Corporate Governance 2024 Comparisons

The BV and the NV

The corporate entities that are frequently used for commercial activities in the Netherlands are:

• the private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid or BV); and
• the public company with limited liability (naamloze vennootschap or NV).

The BV and the NV are legal persons under Dutch law. Their equity is divided into shares that are owned by shareholders.

The BV is the most frequently used type of corporate entity in the Netherlands. In 2024, 1,156,074 BVs and 3,133 NVs were registered in the Netherlands. Most Dutch listed companies are NVs, but it is also possible to list a BV.

The following legal entities also have legal personality in the Netherlands:

• an association (vereniging);
• a co-operative (coöperatie);
• a mutual insurance association (onderlinge waarborgmaatschappij); and
• a foundation (stichting).

Book 2 of the Dutch Civil Code applies to all the legal entities listed above. It does not apply to entities without legal personality, which include:

• a general partnership (vennootschap onder firma);
• a limited partnership (commanditaire vennootschap);
• a professional partnership (maatschap); and
• a sole trader (eenmanszaak).

Unless otherwise stated, the answers in this chapter will focus on BVs and NVs.

General

Several acts (wetten) are sources of corporate governance requirements for BVs and NVs. The Netherlands is a member of the European Union (EU), which means that for a large part, Dutch corporate law is based on European regulations, which have been implemented in several relevant Dutch acts.

Dutch Civil Code (Burgerlijk Wetboek)

Book 2 of the Dutch Civil Code is the primary source of corporate law in the Netherlands. Provisions regarding the following are relevant to the corporate governance of NVs and BVs:

• the various corporate bodies within a company;
• the duties, powers and liabilities of these corporate bodies;
• more specific rules on representation and directors' conflicts of interest; and
• financial reporting and disclosure.

Financial Supervision Act (FSA) (Wet op het financieel toezicht)

In addition, Chapter 5 of the FSA provides for rules on the supervision of the business conduct of Dutch listed companies. It contains rules on the disclosure of major holdings, financial reporting, the prevention of market abuse and the obligations of institutional investors. The Dutch Authority for the Financial Markets (Autoriteit Financiële Markten – AFM) supervises compliance with these rules.

Dutch Corporate Governance Code (CG Code)

The CG Code applies to:

• all companies with registered offices in the Netherlands whose shares or depositary receipts for shares have been admitted to trading on a regulated market or a comparable system; and
• all large companies with registered offices in the Netherlands (with a balance sheet value of more than EUR500 million) whose shares or depositary receipts for shares have been admitted to trading on a multilateral trading facility or a comparable system (Dutch listed companies).

The purpose of the CG Code is to facilitate a sound and transparent system of checks and balances of Dutch companies that come within scope of the CG Code.

The CG Code contains principles and best practice provisions regulating the relationship between the management board, the supervisory board (or the one-tier board as the case may be) and the general meeting/shareholders of Dutch listed companies. The principles and best practice provisions aim to define responsibilities for sustainable long-term value creation, risk control, effective management and supervision, remuneration, and the relationship with shareholders (including the general meeting of shareholders) and stakeholders.

The broad outline of the company’s corporate governance is set out each year in a separate chapter of the management report or published on the company’s website. Here the company explicitly states the extent to which it complies with the principles and best practice provisions stipulated in the CG Code and, where it does not comply, why and to what extent it departs from them. The CG Code was most recently revised in 2022. The CG Code 2022 came into force on 1 January 2023. Dutch listed companies reported on the GC Code 2022 for the first time in 2024 in the management report for financial year 2023.

Articles of Association

The articles of association of a BV/NV may also provide for specific corporate governance rules within the boundaries of Book 2 of the Dutch Civil Code. They may require, for example, a specific quorum or majority for certain resolutions of the general meeting or of the supervisory board or management board.

General

In addition to the applicable provisions of Book 2 of the Dutch Civil Code, which also contain various specific rules for Dutch listed companies, the following regulations apply to Dutch listed companies. The requirements of Acts are mandatory: the requirements (principles and best practice provisions) of the CG Code are based on the “comply or explain” principle.

Financial Supervision Act (FSA) (Wet op het financieel toezicht)

See 1.2 Sources of Corporate Governance Requirements.

CG Code

See 1.2 Sources of Corporate Governance Requirements.

Sector-specific legislation

Sector-specific legislation is in place for certain entities, such as financial institutions. The healthcare sector, for example, has a Healthcare Governance Code.

Sustainability Legislation Initiatives

European background

In December 2019, the European Commission introduced the European Green Deal, the purpose of which is to transform the EU into a modern, resource-efficient and competitive economy. Several legislative initiatives have since been taken to transform the EU into a more climate-neutral and green economy, including the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).

CSRD

This Directive came into force on 6 January 2023 and must be implemented by member states by July 2024. The implementation of the CSRD in the Netherlands takes place through various laws and decrees. Companies must report on sustainability, covering environmental, social and governance (ESG) issues. See 2.2 Environmental, Social and Governance (ESG) Considerations for more information on the CSRD.

CSDDD

On 23 February 2022, the European Commission published the proposal for the CSDDD, which aims to harmonise existing EU member state laws on supply chain due diligence, obligations regarding actual and potential human rights adverse impacts and environmental adverse impacts with respect to their own operations and those of their subsidiaries and other entities in their value chain.

The European Council adopted its position on the CSDDD on 1 December 2022, proposing quite a few changes to the Commission's proposal. On 1 June 2023, the European Parliament voted on the CSDDD. The European Parliament's proposal on some points goes further than those proposed by the European Commission and the European Council. After various intensive negotiations between the European Commission, the European Parliament and the European Council on the final text of the CSDDD, the European Council formally approved the finalised text of the CSDDD on 24 May 2024. The CSDDD will enter into force 20 days after its publication in the Official Journal of the EU. Member States will have two years to implement the directive into national laws and regulations. The CSDDD includes a phased implementation for in-scope companies.

CG Code

The main theme of the CG Code 2022 is sustainable long-term value creation. See also the following sections concerning various topics of corporate governance in relation to Dutch listed companies.

