with article 2:391(5) DCC. The Tabaksblat Code was designated by the Decree of 27 December 2004, Staatsblad [Official Gazette], 2004, 747; which was amended by the Decree of 20 March 2009, Staatsblad [Official Gazette], 2009, 154, also incorporating Council Directive (EC) 2006/46 amending Council Directives 78/660/EEC on the annual accounts of certain types of companies, 83/349/EEC on consolidated accounts, 86/635/EEC on the annual accounts and consolidated accounts of banks and other financial institutions and 91/674/EEC on the annual accounts and consolidated accounts of insurance undertakings, 2006, OJ L 224/1-7. According to article 2a of the 20 March 2009 Decree, the corporate governance statement may also be provided on the company's website provided that the company explicitly refers in its annual report to the electronically available statement; an electronic corporate governance statement will be legally regarded as being part of the annual report.
Frijns Code, supra note 19, Principles and and best practice provisions II. 1.2 and III.1.6.
Frijns Code, supra note 19, Principle and best practice provision II.1.5. The suggested recommendation by Ms Barbara Biers to delete the in-control statement from the Tabaksblat Code has not been followed when amending the Frijns Code; see: B. Biers, 'Het risico van de risicobeheersing en interne controlesystemen: de 'in control' verklaring van de Code Tabaksblat' [The risk of risk management and internal control systems: the in control statement of the Tabaksblat Code], in Ondernemingsrecht [Company Law Review], 16,2005, pp. 539-545.
Explanatory comments to the Frijns Code, supra note 19, p. 39. Compare the Combined Code on Corporate Governance 2008 (UK), which provided its own guidelines on how to assess internal control by referring to the Turnbull Guidance - Institute of Chartered accountants in England and Wales, 'Guidance on Iinternal Control', 1999, and the UK Financial Reporting Council 'Revised Guidance for Directors on the Combined Code 2005', at: http://www.frc.org.uk/documents/pagemanager/frc/Revised%20Turnbull%20Guidance%20October%202005.pdf, accessed on 14 June 2010.
Article 2:393(3) DCC. See also Article 3(c) of the Decree of 20 March 2009, supra note 38, pp. 3 and 6; C. de Groot, Corporate Governance as a Limited Legal Concept (Alphen aan de Rijn: Kluwer Law International 2009), p. 119, referring to B.J.C.M. van Beurden, 'De raad van bestuur verklaart: de onderneming is 'in control'' [The board declares: the company is 'in control']', Tijdschrift voor Ondernemingsbestuur [Review for Corporate Governance], 2004, pp. 259-164, argues that the Dutch provisions on risk reporting in the Frijns Code go further than parallel provisions in SOX and the UK Combined Code. However, both De Groot and Van Beurden referred to the Tabaksblat Code. As has been explained above, the Frijns Code imposes less strict language as regards the scope of the management board's in-control statement.
Decree of 20 March 2009, supra note 38, p. 8.
As of 2009, the Frijns Code applies to listed companies with a registered office in the Netherlands (see section 3.3 supra).1The Frijns Code replaced the Tabaksblat Code.2 The content has not been substantially amended, with a few exceptions. E.g. one amendment concerns the inclusion of CSR in a directors' responsibilities and a recommendation to report on CSR in the company's annual report (see chapter 3).3 Another amendment is that inclusion of 'forward-looking information' in the directors' in-control statement is no longer required. However, the Frijns Code does require a more detailed description of a company's internal risk management and control systems in the annual report.
The Frijns Code requires that the directors include an 'in-control statement' in their annual report (best practice provision II.1.5). Compared with the Tabaksblat Code, the scope of the Frijns Code management board in-control statement is less strict.4 There is no longer a requirement to state that the internal risk management and control systems are 'adequate and effective' without any qualification. The current text is more in line with the wording used in the SEC Rule on Internal Control (see section 5.2.3 supra). The Frijns Code states that the management board shall declare:
that the internal risk management and control systems provide a reasonable assurance that the financial reporting does not contain any errors of material importance and that the risk management and control systems worked properly in the year under review.
The directors must also substantiate this. In the annual report, the management board shall report on the main risks related to the company's strategy. It shall describe the design and operation of the internal risk management and of the control systems during the financial year (best practice provision II.1.4). In doing so, the board shall describe any major shortcomings, any significant changes that have been made to the systems, and any major improvements that are planned. They shall confirm that this has been discussed with the supervisory board and the audit committee; i.e. a committee which is supposed to supervise the functioning of the systems (best practice provision III.5.4a, V.2 and V.4; and compare articles 2:141(2) and 2:251 DCC pursuant to which the executive directors must inform the non-executive directors about the management and control systems in writing). The explanatory comments to the Frijns Code establish a link with the COSO framework by stating:
it would be logical for the management board to indicate in the description of the design and effectiveness of the internal risk management and control systems what framework or criteria (e.g. the COSO framework for internal control) it used in assessing the internal risk management and control system.5
Contrary to SOX, neither the directors' in-control statement itself nor the contents of the Dutch annual report need to be certified (attested) by a registered public accounting firm.6 However, the accountants do need to check whether the annual report was drawn up in accordance with the legal requirements (i.e.: does it contain all the required subjects?). They must also check whether the annual report and the in-control statement are consistent with the annual accounts (no inconsistencies).7 Contrary to the SEC Rule on Internal Control and its commentaries, neither the Frijns Code nor the explanatory comments contain an explicit reference to anti-corruption legislation or to corporate in-house anti-corruption programmes.
Finally, it is notable that the best practice provision II.3.1(c) states that an executive director shall "not provide unjustified advantages to third parties to the detriment of the company." Although this provision is placed under the heading of Principle II.3 regarding a conflict of interest between directors and the company, it can certainly contribute to avoiding corrupt practices within a company.