Dutch company law status update 2023

Update of Corporate Governance Code
The definitive version of the updated Dutch Corporate Governance Code was published on 20 December 2022. The most striking changes relate to long-term value creation, diversity and the role of shareholders. Companies must, among other things, develop a vision of sustainable long-term value creation with an appropriate strategy and specific objectives. This updated Code entered into force on 1 January 2023. In directors’ reports for 2023, listed companies will have to account for compliance with the updated Code for the first time. Also see our newsletter of 20 December 2022. The legal embedding of the Code is expected to take place within the foreseeable future.

Proposed EU directive improving corporate sustainability reporting (CSRD)
The Corporate Sustainability Reporting Directive (CSRD) was published in the Official Journal of the EU on 16 December 2022. The CSRD replaces the existing Non-Financial Reporting Directive (NFRD) and, among other things, expands the reporting requirements with regard to people and the environment, responsible corporate governance and responsibility in the chain. Based on the CSRD, companies must, among other things, publish ESG targets (Environmental, Social, Governance) and report on their progress in these areas annually. The European Sustainability Reporting Standards (ESRS), still to be adopted, must be used for this. Companies must report not only on their own performance on the ESG themes, but also on the performance of their customers and suppliers. The CSRD will come into force in phases, depending on the type of company. Also see our newsletter of 22 December 2022.

Investments, Mergers and Acquisitions (Security Screening) Act (Vifo Act)
The Vifo Act was published in the Bulletin of Acts and Decrees (Bulletin of Acts and Decrees 2022, 215) on 10 June 2022. However, the Act has not yet entered into force because the underlying governmental decrees have not yet been adopted (Scope of Sensitive Technology Decree and Vifo Decree). After the Vifo Act enters into force, vital providers, companies with sensitive technology and campus managers must report capital investments, mergers and acquisitions to the Investment Screening Bureau (BTI) of the Ministry of Economic Affairs. This concerns acquisition activities from both abroad and the Netherlands. The BTI then assesses whether there is a risk to national security. In that case, the government can attach conditions to the investment, merger or acquisition and in extreme cases, the investment, merger or acquisition may be prohibited.

The BTI can only assess transactions that fall within the retroactive effect of the legislation (reference date 8 September 2020) and which are suspected to pose risks to national security. In that case, the BTI will inform the reporting parties about this and they will be asked to make a report. It is very possible that, due to urgency, the fixed dates for changes for new legislation (1 January and 1 July) may be deviated from, as a result of which the Act can enter into force in the first quarter of 2023.

Amendment of the Whistleblowers Authority Act
The Amendment of the Whistleblowers Authority Act in implementation of the European directive on protection of persons who report breaches of Union law was published in the Bulletin of Acts and Decrees on 3 February 2023 (Bulletin of Acts and Decrees 2023, 29). The Act for the implementation legislation amends the current Whistleblowers Authority Act, which will then be called the Whistleblowers Protection Act. Among other things, the burden of proof of detriment is being shifted to the employer and the person involved is no longer required to report internally first. The circle of protected persons is also being extended to include self-employed persons, contractors, subcontractors, supervisory directors, suppliers, consultants, shareholders, job applicants and paid volunteers and trainees.

An internal reporting channel will also become mandatory not only for employers with more than 50 employees, but also for all organisations that are subject to financial supervision or anti-money-laundering legislation. The internal reporting procedures must also comply with stricter requirements. The Netherlands has since passed the implementation deadline of 17 December 2022. The Act is expected to come into force soon, without any transitional regime for large employers (≥250 employees). For smaller employers (50-249 employees), the Act is expected to come into effect on 17 December 2023. We will be sending a more detailed newsletter on this soon.

Private member’s bill for the Responsible and Sustainable International Business Practices Act
Following advice from the Council of State, the Private member’s bill for the Responsible and Sustainable International Business Practices Act (35 761) was submitted with modification to the Lower House on 2 November 2022. The purpose of this legislative proposal is to set a lower limit for international corporate responsibility that ensures that (Dutch) companies will comply more closely with the international standards on human rights, employment and labour relations, and the environment laid down in the OECD guidelines. The proposal introduces, among other things, a duty of care for Dutch companies active abroad and foreign companies with an activity or product in the Netherlands. It also contains an obligation to perform due diligence in the production chain of large companies.

The intended effective date is 1 July 2024, earlier than the CSDDD referred to below. The initiators believe that developments at European level are going too slow. However, it was proposed to have the due diligence obligations take effect in phases. Enforcement under administrative law is proposed as from 1 January 2025, enforcement under criminal law and civil law with effect from 1 July 2025. In view of the discussion about the legislative proposal, the question is whether this proposed timing is feasible.

Cross-border restructuring implementation act
The Cross-Border Conversions, Mergers and Divisions Directive Implementation Act (36 267) submitted to the Lower House on 5 December 2022. The Implementation Act provides for a (further) regulated procedure for the course of conversions, mergers and demergers of private companies and public companies for the preparatory phase (1), the decision-making phase (2) and the implementation phase (3). The provisions are largely in line with the current provisions of the Dutch Civil Code for domestic mergers and demergers, but both shareholders and the Works Council (or employees) receive more and earlier information in phase 1. The documentation will be submitted electronically and communicated via the commercial registers. The deadline for implementation was 31 January 2023, but proved not to be feasible, partly due to capacity problems at the Chamber of Commerce. No envisaged date for entry into force is known, but we expect the Act to come into force in 2023, early 2024 at the latest.