Act on Growth Quota and Target Ratios (Diversity Act)

On 1 January 2022, the Diversity Act (Wet ingroeiquotum en streefcijfers) entered into force. It seeks to ensure a better balance between the number of men and women on the management board, the supervisory board and the senior management of large companies (grote vennootschappen), and introduces a statutory diversity quota for supervisory boards of Dutch listed companies (diversity quota). In addition, large companies (grote vennootschappen) (whether listed or not) must set more appropriate and ambitious target ratios, draw up an action plan and report on this in the management report and to the Social and Economic Council (Sociaal Economische Raad) (SER) within ten months of the end of the financial year.

The definition of a large company under the Diversity Act

For the purpose of the Diversity Act, a large company (grote vennootschap) is a company that meets at least two of the following requirements on two consecutive balance sheet dates:

• the value of the assets exceeds EUR25 million;
• the net turnover for the financial year exceeds EUR50 million; and
• the average number of employees is 250 or higher.

It is not sufficient to test the size of its own assets, net sales and employees; data from group companies that should be included in the consolidation should be included in the test. This applies even if no consolidated financial statements need to be prepared.

The first two criteria above were increased as of 23 March 2024 (before 23 March 2024 the first criterion was EUR20 million and the second criterion was EUR40 million). The new criteria apply as of financial years beginning on or after 1 January 2024, where NVs and BVs may choose to apply the new criteria for financial year 2023 as well.

Non-Financial Reporting Directive (NFRD)

Dutch large listed companies must report on policies and performance on issues such as environmental pollution. In the Netherlands, fewer than 100 companies must report non-financial information.

A company is considered “large” for the purpose of the NFRD if two of the following three criteria are fulfilled:

• a balance sheet total of more than EUR25 million;
• a net turnover of more than EUR50 million; and
• more than 500 employees.

Recently, the first two criteria were increased (from EUR20 to EUR25 (first criterion) and EUR40 to EUR50 (second criterion)). See 2.1 Hot Topics in Corporate Governance. 

Corporate Sustainability Reporting Directive

The CSRD revises and strengthens rules introduced by the NFRD. It will ensure that companies provide reliable, consistent and comparable sustainability information for investors and other stakeholders.

Reporting must be done in accordance with the European Sustainability Reporting Standards developed by the European Financial Reporting Advisory Group.

The CSRD will be applicable for financial years starting on or after:

• 1 January 2024 for Dutch large listed companies (see 2.2 Environmental, Social and Governance (ESG) Considerations) that already have to report in order to conform with the NFRD;
• 1 January 2025 for large companies (grote vennootschappen) (see 2.1 Hot Topics in Corporate Governance); and
• 1 January 2026 for listed small and medium entities (SMEs), which will be subject to a mitigated reporting regime.

The CSRD requires an external auditor to provide assurance on sustainability reporting. Such assurance can initially be limited, but more reasoned assurance will be required later. The CSRD requires companies to publish their sustainability reports in a dedicated section of their management reports.

Corporate Sustainability Due Diligence Directive

Under the CSDDD, companies will need to adopt due diligence policies to identify, prevent or mitigate – and ultimately end – any adverse impact of their operations on human rights, the environment and good corporate governance (including corruption). Companies also need to have a plan to ensure that their business strategy is compatible with limiting global warming to 1.5°C in line with the Paris Agreement.

The CSDDD will apply not only to (very) large European companies (whether in certain sectors or not) but also to certain non-EU entities.

The CSDDD has not yet been published in the Official Journal of the EU. The new obligations are expected to apply as of 2026.

Principal Bodies of BVs and NVs

All private companies with limited liability (BVs) and public companies with limited liability (NVs) have a management board and a general meeting. BVs and NVs may opt for a supervisory board or for non-executives in the board, resulting in the following three possible governance structures:

• only a management board is in place, with executive directors;
• both a management board and a supervisory board are in place (a two-tier structure); or
• a one-tier management board is in place, consisting of executive directors and non-executive directors (one-tier board structure).

Large Company Regime (Structuurregime)

A supervisory board (or a one-tier board consisting of executive and non-executive directors) is mandatory if a company has filed a statement with the Dutch Trade Register for two consecutive years, stating that it qualifies as a “large” company under the statutory two-tier rules (structuurvennootschap). This supervisory board must consist of three or more directors (or three or more non-executive directors in the case of a one-tier board).

See 4.1 Board Structure for more information on the one-tier board.

The main characteristics of a structuurvennootschap are:

• in principle, the general meeting and the works council (ondernemingsraad) can significantly influence the composition of the supervisory board;
• the supervisory board, rather than the general meeting, is authorised to appoint the directors of the management board and to remove them from office – the supervisory board lacks this authority if the so-called mitigated large company regime applies; and
• certain important resolutions of the management board require the prior approval of the supervisory board (or the majority of the non-executive directors in the case of a one-tier board).

The large company regime (structuurregime) is applicable to a Dutch company that has filed a registration with the Dutch Trade Register, stating that from its adopted annual accounts it appears that:

• its issued capital and reserves amount to not less than EUR16 million;
• it has set up a works council on the grounds of a statutory requirement; and
• as a rule, it employs at least 100 employees in the Netherlands.

It must also have kept this mandatory registration with the Dutch Trade Register for three consecutive years. Upon the expiration of this three-year term, the company’s articles of association must be amended to incorporate certain mandatory provisions relating to the large company regime apply.

For the second and third requirements mentioned above, the dependent companies (afhankelijke maatschappijen) of the potential large company are also taken into account. A company qualifies as a dependent company of another legal entity if such other entity provides at least 50% of the capital of such company.

A company that meets the criteria set out above is required to file a registration with the Dutch Trade Register within two months after the adoption or approval of the company’s annual accounts by the general meeting. A repeated annual registration for consecutive years is not required.

Exemptions

The large company regime does not apply to certain companies, such as:

• companies that (virtually) exclusively operate as a holding or finance company for their group companies, provided the majority of the employees of the group are employed outside the Netherlands; and
• companies of which at least half of the share capital is held by a company that applies the large company regime.

Mitigated Large Company Regime (Beperkt Structuurregime)

Certain structuurvennootschappen are allowed to apply the mitigated large company regime (beperkt structuurregime) instead of the full regime. This applies, for example, to structuurvennootschappen in which at least 50% of the share capital is held by a legal entity (either by itself or by its dependent company) that employs the majority of its employees outside the Netherlands. Under the mitigated large company regime, the general meeting appoints the managing directors (as opposed to the supervisory board which is entitled to appoint the managing directors in case of the full large company regime). For more information, see 4.4 Appointment and Removal of Directors/Officers.

