Evaluation of the Management and Supervision Act

The Management and Supervision (adjustment) Regulations Act Public and Private Companies  (Wet bestuur en toezicht) (hereafter: the Act) entered into effect on 1 January 2013. During the parliamentary debate the Minister of Security and Justice had pledged that the Act was to be evaluated three years after it entered into effect. At the request of the Minister of Security and Justice the research was conducted by the University of Groningen and the results of the research were published on 15 December 2017. This article will address some of the research team’s conclusions and recommendations.

One-tier board model

In the Act a statutory basis for the one-tier board model was introduced for both public companies with limited liability (“NVs”) and private companies with limited liability (“BVs”). In the one-tier board model, the company is governed by a unified board which performs both management and supervisory functions. There is no separate supervisory board, but instead non-executive members of the board take on the supervisory role.

The research showed that the one-tier board model has increased the usefulness of both the NV and BV in both national and international company structures.

Currently, the option of a one-tier model is not open to banks and insurance companies because section 3:19 para 1 of the Financial Supervision Act requires these entities to establish a supervisory board. According to the researchers, however, there are no reasons to maintain this restriction for banks and insurance companies and they therefore suggest to make the one-tier model available to these types of businesses.

The researchers concluded that in practice the one-tier board model is largely working as intended in accordance with the legal theory. In order to keep the articles of association in line with the legal theory the research committee recommends that the articles stipulate that the supervisory task of a non-executive director is not limited to supervising the executive directors. Also the research committee recommends to make it unambiguously clear in the articles of association that non-executive directors have no power to represent the company, if this is intended.

Directors’ responsibility

Because of the statutory introduction of the one-tier board model, section 2:9 of the Dutch Civil Code has been amended. According to section 2:9 para 2 Dutch Civil Code each director bears responsibility for the general course of business. It was pointed out by the researchers that it is rather unclear what the general course of business entails. The researchers acknowledge that it is undesirable to provide a clearly defined legal interpretation of this concept. It is however advisable that some guidance is given by indicating that the concept of general course of business at least the includes the strategic, financial and risk policies of the company.

Conflict of interest

In the Act the rules on conflicts of interest have been substantially changed.   In the event of a conflict of interest, a director or supervisory director may not participate in the deliberations and decision-making (sections 2:129/2:239 para 6 and 2:140/2:250 para 6 Dutch Civil Code). The research shows that in practice there is some uncertainty about the practical application of the regulation. The researchers recommend to clarify the relationship between section 2:129/2:239 para 6 Dutch Civil Code and a clause in the articles of association providing for replacement in the event of absence from office of any of the directors (statutaire beletregeling), the statutory approval provision concerning distributions to shareholders and the statutory provision pursuant to which tasks can be divided amongst the directors. 

Furthermore, the research committee evaluated the regulation for limiting the number of functions that directors and supervisory directors may hold and the regulation concerning a balanced allocation of seats between men and women in the management board and the supervisory board.

You can consult the English summary of the report via this link.