One-Tier Board Act Expected To Enter Into Effect On 1 July 2012


The Minister of Security and Justice has recently confirmed to the lower house of the Dutch Parliament that the One-Tier Board Act will probably enter into effect on 1 July 2012 (instead of 1 January 2012). It is expected that proposed remedial legislation now before the lower house will also enter into effect on that date. The purpose of the remedial legislation is to except cultural, religious and charitable foundations from the future rules limiting the holding of multiple board memberships. Certain ambiguities in the proposed legislation have recently been eliminated by a memorandum of amendment. The main features of the One-Tier Board Act and the proposed remedial legislation are set out below.

Main features

The main features of the One-Tier Board Act (hereinafter also the "Act") are:

the creation of a statutory basis for the one-tier board system; the imposition of limitations on the holding of multiple board memberships; amendment of the conflict of interest rules; the introduction of target figures for achieving gender diversity on management and supervisory boards; a change in the employment-law status of management board members of listed companies. One-tier board system

The Act provides for a one-tier board system as an alternative to the existing two-tier system, in which a management board and supervisory board exist side-by-side. Dutch NVs (public limited liability companies) and BVs (private limited liability companies) will therefore soon have a statutory option to institute a single board made up of both executive and non-executive members.

In practice, a number of large Dutch companies have already instituted a one-tier board system. However, there is a certain degree of uncertainty about the compatibility of such a board with the existing statutory provisions on the allocation of duties, responsibilities and liability among management board members and among supervisory board members. The new rules will not fundamentally change those provisions.

The principle of collective responsibility will continue to apply: each management board member (which includes both executive and non-executive board members in a company with a one-tier system) will remain responsible for the performance of the board's duties and can in principle be held liable for mismanagement if those duties are not performed properly. As is the case under the current rules, it will be possible to allocate the management board's duties among its members. In the event of mismanagement an individual management board member can avoid liability if he proves that the mismanagement was not attributable to him – taking into account, among other things, the duties allocated to him – and, in addition, that he was not negligent in acting to prevent its consequences. As pointed out in the parliamentary documents, it may be assumed that the non-executive board members in the one-tier scenario will receive more information, and at an earlier stage, than supervisory board members do in the two-tier scenario. This difference in position may, in practice, be expected to affect their respective liability.

Under the Act, an allocation of duties between the board's executive and non-executive members (where the company has...

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