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By Reinier W.L. Russell
Russell Advocaten, B.V.
Amsterdam, Netherlands

On 1 January 2018, the new Corporate Governance Code 2016 became effective. What will be the consequences for your company?

The Dutch Corporate Governance Code contains principles and specific provisions regarding the relations between the management board, the supervisory board and the general meeting of shareholders of a company. The Code applies to all companies with registered office in the Netherlands and whose shares or certificates are traded at the stock exchange. In practice, the Code will be used in case law as a standard for good governance for other companies also.

The Code has not been laid down in separate laws and regulations but is enshrined in the law. The relevant article provides that a code of conduct can be drawn up which companies have to adhere to. Both the Code 2003 (Code Tabaksblat) and the Code 2008 (Code Frijns) were specified as such a code of conduct by decree and the same applies to the code 2016.

Most Significant Changes

The new Dutch Corporate Governance Code entails the following significant changes:

  • There will be a greater focus on long-term value creation for listed companies.
  • Managers and supervisory directors are to create a culture that stimulates the desired conduct and standards for integrity within the listed company.
  • The risk management of the listed company has to obtain a stronger basis.
  • The supervisory board will be involved more closely in the appointment, evaluation and potential dismissal of the internal auditor.
  • The management board and supervisory board have to take into account higher standards regarding checks and balances, good corporate governance and independence of monitoring.
  • Members of the supervisory board will in principle be appointed for a maximum of two periods of four years.
  • If the listed company has an executive committee, the collaboration with the supervisory board has to be included in the annual report.
  • Directors and supervisory board members will gain more responsibility regarding the remuneration policy (that has to focus on the company’s long-term value-creation).

What Does That Mean For You?

As the code follows the principle of comply or explain you will have to explain potential deviations from the code in the annual report. Do you have any questions regarding the new Corporate Governance Code? Would you like to adjust your articles of association in line with the Code? We will be happy to help you! Please contact us.