Bill amending two-tier management system in companies put out to consultation

The Bill aims at offering an alternative to the two-tier concept used in the Netherlands, meaning that a public or private company has an executive board and a non-executive board. The consultation stage has been completed and the amended Bill will be presented to the Dutch Cabinet shortly.

The Dutch legislature holds that the one-tier concept should have a legal basis in the Netherlands, too. The one-tier concept means that a company will have executive and non-executive directors combined in a single board, the latter directors having the title of 'general directors'. Companies will be free to choose either concept, unless they must, by law, adopt the two-tier system. If so, they must maintain the two-tier concept. The Bill also addresses several related subjects, such as rules for conflict-of-interest situations and the relationship between a director and the company in terms of employment law.

The Bill proposes cancelling the current statutory provisions on conflicts of interest and to add new rules to the duties of the board. The aim is that in cases where a director has a direct or indirect relationship with the other party, this director is to refrain from consultations and voting with respect to this other party. If a company has only one director, the non-executive board will have the power of representation in the event of a conflict of interest; if there is no non-executive board, the general meeting of shareholders will have the power to appoint a person who will represent the company.

Another proposal is to cancel the option of a director having an employer/employee relationship with the company, so that current practices will be simpler. Setbacks recognized in this respect are the forfeiture of protection against removal from office in the event of sickness or pregnancy, no entitlement to continued salary payments in the event of bankruptcy and no easy access to the use of pension and social security facilities.

For more information, please contact mr. Godard Croon, Corporate Practice.

Return to newsletter »