This newsletter provides a status update on the most important (draft) legislative proposals in the field of Dutch company law and looks back at some of the legislation that entered into force in 2020.
Bill on the management and supervision of legal entities
The Management and Supervision of Legal Entities Act (Stb. 2020, 507) will enter into force on 1 July 2021. This act standardises the rules on the management and supervision of legal entities and will have consequences for foundations, associations, cooperatives and mutual insurance societies (OWM), amongst others. For example, associations and foundations will be able to establish a supervisory board, and the one-tier board model will be available to all legal entities. In addition, the act introduces more uniform conflict-of-interest rules, extends the liability rules for directors and supervisory board members of informal associations and non-commercial foundations and associations, and applies uniform requirements to provisions in the articles of association regarding the absence or inability to act of directors and supervisory board members. Moreover, multiple voting rights will be restricted and the grounds for the removal of directors and supervisory board members of foundations will be expanded. More information – including on the transitional rules – can be found in our newsletter of 12 November 2020.
Statutory cooling-off period for management of listed companies
The Upper House of the Dutch Parliament is expected to adopt shortly a bill on a cooling-off period for the management of listed companies (35 367). According to the bill, a listed company may impose a cooling-off period of up to 250 days in two cases, namely when management deems one of the following situations to be substantially contrary to the interests of the company and its affiliated undertakings:
- shareholders request consideration of a proposal to appoint, suspend or remove one or more directors or supervisory board members or to amend a provision of the articles of association to this effect; or
- a public offer for the company’s shares is announced or made without an agreement having been reached with the company on the offer
During the cooling-off period, management gathers information and must consult with shareholders representing at least 3% of the outstanding share capital, as well as with the company’s works council. The general meeting’s right to appoint, suspend or remove directors and supervisory board members (or to amend the relevant provisions of the articles of association) is suspended during the cooling-off period. Shareholders entitled to add items to the agenda can request a green light to end the cooling-off period. Only one cooling-off period can be running at any given time. Thus, if, for example, a request to remove a director or supervisory board member is submitted and shortly afterwards a hostile takeover bid is made, it is up to the company’s management to determine for which case the cooling-off period will be used. The bill does not specify a minimum time limit within which management must initiate the cooling-off period. While it is not yet known whether the bill will be considered contentious, for the time being entry into force on 1 March 2021 seems likely.
Bill on gender balance on management and supervisory boards
The Gender Balance on Management and Supervisory Boards Act (35 628) was submitted to the Lower House on 4 November 2020. The act provides for:
- a quota (at least 1/3rd men and 1/3rd women) for the supervisory board or non-executive directors of NVs and BVs listed on a regulated market in the Netherlands; and
- an appropriate and ambitious target for the supervisory board, the management board (board of directors) and sub-senior management of large NVs and BVs, with an obligation to draw up a plan and to report on this matter – in addition to the annual report – to the SER.
For large listed companies, the quota applies to the supervisory board (or non-executive directors) while the target applies to the management board (board of directors) and sub-senior management. The bill has been deemed urgent and uncontentious. Entry into force on 1 July 2021 appears feasible.
Bill on transparency in civil society organisations
On 23 November 2020, a bill on transparency in civil society organisations (35 646) was submitted to the Lower House. The results of a consultation on this bill were initially published on 22 December 2018, but the bill was subsequently substantially amended further to the opinion of the Council of State.
The bill allows mayors and the Public Prosecution Service to request and obtain information from civil society organisations about their foreign donations. Such a request for information may relate only to the geographic origin and extent of the foreign donation. More detailed information, including about the donor, can be requested but only if the donation is substantial and only if necessary. Furthermore, foundations will be required to file their balance sheet and statement of income and expenses with the trade register, although these documents will only be available to certain authorities. No date of entry into force has been proposed.
Bill on assessment of the economy and national security
On 8 September 2020, a draft legislative proposal on the Economic and National Security Assessment Act was submitted for consultation. The bill aims to protect national security by introducing a test for activities that lead to changes in control or influence over companies essential for vital processes or that possess sensitive technology. The bill specifies a cut-off date of 2 June 2020, meaning takeovers and investments occurring after that date can be tested retroactively. It was previously announced that entry into force would be possible in 2021, but given that the bill has not yet been submitted to the Lower House, entry into force in 2022 appears more likely.
Modernisation of partnerships
In early 2019, a draft bill on the modernisation of partnerships was submitted for consultation. Due to the large number of substantive responses as well as criticism on the lack of tax provisions and transitional rules, it was decided that a new consultation would take place. This should have occurred in autumn 2020 but has not yet taken place. We expect consultation to be held early this year, so that a bill could be submitted to the Lower House in 2022.
Bill modifying shareholder dispute resolution procedures and clarifying the standing requirements for inquiry proceedings
In late November 2019, a draft proposal to amend shareholder dispute resolution procedures and clarify the standing requirements for inquiry proceedings was submitted for consultation. The act contains the following proposals:
- Changes to shareholder dispute resolution: The grounds for expulsion and exit are broadened. The behaviour of a shareholder acting in another capacity (e.g. as a director) can also be taken into account by the court in expulsion proceedings. The shareholder exit procedure is simplified through application of the principles of reasonableness and fairness. In short, such a claim cannot be granted if the company or a fellow shareholder has made an irrevocable, unconditional and reasonable offer to acquire the shares, which is covered by sufficient safeguards.
