Legal Flash: The Monitoring Committee presents the revised Dutch Corporate Governance Code
The Dutch Corporate Governance Code Monitoring Committee (the Committee) presented the final revised Dutch Corporate Governance Code (the Code) today.
As indicated in our legal flash of 11 February 2016, the consultation document contained proposals for topical areas of the existing Code that was first published in 2003 and was most recently revised in 20081.
Changes to the consultation document
The Committee received over one hundred responses from different parties on the consultation document. These responses were taken into consideration and the Committee made revisions to the initial consultation document. The Committee has deleted the possibility of members of the supervisory board being granted a share-based remuneration. The obligation to have a member within the supervisory board with expertise in the field technologic innovation and new business did not make it into the Code either. Also the installment of a special committee in case of take-over situations has been abolished. Other than that the Committee has clarified certain elements of the Code such as the role of and relationship between the supervisory board and executive committee. The diversity clauses have been extended to the executive committee. As part of the remuneration report, the company has an accountability obligation for pay ratios within the company.
The key topics of the new Code are long-term value creation and the introduction of culture as element of good corporate governance. Risk management and strengthening the internal audit function are elements on which the Code lays more focus. Also diversity is given more attention and new provisions on the executive committee are added. The number of provisions on remuneration are reduced and less detailed. The one-tier board and the two-tier board are still addressed in the same Code. The Code also gives more guidance on the comply-or-explain principle. To the extent the best practices of the Code are not complied, the explanation should address certain elements, such as (i) how the company deviates from the Code, (ii) the reasons for deviation, (iii) how long the company expects to deviate from the Code and (iv) whether alternative measures are taken.
The Code will be applicable as of the financial year 2017 (presuming that the relevant resolutions will be adopted by the cabinet of the Dutch government in the course of 2017). As a result of the implementation of the Code, corporate governance related documents, such as regulations, policies and comply-or-explain reports of companies to which the Code applies, will need to be updated in accordance with the new provisions.
A comparison between the Code and the current Corporate Governance Code will be available on our website as of next week.
1The Code addresses listed entities that have registered offices in the Netherlands and a balance sheet total of more than EUR 500 million. In conjunction with section 2:391 paragraph 5 of the Dutch Civil Code, the Code requires listed entities to report on how they have applied the Code in their annual reports either by confirming that they have complied with the Code’s principles or, where they have deviated from the Code, by explaining their reasons.
Although this publication has been compiled with great care, Loyens & Loeff N.V. and all other entities, partnerships, persons and practices trading under the name 'Loyens & Loeff', cannot accept any liability for the consequences of making use of this issue without their cooperation. The information provided is intended as general information and cannot be regarded as advice.