Voluntary Application of the (Full or Mitigated) Large Company Regime

A company may also voluntarily apply the provisions of the full or mitigated large company regime if it (or a dependent company) has established a works council to which the provisions of the Works Council Act (Wet op de Ondernemingsraden) apply.

The Management Board

The primary responsibility of the management board is to manage the company and its business. In the performance of its duties, the management board is collectively responsible for:

• formulating and determining the policy and strategy;
• achieving the legal entity’s objects; and
• the day-to-day management of the company and its business.

The management board must carry out its duties in line with the company’s objectives, which are included in the company’s articles of association.

Depending on the articles of association, the management board may resolve on:

• the issuance of shares (if this authority is granted to the management board by the general meeting);
• reservations from the profits;
• (approval of) (interim) distributions; and
• the right of initiative for certain resolutions of the general meeting, such as shares issuances, amendments to the company’s articles of association, legal mergers, demergers, dissolution and conversion.

The Supervisory Board

If installed, the supervisory board supervises and advises the management board on the general course of affairs of the company and the business affiliated with it.

General Meeting – Shareholders

In principle, the general meeting may resolve on the following:

• the appointment (including remuneration and, in the case of a one-tier board, designating whether a person is appointed as an executive or non-executive director), suspension and dismissal of managing directors and supervisory directors (see 3.1 Bodies or Functions Involved in Governance and Management regarding the deviating provisions applicable to companies subject to the full or mitigated large company regime);
• any increase (including the issuance of shares) or decrease of share capital;
• the adoption of the annual accounts;
• distributions;
• amendments to the company’s articles of association, covering legal mergers, demergers, dissolution and conversion; and
• the appointment of the auditor.

The general meeting is entitled to receive information from the Management Board.

The articles of association may provide that certain management board resolutions are or can be made subject to the approval of the general meeting or supervisory board.

For the NV, the approval of the general meeting is required for resolutions of the management board concerning a major change in the identity or character of the company or business.

Listed Company

General meetings of a listed company hold an advisory vote on the remuneration report and adopt the remuneration policy for the management board and supervisory board every four years. The resolution to adopt the remuneration policy requires a 75% majority of the votes validly cast, unless the articles of association explicitly provide otherwise.

Management Board

The management board has collective responsibility. If collegial governance is in place, it is possible to make a division of tasks. The responsibility for fulfilling a particular board task, as part of the board policy, always remains with the entire board.

Each managing director has one vote. The articles of association may provide that a director has more than one vote, but one director cannot have more votes than the other directors collectively.

Dutch law does not include quorum requirements (the articles of association may provide otherwise). The management board adopts resolutions by simple majority of the votes validly cast (the articles of association may provide otherwise). Meeting and decision-making rules can be included in the articles of association and elaborated on in the regulations of the management board. The management board adopts resolutions inside a meeting; resolutions outside a meeting are allowed, depending on the articles of association.

Supervisory Board

The characteristics of the collective responsibility of the management board and the decision-making process as described above are also applicable to the supervisory board.

Shareholders Meeting

The general meeting of a BV/NV is led by a chair, who is responsible for the meeting order; often the chair of the supervisory board is the chair of the general meeting.

Every shareholder of a BV/NV has the right to attend the general meeting, speak at it and exercise voting rights, either in person or by written proxy.

A BV may have non-voting shares; shareholders with non-voting shares cannot vote but do have the right to attend the general meeting.

Managing directors and supervisory directors have an advisory vote to the general meeting.

Management Board

The management board has collective responsibility. If collegial governance is in place, it is possible to make a division of tasks. The responsibility for fulfilling a particular board task, as part of the board policy, always remains with the entire board.

Each managing director has one vote. The articles of association may provide that a director has more than one vote, but one director cannot have more votes than the other directors collectively.

Dutch law does not include quorum requirements (the articles of association may provide otherwise). The management board adopts resolutions by simple majority of the votes validly cast (the articles of association may provide otherwise). Meeting and decision-making rules can be included in the articles of association and elaborated on in the regulations of the management board. The management board adopts resolutions inside a meeting; resolutions outside a meeting are allowed, depending on the articles of association.

Supervisory Board

The characteristics of the collective responsibility of the management board and the decision-making process as described above are also applicable to the supervisory board.

Shareholders Meeting

The general meeting of a BV/NV is led by a chair, who is responsible for the meeting order; often the chair of the supervisory board is the chair of the general meeting.

Every shareholder of a BV/NV has the right to attend the general meeting, speak at it and exercise voting rights, either in person or by written proxy.

A BV may have non-voting shares; shareholders with non-voting shares cannot vote but do have the right to attend the general meeting.

Managing directors and supervisory directors have an advisory vote to the general meeting.

Collective Responsibility

The management board of a legal entity is charged with the management of the legal entity and its affiliated business. Specific tasks may be expressly attributed or delegated to an individual managing director or pursuant to the articles of association. The management board is collectively responsible for resolutions, even resolutions made by individual board directors.

Taking into account the general duties mentioned above, the specific details of the management board’s role depend on several factors, such as the size and nature of the legal entity’s activities.

The responsibilities of the individual board directors of Dutch companies within the scope of the CG Code are often set out in charters of the management board.

Also, the supervisory board has collective responsibility.

Chairperson

Neither Book 2 of the Dutch Civil Code nor the CG Code stipulates who appoints the chairman of the management board of the supervisory board of an NV/BV. The chair of a one-tier board must be a non-executive director.

Additional Requirements for Dutch Listed Companies Following From the CG Code

A supervisory board of a Dutch listed company appoints a vice chairperson. One of the directors of the supervisory board must be a financial expert (this is mandatory law, see 4.3 Board Composition Requirements/Recommendations). The audit committee and the remuneration committee should not be chaired by the chairperson of the supervisory board, nor by a former managing director of the company.

General Composition

A board must have at least the following number of members:

• One member:
1. a management board: being a legal person or individual; and
2. a supervisory board: being an individual.
• Two members:
1. one-tier board:
1. one executive member; being a legal person or an individual; and
2. one non-executive member, who must be an individual.

