The Dutch caretaker government has responded to recent recommendations on NV law modernisation made by a group of experts. The response includes several corporate governance-related motions by parliament. Although no concrete next steps were announced, we do get a glimpse of what changes to NV law may lie ahead.

Generally speaking, the government proposes waiting for developments at the European level and leaves it to the future cabinet to take new initiatives if appropriate. This could include enshrining a social duty of care for boards in law, to ensure that the company acts responsibly and that the interests of all stakeholders are balanced. Other issues discussed in the government response are the possible reintroduction of a statutory clawback, and the creation of a statutory framework for loyalty shares and a statutory basis for virtual general meetings. As to the proposal to further discourage quarterly reporting by listed companies, the response is more concrete: it sees no need for that.

Background

In 2016, the government announced the intention to modernise the law for Dutch public limited liability companies (NVs). In 2020, a first draft bill to modernise NV law was published (see this article) and several motions were adopted by the lower house requesting the government to investigate certain CSR and governance-related proposals. In his letter of 14 June 2021, the responsible minister provides an update on these topics and on the recent report of an expert group that was set up to give advice on the modernisation of NV law.

The expert group and its report

The expert group was composed in consultation with representatives of the Ministry of Justice and Security and comprised legal scholars and representatives of Eumedion, the VEB, the VEUO and VNO-NCW.

In its report, the expert group discussed the following subjects:

• enhancing corporate social responsibility and establishing? the role corporate law can play in that regard, for example by introducing an explicit social duty of care for directors, imposing additional disclosure obligations or allowing companies to incorporate their purpose in their articles of association,
• virtual shareholder meetings
• loyalty shares
• certain technical amendments, mainly aimed at making NV law more flexible, in line with the amendments to the BV regime in 2012.

We dive deeper into these topics below.

Corporate Social Responsibility (CSR)

The expert group summarised the initiatives at the European and national level to introduce a statutory social duty of care for directors. This would require directors, in performing their duties, to also weigh the interests of the society at large.

At the European level, these developments form part of broader initiatives to enhance sustainable corporate governance. At the national level, the expert group referred to the initiative of 25 academics advocating the introduction of responsible corporate citizenship into the statutory duties of directors and allowing companies to include a purpose in their articles of association.

As to the two national items, the expert group concluded that Dutch law already largely covered what the 25 academics had advocated and that new legislative initiatives in this regard would not be opportune. In addition, in light of the various European initiatives, the expert group felt it was not the appropriate time to introduce Dutch CSR legislation. The expert group supported the idea that additional disclosure requirements might have a positive effect.

In the letter, the minister states that he is in favour of more extensive disclosure requirements for companies and their directors where strategy, business and societal impact is concerned. However, before proposing national legislation, the minister first wants to await the relevant European developments.

Virtual shareholder meetings

The expert group unanimously agreed that legislation facilitating fully virtual general meetings must be introduced for all types of legal entities in the short term and that potential future European developments should not be awaited. The expert group noted that the experience arising from virtual shareholder meetings on the basis of the temporary Covid-19 Act will be valuable in the drafting process.

In the letter, the minister indicates that he will further examine whether to incorporate virtual general meetings into Dutch law.

Loyalty shares

Currently, Dutch law does not explicitly address the concept of loyalty voting. However, in practice, structures have been developed to facilitate this type of voting. A majority of the expert group was in favour of introducing a specific statutory basis for loyalty voting and loyalty dividend arrangements. This could remove any uncertainty about the legality of the structures currently being applied in practice and regulate the use of loyalty shares. The expert group was not, however, aligned on what the details of this statutory arrangement should be.

The minister concludes this letter by stating that one of the purposes of a statutory basis could be to counter excessive loyalty voting schemes aimed at concentrating all voting power in a small group of shareholders. However, the minister does say that further research is required and that it will be up to the new cabinet to propose concrete next steps.

Technical amendments to Dutch NV law

The expert group unanimously agreed that NV law should be made more flexible, in line with the amendments to BV law introduced in 2012. The majority of the technical amendments proposed in the draft bill published in 2020 (see our article) is supported by the expert group. However, Eumedion and VEB, two Dutch groups representing the interests of shareholders of listed companies, take the view that some of the changes should only apply to non-listed companies.

The minister will also further consider these proposals in the context of modernising Dutch NV law.

Next steps

In the second half of 2021, the minister will again inform the lower house of parliament on the progress made.

We will keep you informed of any further developments.