A proposal to update the Dutch Corporate Governance Code was published on 21 February 2022. The proposal prepared by the Corporate Governance Code Monitoring Committee (the "Committee") is set out in a consultation document inviting interested parties to respond by 17 April 2022. The Committee aims to adopt a revised Code later this year, with such revised Code applying to financial years starting on or after 1 January 2023. Companies would have until the end of 2023 to ensure that they comply with the revised Code.
We look forward to discussing the proposal in more detail with you and we will cater for the opportunity for group and bilateral discussions. Should you have questions in the meantime, please get in touch with your contact at De Brauw or with one of our experts.
What is being proposed?
The changes to the Code focus on five themes:
By proposing the changes, the Committee aims to respond to recent developments in society, such as a greater emphasis on ESG and sustainable corporate governance.
Long-term value creation
The Committee views climate change as one of the most important themes for the coming decade, having an impact on corporate governance and on long-term value creation as its pinnacle. Insufficient attention to ESG may, according to the Committee, have significant consequences for companies, and in this light the Committee proposes several additions to the Code, including:
In addition, the Committee proposes including in the Code's explanatory notes that companies can choose to formulate a "purpose" in their articles of association or as part of their strategy. Companies considering the ESG-related impact on their value chains are referred to the draft CSRD Directive and the OECD's due diligence guidelines. By requiring that the effects of the company's business activities on its value and production chains be published in the management report, the Committee seems to pre-empt the enactment of the CSRD Directive.
Role of shareholders
In the 2016 revision of the Code, the provisions on the role of shareholders were left virtually unchanged. The proposal now seeks to further specify the role of shareholders and emphasise the importance of effective and sustainable shareholder engagement in the governance of listed companies.
For this purpose, the Committee took elements from Eumedion's Stewardship Code. The proposal entails:
Diversity & Inclusion
The Committee emphasises that diversity goes beyond gender, and that inclusion is as important as diversity. To this end, the Committee expands the Code's provisions as follows:
Where reference is made to the management board and supervisory board, this should also be read to include executives and non-executives on a one-tier board.
Amendments arising from new legislative developments
The Code's response time
The Committee proposes an "anti-cumulative" provision on the Code's 180-day response time and the statutory 250-day response time in the Dutch Civil Code.
The Committee has observed that the statutory response time that shareholders may need to observe in relation to (i) the tabling of shareholder resolutions concerning the appointment, suspension or dismissal of managing and supervisory directors and any related amendments to the articles of association, and (ii) a hostile takeover offer that has been announced or made, has a certain overlap or concurrence with the Code's response time. The Code's response time relates to shareholder resolutions that could lead to a change in strategy, such as the dismissal of managing and supervisory directors.
The Committee wants to maintain the response time in the Code, but addresses the overlap or concurrence by adding, in short, a rule preventing companies from opting for the Code's response time if they previously invoked the statutory response time. If the reverse is the case and the Code's response time was invoked first, the court will have to determine whether the company can still make use of the statutory response time as well.
Remuneration policy and report
The Committee has also observed the relatively new Dutch statutory provisions on the remuneration policy and report to be drawn up by listed companies. These provisions include a statutory list of elements that should feature in the remuneration policy and report, and contain requirements for companies to allow shareholders to vote on the remuneration policy at least every four years and to put the remuneration report to an annual advisory shareholders vote.
This could have prompted the Committee to withdraw the Code provisions in question, but the Committee instead opted for the following changes:
Responsibility for annual accounts
The Dutch Minister of Finance has asked the Committee's attention for a Leiden University report into certain enhancements of companies' responsibility for their annual accounts and the external auditor's review of the accounts. Some of the report's recommendations were more "controversial", as the Committee calls it, such as the idea of an extended in-control statement for listed companies. These recommendations therefore require further consideration and consultation and have not been adopted by the Committee in the proposed Code update.
The Committee does, however, propose certain additions to the Code in relation to the internal audit function of listed companies:
An English translation of the Committee's consultation document with the full proposal for the revision of the Code will be available soon.