The Act on the governance and supervision of legal persons (‘’Act’’) has been a topic of discussion in our blogs a several times. This time a number of important points are listed in the context of the Act with regard to a one-tier board, dismissal of directors and the board prohibition. The Act will enter into force on the first day of July 2021.
One-tier board
1. The Act introduces a legal basis for a one-tier board for associations, foundations, cooperatives and mutual insurance societies. A one-tier board refers to a management model in which the executive and non-executive directors jointly form one legal body. The current law only provides a one-tier board for the private limited company and the public limited company.
2. If a legal entity has established a one-tier board, predetermined duties shall be deposited with the non-executive directors. This involves supervising the performance of duties by the directors, chairing the board of directors, making nominations for the appointment of directors and determining the remuneration of executives.
3. It is not always allowed to set up a one-tier board. There is a chance that specific regulations to a particular sector are applicable, which require the establishment of a separate supervisory legal body. In that case, a one-tier board is therefore not possible.
Dismissal of directors
4. A director of a foundation, association, cooperative or mutual insurance society may be dismissed by the court at the request of an interested party or the public prosecutor.
The grounds for dismissal shall be expanded with the Act. A director of one of the aforementioned legal entities may be dismissed under the Act for:
(i) neglect of his duties;
(ii) for other important reasons;
(iii) for a change of circumstances on the basis of which the continuation of his directorship cannot reasonably be tolerated or;
(iv) for not or not properly complying with an order issued by the provisional relief judge of the District Court pursuant to Section 2:297 of the Dutch Civil Code.
5. The grounds for dismissal referred to in point 4 shall also apply to the dismissal of a supervisory director of an association, foundation, cooperative or mutual insurance society.
The board prohibition
6. The regulation relating to the board prohibition of a director of a foundation, association, cooperative or mutual insurance society shall be expanded. In the current law, the board prohibition has been designed in such a way that a dismissed director may not become a director of the legal entity again within five years after his dismissal.
The Act provides that a dismissed director may not be appoint as a director and supervisory director for a period of five years after his dismissal. The Act does, however, give an exceptional position to a director who, partly in view of the duties assigned to other, cannot be seriously blamed.