The One-Tier Board (IVOR nr. 85) 2012/4.4.2.3:4.4.2.3 One-tier boards under present law

The One-Tier Board (IVOR nr. 85) 2012/4.4.2.3

4.4.2.3 One-tier boards under present law

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

As mentioned above, a Dutch company that is not a structure regime company does not have to have a supervisory board. These companies can have a single or "monistic" board. The basic idea is that there are only managing board members. This legal possibility has given creative enterprises and lawyers the possibility to have one-tier boards with day-to-day, "inside", directors and "outside" directors, who only have an advisory and monitoring role. Generally, the Dutch one-tier boards under present law have "inside" directors who have the right to represent and sign for the company — and are registered as such in the trade register — and "outside" directors who cannot represent the company and have more of a monitoring role. The articles of association (in Dutch "statuten") describe this and can also give further colour to the roles of the different directors. A board regulation can give further detail. There are quite a number of private — not public — companies that operate in this creative one-tier board fashion.

The main concern of "outside" directors in one-tier boards under present and future law is that their liability is increased when they become non-executive directors in a one-tier board instead of supervisory directors in a two-tier system.1 The possibility of exoneration or disculpation, because of their "outside role", is deemed not to be sufficiently certain.2 The answer of the Minister of Safety and Justice to the Senate repeats that while there is joint and several liability for all directors,3 a director is only liable in case of serious blame depending on all facts as confirmed in the decision Staleman v. Van de Ven, HR 10/1/1997, NJ 1997, 360.4 Because there are not many one-tier boards, this aspect whether a non-executive director would be excused to a lesser extent than a supervisory director has not been tested in court and creates insecurity.5

Examples of well-known big companies with a one-tier board under present law are:

(1) Unilever NV, which was not a Structure Regime company, because it benefitted from the holding company exception, had a board of "inside" directors, who could appoint "advisory" members to the board, who did meet with the "inside" directors in one board, but had no vote or veto and were not registered in the trade register as directors. In 2004 Unilever NV, referring to the Code Tabaksblat, which mentioned the possibility of having a one-tier board, and to a European Directive on the European Company, which gives the altematives of a oneand two-tier board, changed its board structure. Now the board has 2 executive directors (CEO and CFO) and 12 non-executive directors. One of the non-executives is chairman. This is very close to the UK model. In fact, the directors of Unilever NV are the same persons as the directors of Unilever Plc.6

(2) Reed Elsevier NV uses the "combined board" model. It is a structure regime company with a management and a supervisory board. This looks like a two-tier board system. However, it has been creative and has made use of the Dutch stipulation that the joint meeting of the management board and supervisory board is the "combined board" and is a legal organ, just like the legal organs the management board, the supervisory board and the shareholders meeting are.7 The combined board meets often. All managing board members and supervisory board members are present. Actually this is not very different from the usual practice in a Netherlands supervisory board where members usually meet in the presence of the management board members. But in most companies the supervisory directors discuss decisions that have been planned by the management board members. In most companies the supervisory board members have a monitoring role. In Reed Elsevier NV the arrangements are different. For a long list of important decisions a positive decision of the combined board is necessary. So in practice the combined board, as a whole, makes all the important decisions and is involved in the development of the decisions as well. This special aspect of Reed Elsevier NV is laid down in a "goveming agreement" and special stipulations in the "statuten" that describe the powers of the "combined board".8 The members of these boards of Reed Elsevier NV are the same persons — plus one extra — as the ones on the one-tier board of Reed Elsevier Plc. It is probable that the one extra person of the Reed Elsevier NV supervisory board member is the member nominated by the works council.

One could conclude that the Netherlands needs no new Act for One-tier Boards, because practice creates enough possibilities to be flexible. Although there are examples as mentioned above, there are only a few listed companies with a onetier board: in 2003 only 7 one-tier board companies were listed on Euronext, of which some are foreign and in 2008 only 10 on Euronext, but the increase is due to 3 new listings of foreign companies.9

One could also argue that the Act is unnecessary, because supervisory directors are becoming so active that the Dutch already have a one-and-a-half-tier board in which the tasks of supervisory directors have increased, without any structural change.

Professor Sven Dumoulin, then in-house counsel of Unilver NV and now of Akzo Nobel NV, made clear that there are some reasons why a simple short act would be useful. He does so by identifying 18 differences between supervisory directors and non-executive directors in companies, such as Unilever NV.10 His article has been inspirational for our minister of justice, when preparing a Draft Act or Bill on One-tier Boards.

Deze functie is alleen te gebruiken als je bent ingelogd.