The articles of association can limit the circle of persons eligible for appointment as supervisory director or managing director by setting requirements that directors must meet. The quality requirements set out in the articles of association may be set aside by a resolution of the general meeting with two thirds of the votes cast, representing more than one half of the issued share capital.

Dutch Companies Within Scope of the CG Code

According to the CG Code each supervisory director and each managing director should have the specific expertise required for the fulfilment of their duties. Each supervisory director should be capable of assessing the broad outline of the overall management. The requirement that the supervisory board has financial expertise is enshrined in law. Pursuant to the EU Statutory Audits Directive 2006/43/EC, at least one member of the audit committee must have expertise in the preparation and auditing of annual accounts. This provision has been implemented in Dutch legislation and is applicable to public interest entities (such as listed companies, banks and (certain) insurer companies).

Diversity

Each year, large companies (grote vennootschappen) (see 2.1 Hot Topics in Corporate Governance) must set appropriate and ambitious gender diversity targets for the management and supervisory boards and senior management.

Gender diversity – supervisory boards of Dutch companies within scope of the CG Code listed on Euronext Amsterdam

Supervisory boards of Dutch companies listed on Euronext Amsterdam (both NVs and BVs) are subject to a diversity quota of at least one-third male and one-third female directors. If the supervisory board does not meet this diversity quota, any appointment that does not balance the distribution is void, leaving the relevant vacancy open. Every listed company must take the diversity quota into account in every appointment or reappointment of a supervisory director. The same applies to non-executive directors in the case of a one-tier board.

Additional diversity requirements for Dutch companies within scope of the CG Code

The management board, the supervisory board and the executive committee (if any) should be composed in such a manner as to ensure a degree of diversity appropriate to the company with regard to expertise, experience, competencies, other personal qualities, sex or gender identity, age, nationality, and cultural or other background.

See 4.2 Roles of Board Members regarding the composition of the committees of the supervisory board of a listed company.

Reporting requirements on diversity

Large companies (grote vennootschappen) (see 2.1 Hot Topics in Corporate Governance) must report on the following in their management report:

• the current male/female ratio;
• the target ratios;
• the action plan; and
• the objectives achieved.

In addition, pursuant to the Diversity Act, large companies (grote vennootschappen) (see 2.1 Hot Topics in Corporate Governance)must set more appropriate and ambitious target ratios and draw up an action plan. Every year, the progress with the obligations under the Diversity Act must be reported to the Social and Economic Council (SER), within ten months of the end of the financial year. The basic principle is that what must be reported in the management report must also be reported to the SER. To this end, the SER has developed a diversity portal. Because large companies (grote vennootschappen) are required to report via this portal, it is possible to monitor how these companies satisfy their obligations and how they perform relative to others. Companies listed on Euronext Amsterdam do not have to report on the supervisory board (or on the non-executive directors on the one-tier board) in the management report, because they must already comply with the diversity quota.

Reports to the SER were made for the first time within ten months of the end of FY 2022. On 29 January 2024, the SER published the results for financial year 2022 through the diversity portal (dataverkenner).

Restrictions on Number of Positions of Management and Supervisory Directors

Book 2 of the Dutch Civil Code requires a maximum number of supervisory positions that each managing director or supervisory director is allowed to hold at Dutch large companies (grote vennootschappen) (see 2.1 Hot Topics in Corporate Governance) and Dutch large foundations.

In principle, a managing director may:

• hold a maximum of two positions as a supervisory director in addition to their management board position; and
• not be the chairperson of a supervisory board or of a one-tier board.

A supervisory director may hold a total of five supervisory positions. The position as chairperson of a supervisory board or one-tier board counts twice.

Under the CG Code, the supervisory board’s approval is required if a managing director of the company intends to accept a supervisory board membership elsewhere.

Appointment of Directors

General rules for appointment of managing and supervisory directors of a BV/NV

The first appointment of supervisory directors (if applicable) and of managing directors is included in the notarial deed of incorporation of the NV/BV. After the incorporation of the NV/BV, the general meeting appoints the managing directors and supervisory directors.

The articles of association may provide that the appointment of a managing director or supervisory director by the general meeting must be based on a binding nomination. In that case, only the nominated person may be appointed as director. The binding nature of the nomination can be removed by a qualified majority resolution of the general meeting.

With respect to supervisory directors, the articles of association may provide that a maximum of one third of the supervisory directors may be appointed by third parties.

Specific rules for appointment of managing and supervisory directors of a BV

The articles of association may provide that managing directors and supervisory directors are appointed by a meeting of holders of shares of a certain class or type.

Specific rules for appointment of directors of a BV/NV subject to the large company regime (structuurregime)

The supervisory board appoints the managing directors (or the non-executive directors appoint the executive directors in the case of a one-tier board), unless the mitigated large company regime applies, in which case the general meeting appoints the managing (or executive) directors.

The general meeting appoints a supervisory director (or the non-executive directors, in the case of a one-tier board) following a special procedure, including a nomination right of the supervisory board (or non-executive directors); such nomination takes into account the (enhanced) right of recommendation of the works council.

Removal of Directors

Removal of managing directors

Managing directors of a BV/NV may be suspended and dismissed at any time by the person/body authorised to appoint them. The articles of association of a BV may also grant the power of dismissal to another corporate body. The supervisory board may suspend managing directors at any time, unless the articles of association provide otherwise. The managing directors of a structuurvennootschap may be suspended and dismissed only by the supervisory board.

Removal of supervisory directors

Supervisory directors of a BV/NV may be suspended and removed by the person/body authorised to appoint them. The general meeting of a BV that is not authorised to appoint may nevertheless be granted the power of removal and suspension in the articles of association.

Removal of supervisory directors of a company subject to the large company regime (structuurvennootschap)

Each supervisory director may be:

• suspended by the supervisory board; and
• removed by the Enterprise Chamber of the Amsterdam Court of Appeal on account of:
1. neglect of their duties;
2. other serious reasons; or
3. a drastic change in circumstances based on which their continuation as a director of the supervisory board cannot reasonably be required from the company.

The request may be submitted by the company, represented for this purpose by the supervisory board, and also by a representative appointed for this purpose by the general meeting or by the works council.