Online incorporation of private companies implementation act
The legislative proposal for the Online incorporation of private companies (36 085) was submitted to the Lower House on 21 April 2022. This proposal facilitates the electronic incorporation of a private company. The 'KNB Information Portal' contains, among other things, a template for setting up a private company (BV) electronically, whereby the deed of incorporation can also be drawn up in English. In the first instance, the Netherlands has chosen to make it possible only for private companies (BVs) to be set up electronically and, after evaluation, to determine whether this will also be facilitated for public companies (NVs). The implementation deadline was 1 August 2022 but proved not to be feasible. The expected entry into force of the Act is the last quarter of 2023.

EU Taxonomy Regulation
In 2020, the EU Taxonomy Regulation entered into force, which is the basis for the EU Taxonomy. This concerns a uniform classification system to determine the degree of environmental sustainability of an economic activity. The present taxonomy contains six environmental objectives:

1. Mitigation of climate change;
2. Adaptation to climate change;
3. Sustainable use and protection of water and marine resources;
4. The transition to a circular economy;
5. The prevention and combatting of pollution;
6. The protection and recovery of biodiversity and ecosystems.

Certain companies are already subject to reporting obligations since reporting for financial year 2021. Reporting on economic activities that qualify as ecology sustainable (eligibility) under the first two environmental targets has since been required. These reporting obligations have been extended for reporting for financial year 2022: reporting is now also required on the extent to which economic activities actually align with EU Taxonomy (alignment) under the first two environmental objectives. It is expected that reporting for financial year 2023 will also have to include eligibility and alignment with the remaining four environmental objectives.

Balanced male-female ratio Act
The Act aimed at making the male/female ratio in senior management at large companies more balanced came into effect on 1 January 2022. The reporting requirements in the context of this Act apply to a directors’ report that relates to the financial year beginning on or after 1 January 2022. In addition to reporting in the management report, reporting to the SER must also be done within 10 months of the end of the financial year in a set format via the SER Diversity Portal, launched on 31 January 2023. In this Diversity Portal, in addition to mandatory reporting for financial year 2022, voluntary reporting for financial year 2021 can also be done. A checklist containing information that can be collected for preparation, accompanied by a step-by-step plan, has been published on the SER website.

EU proposal for Corporate Sustainable Corporate Due Diligence Directive (CSDDD)
The EC published the proposal for the Directive on Corporate Sustainability Due Diligence (also referred to informally as the ‘CS triple D’) on 23 February 2022. The proposed directive provides for a step-by-step plan to move large companies (including companies with more than 500 employees and net turnover of more than €150 million) towards a more sustainable policy by detecting and, where necessary, preventing, eliminating or reducing the negative effects of their activities on human rights, such as child labour and worker exploitation, as well as on the environment, in their global value chain. It also contains the obligation to draw up a climate plan in accordance with the Climate Agreement and a duty of care for directors.

In the event of non-compliance with the obligations, the proposal provides for administrative and civil liability of the company and possibly also its directors. No intended effective date is known, but the procedure is progressing at a good pace. However, there is still a lot of discussion about the content and scope. Both higher and lower thresholds have already been proposed and even the exclusion of the financial sector. It is therefore difficult to determine an expected effective date.

Consultation on Digital General Meeting of Private-law Legal Entities Act
The temporary COVID-19 Justice & Security Act provided for, among other things, the possibility of digital meetings. This Act was extended for the last time at the end of 2022 and will end on 1 February 2023. However, the desire for digital meetings will continue to exist. That is why the draft bill for the Digital general meetings of private-law legal entities was submitted for consultation on 7 December 2022. The draft proposal provides that legal entities under private law and SCEs and SEs can meet digitally if this is included in the articles of association. This applies in addition to the existing possibility of hybrid meetings. The scheme is optional and technology-neutral and contains further conditions for both a digital and hybrid meeting. No envisioned effect date is known.

Consultation on the Modernisation of partnerships Act
Civil-law rules and tax measures as well as a number of implementing provisions were submitted for consultation on 10 October 2022 in response to the comments on the consultation for new rules for partnerships in early 2019. The consultation period ends on 10 February 2023. The draft proposal proposes, among other things, the introduction of the public and silent partnerships, without a distinction between profession and business. All partners are jointly and severally liable The public partnership has legal personality, but tax transparency remains intact. No envisioned effect date is known. Also see our newsletter of 3 November 2022.

The following legislative procedures had little or no new developments in 2022:

• Social BV Act - consultation scheduled for the first quarter of 2023.
• Equal Pay for Women and Men Act (including reporting obligations) - pending before the Lower House, no further updates.
• Dispute Settlement and Inquiry Procedure Act - consultation took place in 2019, the aim is to submit a legislative proposal to the Lower House in the third quarter of 2023.
• Transfer of Undertakings in Bankruptcy Act - consultation took place in 2019, submission to the Lower House is scheduled for the last quarter of 2023.
• Act extending shareholder notification obligations - consultation took place in 2019, no further updates.
• Central Shareholders' Register - pending before the Lower House, no further updates.
• Modernisation of Digital Company Law EU - consultation took place in 2021-2022, submission scheduled for the first quarter of 2023.
• Diversity Directive - adopted with implementation deadline of 28 December 2024. However, this does not apply to the Netherlands, as long as we have our own comparable legislation. If this relevant legislation expires in 2030 and is not extended, the directive will still apply (and expires in 2038).
• Fair Share Act - pending before the Lower House, no further updates.
• Fair Decisions Act - consultation took place in 2020, no further updates.