Corporate Governance in the Netherlands

In the Netherlands, the general rules of civil law relating to the governance of companies and listed companies are laid down in Book 2 of the Dutch Civil Code (DCC). This sets out the duties and powers of the various corporate bodies, as well as rules on representation, conflicts of interest and the liability of management board members. The DCC also contains rules regarding financial reporting and disclosure. Compliance with the rules in the DCC can, if necessary, be forced through the courts. In this context, it should be mentioned that a right of inquiry was introduced in Book 2 of the DCC in 1994: shareholders with a specific capital interest (in some cases, even former shareholders)2 may request a court specially designated for this purpose – the Enterprise Chamber of the Amsterdam Court of Appeal (Enterprise Chamber) – to initiate an inquiry into the company's policy and affairs. Upon a showing of mismanagement, the Enterprise Chamber can intervene by, inter alia, suspending or nullifying a management board decision, suspending or removing management or supervisory board members, and appointing temporary board members. In practice, inquiry proceedings have played an important role in the development of law in the area of corporate governance, for example with regard to the issue of the respective roles of the management board and the shareholders in determining the strategy of the relevant company.

In addition, the Netherlands has rules on the supervision of the business conduct of listed companies, laid down in Chapter 5 of the Financial Supervision Act (FSA). The FSA contains rules on, inter alia, the disclosure of major holdings, financial reporting, the prevention of market abuse and the obligations of institutional investors. Supervision of compliance with these rules is carried out by a specially designated body, the Authority for the Financial Markets (AFM).

Alongside these statutory rules is a system of self-regulation consisting of codes of conduct containing principles and best-practice provisions drawn up by the sector itself. The first Dutch Corporate Governance Code containing governance rules for listed companies entered into effect in 2004. In December 2016, a revised version of the Corporate Governance Code was published, with more attention being paid to long-term value creation, culture, reporting of misconduct, risk management and how to apply the Corporate Governance Code in a company with a one-tier board.

Since the introduction of the first Corporate Governance Code, several sectors have set up their own specific codes, such as the Code of the Dutch Pension Funds and the Housing Corporations Code. In 2010, the Banking Code was introduced to govern Dutch banks. This mirrors the Corporate Governance Code in many respects, but also contains rules specifically targeted at banks (specific expertise of certain committee or board members, the treatment and interests of clients). The Banking Code (updated in 2015) applies to both listed and unlisted banks. Listed banks fall under the Corporate Governance Code, as well as the Banking Code.

Both codes adopt a comply or explain system: companies must state on their websites how they applied the principles and best-practice provisions and, if applicable, provide a reasoned explanation of why a provision has not been applied. For both codes, there is a separate monitoring committee that annually reports on the extent to which each code has been complied with, and on any problem areas that have emerged in this regard.

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For further information regarding corporate governance in the Netherlands consult https://thelawreviews.co.uk/edition/the-corporate-governance-review-edi…

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