Independence of Supervisory Directors

Book 2 of the Dutch Civil Code contains no general provisions on the independence of the supervisory board and individual supervisory directors of a BV/NV. However, it is generally accepted that the supervisory board of a BV/NV should, in principle, be sufficiently independent in relation to the company and its stakeholders.

“Large” companies Under the Statutory Two-Tier Rules (Structuurvennootschap) – Composition of Supervisory Board

The supervisory board of a structuurvennootschap must be properly composed. Employees and union representatives cannot be supervisory directors.

Independence Requirements for Supervisory Directors of a Dutch Listed Company Following the CG Code

The following applies under the CG Code:

• all but one of the supervisory directors of Dutch listed companies must be independent, as described in the CG Code;
• less than half of the total number of supervisory directors can be “dependent” in the sense that they can own a block of shares in the company totalling at least 10%, or can be a managing director or supervisory director of a legal entity with that shareholding; and
• the chair of the supervisory board may not be a former managing director of the company and must be independent.

Potential Conflicts of Interest

A managing director or supervisory director may not participate in deliberations and decision-making if they have a direct or indirect personal interest that conflicts with the interests of the company. If a managing director or supervisory director nevertheless participates in the deliberations or decision-making, the management board or the supervisory board resolution becomes voidable.

Any conflict of interest has an impact on internal decision-making only. This means that directors with a conflict of interest remain authorised to represent the company. There is, however, a liability risk.

Consequences of a conflict of interest of management or supervisory directors

If no management board resolution can be adopted as a result, the resolution may be adopted by the supervisory board. If there is no supervisory board, the resolution may be adopted by the general meeting, unless the articles of association provide otherwise. If all the supervisory directors have a conflict of interest, the resolution is adopted by the general meeting, unless the company’s articles of association provide otherwise.

Based on case law, a supervisory director has a duty to provide full transparency about possible conflicts of interest, and to keep conflicting interests separate from the interests of the company. A similar provision applies in case of a conflict of interest of one or more supervisory directors.

Stricter conflict of interest rules apply to Dutch companies within scope of the CG Code

The CG Code stipulates that any form of conflict of interest between the company and the managing directors or supervisory directors must be prevented, and that adequate measures should be taken to avoid conflicts of interest.

The entire management board of the company is collectively responsible for the policy, strategy and day-to-day management of the company, which includes:

• the management of the company (subject to any limitations in the company’s articles of association);
• keeping proper company books and records;
• preparing financial reports and publishing annual accounts in time;
• exercising management control (managing the company and its business, determining its general policy and co-ordinating its organisation, including that of the group);
• exercising financial control (managing the company’s assets, controlling the flow of funds, administering the company's financial condition); and
• exercising control of the company’s juridical acts (to ensure regulatory compliance and compliance with the company’s articles of association, and to fulfil the duty of care towards third parties, by ensuring that the company observes the legal relationships entered into with the third parties).

In the performance of their duties, directors of all boards must be guided by the best interests of the company and the business affiliated with it. This is generally determined primarily by promoting the continued success of this business (bestendig succes van de onderneming). The Dutch Supreme Court added that, in discharging their duties, directors should also – partly based on the principle of reasonableness and fairness – exercise due care with regard to the interests of all those involved in the company and its business, and that this duty of care may require directors, in serving the company’s interests, to ensure that this does not unduly or disproportionately harm the interests of those involved.

Directors should also keep in mind that the legal entity has an independent interest in ensuring that legal and statutory norms or norms arising in part from reasonableness and fairness, including procedural norms necessary for proper decision-making, have been or are properly observed. This implies taking into account the interests of all the stakeholders, including shareholders, employees, creditors and other relevant stakeholders.

In addition, companies, corporate bodies and directors have a duty to act towards each other and other corporate bodies in accordance with the principles of reasonableness and fairness.

General

As mentioned in 4.6 Legal Duties of Directors/Officers, according to Dutch corporate law, all management and supervisory directors must act in the interest of the company and the business affiliated with it. The interest of the company is generally determined primarily by promoting the continued success of this business (bestendig succes van de onderneming). The Dutch Supreme Court added that, in discharging their duties, directors should also – partly based on the principle of reasonableness and fairness – exercise due care with regard to the interests of all those involved in the company and its business.

The management board of a BV/NV is accountable both internally and externally for the fulfilment of its duties and the exercise of the powers arising from the management task. Within the company, the management board has an accountability obligation towards:

• the general meeting;
1. by preparing the annual accounts for shareholders;
2. by publishing a management report; and
3. by providing the general meeting with all requested information, unless this would be contrary to an overriding interest of the company;
• the supervisory board that supervises the management board; and
• the works council.

Milieudefensie/Shell Case

The ruling of the District Court of The Hague of 26 May 2021 is relevant in this respect. An alliance of associations and foundations, together with over 17,000 individual claimants, brought a case against Royal Dutch Shell (RDS) as the top holding company of the Shell group, alleging that RDS had an obligation to contribute to the prevention of dangerous climate change through its corporate policies for the Shell companies.

The court found that, under Dutch law, RDS owed an unwritten standard of care to Dutch residents to reduce CO2 emissions of the Shell group’s activities by net 45% by the end of 2030, relative to 2019. In doing so, the court took into account that there is widely supported international consensus that human rights protect against the consequences of dangerous climate change, and that companies must respect human rights. The court also found that RDS’ policies, intentions and ambitions were incompatible with this reduction obligation. Therefore, the court ordered RDS to comply. This is an obligation of result for the Shell group itself and a significant best-efforts obligation with regard to the Shell group’s business relations and end-users.

An appeal is pending before the Court of Appeal of The Hague.

Dutch Companies Within Scope of the CG Code

According to the CG Code, the management board must pay attention to the interests of stakeholders when developing a view on sustainable long-term value creation by the company and its affiliated business, and formulate a corresponding strategy.

The CG Code describes stakeholders as groups and individuals that, directly or indirectly, influence – or are or may be influenced by – the attainment of the company’s objectives: employees, shareholders and other lenders, suppliers, customers and other stakeholders.

General

In general, managing directors of a BV or NV are not liable for the obligations of the company they are managing. Directors have considerable liberty to act as they deem fit, but must properly perform their duties towards the company. They are jointly and severally liable for damage suffered if the management board performs its duties improperly (onbehoorlijke taakvervulling), based on the management board’s collective responsibility. A distinction is made between the internal and external liability of directors: internal liability is the liability of directors towards the company, while external liability is their liability towards third parties.

