3.6.2 New revisions of the Dutch Company Code impacting corporate governance

In December 2009, the Dutch Lower House adopted various important proposals to amend corporate law.1 The Bills have been submitted to the Upper House and are expected to be adopted in the course of 2010. The subjects concerned the restoration of the balance of power in companies limited by shares, improving the integrity of legal entities, modernisation and creating flexibility in the structure of Dutch companies and the introduction of a works council's right to present a position in the general meeting of shareholders with regard to certain resolutions.

One Bill introduces the permissibility of a ' one-tier board', i.e. one corporate body that includes executive directors and non-executive directors.2 Many Anglo-American legal systems allow this model. To a certain extent the role of the non-executive director will be comparable to the role of supervisory directors in the Dutch two-tier system, although it will exceed the duty of supervision and advising, i.e. responsibilities will also encompass directors' responsibility. In a one-tier board, key board resolutions3 of a large ' structure' company will have to be approved by the majority of the non-executive directors. Conflict of interest situations, including in the event of a merger, acquisition or public offer, are addressed. The Bill also prescribes a limitation of the number of board positions that can be held by one person, which aligns with provision III.3.4 of the Frijns Code. Furthermore, as announced in section 3.4 supra, the Bill determines that the division of seats between men and women within the company must be balanced.4 This provision will be applicable to all large privately and publicly held Dutch companies (BVs and NVs), both in a one-tier system and in a two-tier system.

Another Bill provides for a change in the provisions regarding the convening and registration of shareholders' meetings, thereby implementing the European Directive concerning the exercising of certain rights of shareholders in listed companies.5 This Directive is aimed at strengthening the crossborder exercise of shareholders' rights in listed companies including voting and proxy voting. A request made by shareholders to the management board of a publicly held Dutch company (NV) to place an item on the agenda (see supra section 3.2) may no longer be refused based on the argument that weighty interests of the company dictate otherwise.6 The request, however, must be substantiated. In addition, the item to be put on the agenda can be tested against the article 2:8 DCC standard of' reasonableness and fairness'. This matches the Frijns Code's approach as set out above in section 3.5.

Worthy of note is the Bill that introduces certain new rights for the works councils of Dutch public limited companies.7 The Bill stipulates that a works council can express its opinion about (i) key board resolutions as referred to in article 2:107a DCC submitted for shareholder approval, (ii) resolutions to appoint, suspend and dismiss managing directors and supervisory directors, and (iii) the remuneration policy, i.e. concerning management salaries and bonuses. The Bill also entails the right for the works council to communicate its view regarding any proposal for the appointment of supervisory board members.8 This applies to works councils of holding companies and of subsidiary companies (provided that the majority of the employees of the company and the group companies work within the Netherlands). The new rights are in addition to the works council's advisory rights pursuant to articles 25 and 30 Dutch Works Council Act and are meant to reinforce codetermination at such a time that the works council's view can play a role in the decision-making process in the general meeting. If the works council does not express a view or if the works council is not granted the right to speak in the general meeting, the validity of any shareholder resolution adopted will not be affected and neither do any sanctions apply.