- Clarification of the standing requirements for inquiry proceedings: A separate standing requirement for inquiry proceedings will be introduced for shareholders (and depositary receipt holders) of listed companies with issued share capital of less than €22.5 million. As a result, access to such proceedings cannot be hindered by having low nominal share capital. Shareholders representing (i) at least 1% of the issued capital or (ii) market capitalisation of at least €20 million will be able to request an inquiry. For shareholders of listed companies with issued share capital in excess of €22.5 million, the standing requirements remain unchanged.
While it is not yet known when a bill will be submitted to the Lower House, it is expected to be in the course of this year.
Bill on equal pay
On 7 March 2019, a private member’s bill on equal pay for women and men was submitted to the Lower House. Following the opinion of the Council of State, an amended bill (35 157) was filed on 5 October 2020. Employers with in general at least 250 employees will be obliged to obtain a certificate proving equal pay for equal work. In addition, employers with more than 50 employees will have to provide information in their annual report on differences in the remuneration of male and female employees. Unequal pay must be explained and accounted for. Furthermore, the annual report must indicate how the pay gap will be reduced. The proposal has been deemed uncontentious. In any case, the legislation will most likely not enter into force before 2022.
UBO register for trusts and similar legal arrangements
In addition to the UBO register for companies and other legal entities which entered into force in 2020 (see below), the Anti-Money Laundering Directive (Directive 2018/843) requires the introduction of a UBO register for trusts and similar legal arrangements. The Netherlands has only singled out mutual funds for this purpose. The deadline for implementation was 10 March 2020. In April 2020, a consultation was submitted and on 16 November 2020, a legislative proposal was filed with the advisory section of the Council of State. We expect a bill to be submitted to the Lower House of Parliament in 2021.
EU cross-border restructuring directive
The directive on cross-border conversions, mergers and divisions (Directive (EU) 2019/2121) entered into force on 1 January 2020 and must be transposed into national law by 31 January 2023. The new rules aim to make cross-border conversions, mergers and divisions easier. A legislative proposal is expected to be published for consultation later this year.
EU directive on the use of digital tools and processes in company law
The directive as regards the use of digital tools and processes in company law (Directive (EU) 2019/1151) entered into force on 1 August 2019 and must be implemented by 1 August 2021 (albeit with the possibility of an extension of up to one year for Member States experiencing particular difficulties in doing so). The most notable feature of this directive is that it provides for the possibility to incorporate BVs (and possibly NVs) online. We expect a bill to be published for consultation later this year.
BV with a social purpose
Back in 2018, an initiative note on undertakings with a social purpose was submitted to the Lower House. In early 2020, this initiative was revived and on 10 July 2020, it was reported that the Council of Ministers had approved a letter from the State Secretary for Economic Affairs to the Lower House, announcing the introduction of the so-called social BV, a new form of legal recognition for businesses with a social purpose. While a draft bill has not yet been submitted, consultation could take place in 2021.
LEGISLATION INTRODUCED IN 2020
Act on undesirable control of the telecommunications sector
On 1 October 2020, the Undesirable Control of the Telecommunications Sector Act (35 153) entered into force. This act gives the Minister for Economic Affairs the power to prohibit the acquisition or holding of a majority stake in a telecommunications company if such control would jeopardise the public interest. Acquisition of control occurs inter alia when a party obtains at least 30% of a company’s voting rights. A threat to the public interest will only be found if the controlling stake leads to the possibility to exert relevant influence in the telecommunications sector and if the acquirer is, for example, a state, entity or person suspected of having the intention to facilitate abuse. Relevant influence in the telecommunications sector refers inter alia to situations where abuse or sabotage of the telecommunications company over which control is held or acquired could lead to, for example, an unlawful breach of the confidentiality of communications or the disruption of Internet access or telephone service for a certain number of end-users.
Foreign Direct Investment Screening Act
On 4 December 2020, the Foreign Direct Investment Screening Act entered into force. This legislation was necessary to implement Regulation (EU) 2019/452, which entered into force on 10 April 2019 and has been directly applicable since 11 October 2020. Pursuant to the Regulation, investors outside the EU that wish to invest in the Netherlands as well as the companies in which they invest are required to provide certain information to the government in advance. The act lays down necessary measures to implement the Regulation, such as the establishment of a contact point and rules on the processing, collection and provision of information by the competent authority. The act does not provide for a new (additional) screening mechanism or an additional investment test. These are covered by a separate legislative proposal, discussed above. For more information on these subjects, please see our blog post.
UBO register for companies and other legal entities
On 8 July 2020, the UBO Registration Act (35 179) entered into force. The act originates in the Fourth and Fifth Anti-Money Laundering Directives and has resulted, amongst other things, in the introduction (as of 27 September 2020) of a UBO register with information on the ultimate beneficial owners of companies and other legal entities incorporated in the Netherlands. Effective 27 September 2020, newly established entities are required to provide information about their UBOs when registering with the trade register. Existing entities have 18 months, as from 27 September 2020, to register their UBOs, i.e. until 27 March 2022. The trade register has called on entities in writing to do so earlier, but most will adhere to the statutory deadline. More information can be found in our newsletter of 28 September 2020.
- Geert Raaijmakers, Partner, Amsterdam | Geert.Raaijmakers@nautadutilh.com
- Maarten Buma, Partner, Amsterdam | Maarten.Buma@nautadutilh.com
- Suzanne Rutten, Professional Support Lawyer, Amsterdam | Suzanne.Rutten@nautadutilh.com
Compliments of NautaDutilh – a member of the EACCNY.