Internal Liability

The company may hold the managing directors liable for damage suffered by the company on the basis of company law or tort law.

Internal liability based on company law and tort law

To establish liability in the event of the improper performance of duties (onbehoorlijke taakvervulling), it must be proven that the managing director acted seriously culpable (ernstig verwijtbaar). If a managing director acts in breach of statutory provisions or in breach of the articles of association, they are deemed to have acted seriously culpable.

This gives rise to improper management, unless the contrary is proved by the managing director. In principle, if one managing director is in breach, all the managing directors are jointly and severally liable, due to their collective liability. An individual managing director can be exonerated in the event that, also in view of the duties assigned to others, he does not bear any serious blame and he has not been negligent in taking measures to avert the consequences of improper management. Supervisory directors may also be held liable for improper supervision. In addition to liability for mismanagement, liability for damages may also be based on tort law (onrechtmatige daad). This concerns the liability of each director individually and not the collective liability of the board.

In an insolvency situation, the trustee may sue the directors on behalf of the company.

External Liability

Personal liability of a managing director towards third parties may arise if the managing director commits a wrongful act in their capacity as a director, or in the event of the bankruptcy of the company.

Tort law

In a situation in which the company is liable for damages based on non-fulfilment of contractual or statutory obligations or a wrongful act, a managing director may in some cases also be held personally liable for the damages. A managing director is personally liable only if they bear serious personal blame (ernstig persoonlijk verwijt).

Serious personal blame on the part of a managing director generally exists if:

• the managing director knows or should have known that the company cannot fulfil the obligations under the agreement and nevertheless enters into an agreement on behalf of the company and knows and should have known that the company offers no recourse; and
• the managing director causes or allows the legal entity to fail to fulfil an existing obligation and offers no recourse.

A managing director may be personally liable in bankruptcy.

In a bankruptcy in which any claim remains unpaid, a bankruptcy trustee may hold directors liable for manifestly improper management (kennelijk onbehoorlijk bestuur) that was an important cause of the bankruptcy.

Manifestly improper management is established if:

• the books and records (administratie) were improperly kept and the corresponding books, documents and other data carriers were not kept in such a way that the rights and obligations of the legal entity can be known at all times; or
• the company has failed to fulfil its duty to publish its annual accounts.

In these situations, it is assumed that manifestly improper management was an important cause of the bankruptcy.

If a bankruptcy trustee’s claim is successful, each managing director is jointly and severally liable in relation to the bankrupt estate for the deficit in the bankruptcy, being the amount of the liabilities to the extent that these cannot be satisfied by the liquidation of the other assets.

Individual directors can be exonerated if they can demonstrate that they cannot be held liable for the manifestly improper management and that they did not fail to take measures to mitigate the consequences of the manifestly improper management.

Other Bases of Liability of Directors

Managing directors of a BV/NV may also be jointly and severally liable in the following cases:

• for the debts of the company under social security and tax laws;
• for providing misleading (interim) accounts or annual accounts or annual reports; or
• for the company acquiring shares in its own capital in certain situations.

BV

Managing directors could be liable for any due and payable company debts if the company is unable to continue paying these debts after a dividend distribution has been made, if the directors knew or reasonably should have foreseen this at the time of the distribution. On the basis of case law, the same may apply to managing directors of an NV.

Limitation of Liability

In general, a managing director’s liability may be limited in two ways.

• The general meeting discharges managing directors, waiving possible claims for damages. This concerns internal liability and is a common agenda item at the annual general meeting.
• Exoneration from joint and several liability of an individual managing director in the event of (manifestly) improper management in the case of joint and several liability of managing directors if a director can demonstrate that they cannot be held liable for the (manifestly) improper management and did not fail to take measures to mitigate the consequences of the (manifestly) improper management.

General

BVs

The general meeting determines the individual remuneration of managing directors, unless the articles of association provide otherwise.

NVs

The general meeting determines the individual remuneration of managing directors, unless the articles of association provide otherwise. The articles of association of an NV may only provide that another corporate body will determine the individual remuneration, often the supervisory board. The remuneration of supervisory directors is always determined by the general meeting.

In addition, NVs must have a remuneration policy in place that must be adopted by the general meeting. The works council must be given the opportunity to take a position thereon (or give its advice in the case of a Dutch listed company); this position (or advice) shall be offered to the general meeting at the same time as the proposal to adopt the remuneration policy.

CG Code

For companies within scope of the CG Code, the following applies on a “comply or explain” basis:

• the remuneration policy for the management board, prepared by the supervisory board’s remuneration committee, should also focus on sustainable long-term value creation for the company and its affiliated business;
• severance pay is limited to one year’s salary and will not be awarded if the managing director resigns or in the event of seriously culpable or negligent behaviour by the director; and
• supervisory directors must not be awarded remuneration in the form of shares and/or rights to shares.

Disclosure in Relation to Remuneration

Companies that are not listed

These companies must publish the following in the notes to the annual accounts:

• The amount of the remuneration, including pension charges and other benefits, for:
1. the managing directors and former managing directors; and
2. separately, the joint supervisory and former supervisory directors (this provision does not apply to micro and small companies).
• The amount of loans, advances and guarantees granted for the benefit of individual directors and supervisory directors.

Companies that are listed

Dutch listed companies must publish a remuneration report, which must:

• be clear and understandable;
• summarise all the remuneration awarded or due to individual directors in the previous financial year;
• be submitted to the annual general meeting for an advisory vote;
• be made public on the company’s website after the general meeting and must be accessible for ten years; and
• be checked by the external auditor as to whether all the required information is included in the report.

The company explains in the remuneration report how the previous vote of the general meeting has been considered.

CG Code

For companies within the scope of the CG Code, in addition to the statutory requirements, the requirements of the CG Code apply on a “comply or explain” basis.

The management board manages the company; see 3.2 Decisions Made by Particular Bodies and 4.6 Legal Duties of Directors/Officers.

Shareholders provide the equity and, in principle, are liable only up to the amount of their investment in the company. They do not participate in most corporate decisions, and may establish contractual arrangements with the company, such as relationships agreements.

See 3.2 Decisions Made by Particular Bodies regarding the adoption of resolutions by the general meeting.

General

In general, shareholders are not involved in the management of the company.

The articles of association may stipulate that the management board must act in accordance with the instructions of a corporate body of the company (eg, the general meeting). The management board should assess whether the instruction is in the interest of the company and its affiliated business.

Dutch Listed Companies

It is apparent from case law that the following applies to Dutch listed companies with respect to the role of the general meeting and the policy and strategy of the company.

• The rule of law is that the management board, under the supervision of the supervisory board, is responsible for determining the policy and strategy of the company and its business.
• The management board is accountable to the general meeting in respect of its policy and strategy.
• The management board is not obliged to involve the general meeting in its decision-making in advance, nor to consult the general meeting; this is different if statutory provisions or provisions in the articles of association provide otherwise.
• The general meeting may express its opinions in this regard by exercising its powers prescribed by law or in the articles of association of association. Shareholders cannot force the company to include voting items, regardless of whether this is a binding or advisory vote, on the agenda of the general meeting in respect of matters that fall within the powers of the management board, such as determining the policy and strategy.

General

Both BVs and NVs must have one general meeting a year. The annual general meeting of an NV must be held within six months after the end of the company’s financial year. The articles of association may provide for a shorter period. The annual general meeting of a BV must be held once a year, unless all shareholders are also directors of the BV; the signing of the annual accounts by all directors is also considered adoption of the annual accounts (the articles of association may provide otherwise).

Extraordinary Meeting

In addition to the annual general meeting, extraordinary meetings may also be convened for matters that come up between the annual meetings and need to be addressed in a general meeting.

Convening of a General Meeting

Both the management board and the supervisory board may convene a general meeting of an NV/BV (bijeenroeping). The articles of association may also grant this power to other parties.

Shareholders whose shareholding exceeds a certain threshold may request the board and supervisory board to convene a general meeting. If this request is denied, they can enforce in court that the general meeting be convened.

The general meeting is held at a place stated in the articles (for a BV this can also be outside of the Netherlands) or in the municipality where the company has its place of business. A general meeting of an NV can also be held elsewhere if the entire share capital is represented or if, in the case of a BV, all persons with meeting rights agree to it. A Dutch bill is pending to allow general meetings to be held entirely virtual.

Procedure at a General Meeting

Resolutions of the general meeting are adopted by absolute majority (volstrekte meerderheid) – ie, more than 50% of the votes validly cast. Certain resolutions are adopted by a qualified majority, as required by Dutch law or the articles of association.

In the case of an NV, each shareholder has at least one vote. In the case of a BV, virtually every deviation is allowed and shares without voting rights may also be created.

In addition to shareholders with or without voting rights, other parties may also have meeting rights, which means they may attend and speak at the meeting.

Managing directors and supervisory directors have an advisory vote.

The main proceedings through which shareholders can initiate legal proceedings against the company or directors are the inquiry proceedings. Shareholders can also have a board resolution nullified by the court or have it determined to be void.   

Inquiry Proceedings (Enquêteprocedure)

The Enterprise Chamber of the Amsterdam Court of Appeal (Enterprise Chamber) (Ondernemingskamer) has exclusive jurisdiction for these proceedings, which may be initiated by shareholders owning a certain percentage of the shares.

At the written request of the shareholder, the Enterprise Chamber may appoint one or more persons to conduct an investigation into the policy and affairs of the company. The Enterprise Chamber will only grant the request if there appear to be valid reasons to doubt a correct policy or course of action.

At any stage of the proceedings, at the request of the original applicants, the Enterprise Chamber may also order interim measures (onmiddelijke voorziening), for the duration of the proceedings. For example, it may temporarily appoint a managing director.

The report of the outcome of the investigation shall be filed at the registry of the Amsterdam Court of Appeal. Based on the report, the Enterprise Chamber may conclude that there has been mismanagement and order one or more of the following limitative provisions, which it considers appropriate based on the outcome of the investigation:

• suspension or annulment of a resolution of the directors, supervisory directors, general meeting or any other body of the legal entity;
• suspension or dismissal of one or more managing or supervisory directors;
• temporary appointment of one or more managing or supervisory directors;
• temporary departure from the provisions of the articles of association specified by the Enterprise Chamber;
• temporary transfer of shares for management purposes; and
• dissolution of the legal entity.

Dutch law does not recognise a derivative action.

Disclosure Obligations for Shareholders in Listed Companies

Anyone who acquires or disposes of a capital interest or the voting rights of a Dutch NV whose shares are listed on a regulated market within the European Economic Area (EEA), or a non-Dutch listed company whose shares are listed on a Dutch regulated market, must notify the AFM without delay if the percentage of capital interest of voting rights reaches, exceeds or goes under any of the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% or 95%.

This may be the case if shareholders obtain or lose ownership of shares (or related financial instruments) and/or votes, or due to an increase or decrease in the issued share capital of the listed company.

The same applies to anyone holding a gross short position in the company that reaches, exceeds or falls below any of the aforementioned thresholds.

The AFM publishes the notifications in its online registers.

In addition, the EU Short Selling Regulation contains disclosure obligations in respect of net short positions in EEA issuers.

Disclosure Obligations Applicable to Directors of Listed Companies

Managing directors and supervisory directors of Dutch NVs whose shares are listed on a regulated market in the Netherlands also need to notify the AFM of their shares and voting rights, and of any changes in these shares and voting rights concerning (rights to acquire) shares in the issuing institution of which they are director and in affiliated issuing institutions.

Additional reporting obligations may apply under the EU Market Abuse Regulation.

Annual Reporting Obligations for BVs and NVs

The financial report consists of three parts:

• the management board report;
• the annual accounts; and
• other information – eg, the report of the external auditor.

The management boards of both BVs and NVs must publish their annual accounts and file them with the Dutch Trade Register no later than eight days after adoption by the general meeting. If the annual accounts have not been adopted within two months after the end of the period set for their preparation, the management must publish the annual accounts with a statement that the annual accounts were not adopted.

In any event, annual accounts shall be filed within ultimately 12 months after the end of the financial year, regardless of whether or not they are adopted by the general meeting, together with other parts of the financial report. See 6.3 Companies Registry Filings regarding filing requirements.

Dutch Listed Companies

Dutch listed companies must prepare and publish the financial report within four months after the end of the financial year, and the half-yearly financial reports within three months after the end of the first six months of the financial year, both with the AFM.

General

Corporate governance arrangements need to be disclosed in the management report. The management board describes the main risks and uncertainties to which the BV or the NV is exposed. The management report of large companies (see 2.1 Hot Topics in Corporate Governance) must also contain an analysis of both financial and non-financial performance indicators, including environmental and employment-related issues.

Dutch Listed Companies

Dutch listed companies must include additional information in the management report, including the following:

• the key features of the internal risk management and control systems in relation to the financial reporting process of the company and its consolidation group;
• the composition and performance of the management board, the supervisory board and their committees; and
• the diversity policy regarding the composition of the management board and the supervisory board.

Additional information in line with the CG Code

The CG Code provides that the company must explicitly state in a separate chapter of the management report (or a publication on the company’s website) the extent to which it complies with the principles and best practice provisions of the CG Code and, where it does not comply, why and to what extent it deviates from these principles or best practice provisions.

According to the CG Code, the management board report must include a report on sustainable long-term value creation by providing information on the effects of the actions of the company and its affiliated business on people and the environment, a report on risk management, and explanatory notes on the culture within the company, the contribution of the culture and the values to the sustainable long-term value creation, and the effectiveness and compliance with the code of conduct.

Supervisory Board Report

The supervisory board report is mandatory only for Dutch listed companies and, according to the CG Code, it must include:

• the role of the supervisory board, such as its involvement in the establishment of the strategy and the way in which it monitors its implementation;
• the independence of the supervisory board and of its directors and chair; and
• the way the evaluation of the supervisory board, its committees and the individual directors has been carried out.

Annual Accounts

Non-listed companies

The management boards of both non-listed BVs and NVs must publish their management reports and file them with the Dutch Trade Register, after which they will become publicly available.

The management board must prepare the annual accounts and make them available for inspection by shareholders at the company’s offices within five months after the end of the financial year. The general meeting can extend this deadline by five months in exceptional circumstances.

The general meeting has two months to adopt the annual accounts after the period for preparing the annual accounts has expired. Within two months after that period has expired, the general meeting must adopt the annual accounts, during a general meeting.

Please see 6.1 Financial Reporting regarding the relevant filing deadlines and 5.3 Shareholder Meetings regarding the timing of holding general meetings.

Dutch listed companies and large companies (see 2.1 Hot Topics in Corporate Governance) have to disclose complete financial statements. There are exemptions for medium, small and micro legal entities.

Dutch listed companies

Dutch listed companies whose securities are admitted to trading on a regulated market in the European Union must make the annual accounts publicly available and simultaneously file them with the AFM within four months after the end of the financial year.

The general meeting has two months to adopt the annual accounts, which also need to be filed with the Dutch Trade Register within eight days after they are adopted.

Please note that if the annual accounts have not been adopted within two months from the end of the period prescribed for preparation in accordance with the statutory requirements, the management board must immediately make the prepared annual accounts public.

Semi-annual accounts only mandatory for Dutch listed companies

Dutch listed companies whose securities are admitted to trading on a regulated market in the European Union must publish and file semi-annual financial reports with the AFM, simultaneously, within three months after the end of the first six months of the financial year. This is in accordance with the FSA.

The AFM can impose an order subject to penalty for non-compliance and an administrative fine when these accounts are not filed in time.

Sanctions

Not filing the annual accounts on time is an economic crime, as stated in the Dutch Economic Offences Act. The penalty for this can range between paying a fine and prosecution. Not filing the annual accounts on time can also be proof of mismanagement, which could lead to the management board being personally liable for debt when a company is declared bankrupt on the basis of manifestly improper management (kennelijk onbehoorlijk bestuur).

Dutch corporate law requires an audit of the financial statements for all large and medium-sized companies.

The external auditor must examine whether the annual accounts provide the requisite legal disclosures and provide a true and fair view, whether other parts of the financial report comply with the statutory requirements, and whether the management report conflicts with the annual accounts or contains any other material mis-statements.

The external auditor reports on their audit to the management board and the supervisory board, and records the result of the audit in an independent auditor’s report.

Appointment of the External Auditor

Book 2 of the Dutch Civil Code provides the following regarding the appointment of an external auditor:

• the general meeting appoints an external auditor;
• if the general meeting fails to do so, the supervisory board is authorised to make the appointment; and
• in the absence of a supervisory board, the management board is authorised to appoint the external auditor.

If an NV/BV is a public interest entity, the appointment must be notified to the AFM.

Further rules on the selection and appointment of auditors of public interest entities are included in Regulation (EU) 537/2014 on specific requirements regarding statutory audit of public interest entities (Audit Regulation) and in the CG Code. The audit committee plays an important role in preparing the appointment.

Public interest entities must regularly change audit firms.

An audit firm may not perform that function for more than ten consecutive years. The same firm may not carry out the statutory audit again until four years have passed. Within the relevant audit firm, the auditor responsible for the audit may not be responsible for the audit report for more than five years.

The management board is responsible for identifying and managing the risks associated with the company’s strategy and activities.

The management board informs the supervisory board about the company’s strategic policy, its general and financial risks, and its internal control system at least once a year, to enable the supervisory board to perform its supervisory duties.

Additional Requirements for Dutch Listed Companies Based on the CG Code

The CG Code contains several best practices to further strengthen risk management and disclosure:

• a Dutch listed company must have adequate internal risk management and control systems;
• at least once a year, the management board must audit the operation of the internal risk management and control systems, and carry out a systematic review of their design and effectiveness;
• this monitoring covers all material control measures related to strategic, operational, compliance and reporting risks; and
• in performing their duties, the auditors must take into account the effectiveness of internal risk and control systems and the integrity and quality of financial reports.

Internal Audit Function

The internal audit function is responsible for assessing the design and operation of the internal risk management and control systems. The management board is responsible for the internal audit function. The supervisory board supervises the internal audit function and maintains regular contact with the person performing this function. The internal audit function reports hierarchically to a managing director, preferably to the CEO.

In the management report, the management outlines the main risks and certainties to which the NV or BV is exposed. For a proper understanding of the results or position of the company and its group companies, the management report also includes, if necessary, an analysis of both financial and non-financial performance indicators, including environmental and employment-related issues.