Legislative proposal on balanced gender diversity at the top of large companies

December 16, 2020

On November 6, 2020, the Minister for Legal Protection and the Minister of Education, Culture and Science submitted the legislative proposal to amend certain provisions of Book 2 of the Dutch Civil Code in order to create a more balanced male-female ratio in top management positions (the “Proposal”, in Dutch:Wetsvoorstel inzake evenwichtige man/vrouwverhouding in de top van het bedrijfsleven) to the Dutch House of Representatives.

The Proposal aims to introduce a legal ground for the two following measures

  • a diversity quota for supervisory boards of listed companies; and
  • the obligation for large NVs and BVs to set self-imposed appropriate and ambitious targets in order to promote gender diversity on the management board, supervisory board and within senior management.

Current diversity rule
On January 1, 2020 the temporary statutory gender diversity target regulations for large NVs and BVs expired. These regulations were based on a ‘comply-or-explain’ principle and required large NVs and BVs to strive for a balanced composition of their management and supervisory board, to the effect that at least 30% of their management and supervisory board members were women and at least 30% were men. With no legal sanctions applying, the approach proved to have little effect.

Social and Economic Council (Sociaal-Economische Raad or abbreviated the “SER”)
In recent years, intensive attention has been paid to increase gender diversity in company boards. In September 2019 – upon request by the Dutch government- the SER provided an advisory report in which it included measures to increase gender diversity in company boards. Following the SER’s advisory report the Dutch government prepared a legislative proposal in line with the advisory report, which Proposal now has been submitted to the Dutch House of Representatives.

Diversity quota for listed companies
The first measure includes a diversity quota of at least one-third for both women and men on supervisory boards of Dutch NVs and BVs that are listed on Euronext Amsterdam (irrespective of whether they are a two-tier board company or not). This means that, as long as a listed NV or BV does not meet the diversity quota and chooses to appoint a supervisory board member of the overrepresented gender, such appointment will be null and void. In order to avoid legal uncertainty, this will however not impact the legal validity of the board decisions taken. Such decisions are legally valid until the nullity of the appointment has been established in court to stand. The diversity quota will be applicable to new appointments and will not apply to the reappointment of a supervisory board member, provided that the reappointment occurs within eight years after the first appointment of the supervisory board member.

Target Figure and Target Plan for “large” NVs and BVs
The second measure to improve gender diversity is the obligation for all non-listed large NVs and BVs to set appropriate and ambitious gender balanced targets at the level of the management board, supervisory board and the senior management (the “Target Figure“). An NV or BV qualifies as large if, at two consecutive balance sheet dates, and without any interruption thereafter, two of the three following requirements are met:

  • the value of the assets according to the balance sheet with explanatory notes, based on the acquisition price and production price, amounts to more than EUR 20,000,000;
  • the net turnover for the financial year exceeds EUR 40,000,000; and
  • the average number of employees over the financial year exceeds 250.

For listed companies, the above mentioned target only applies at the level of the management board and senior management, as the diversity quota already applies to the supervisory board of listed companies.

The Target Figure should be appropriate and ambitious. The appropriateness depends on (i) the size of the management board, supervisory board and senior management and (ii) the existing balance between men and women in the company. Furthermore, an ambitious Target Figure must aim to improve the existing gender balance. This generally means that the Target Figure can never be 0 and at least one woman has to be appointed to an all-male (management and/or supervisory) board.

Target Plan
According to the proposed provisions, large companies must additionally make a plan which outlines the actions needed to meet the self-imposed targets (the “Target Plan“). Large companies will be obliged to publish the Target Plan yearly within 10 months after the end of the each book year (in accordance with the terms applicable to the directors report) and report their progress to the SER. As this information must also be included in the annual directors report (bestuursverslag), the SER will investigate whether it is possible to develop a fixed reporting format for companies to submit the data, in order to ease the double reporting requirement.

Exemption group companies
Group companies are exempted from the above mentioned obligations if the top holding company sets Target Figures for their group companies, includes them in their Target Plan and in connection thereto reports to the SER.

Current status legislative proposal
It is unknown if and when these diversity rules come into force, as the legislative Proposal still needs to be discussed and adopted by the House of Representatives and the Senate.

The full text of the legislative Proposal of November 6, 2020 can be found here (available in Dutch only):
https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/kamerstukken/2020/11/05/voorstel-van-wet-inzake-evenwichtige-man-vrouwverhouding/wvs+m-v+verhouding.pdf

The full text of the explanatory notes to the legislative Proposal can be found here (available in Dutch only):
https://www.rijksoverheid.nl/binaries/rijksoverheid/documenten/rapporten/2020/10/29/tk-mvt-inzake-evenwichtige-man-vrouw-verhouding-in-de-top-van-het-bedrijfsleven/tk-mvt-inzake-evenwichtige-man-vrouw-verhouding-in-de-top-van-het-bedrijfsleven.pdf

For more information, please contact:

Rachelle Giller

Rachelle Giller

Anna Zhu

Anna Zhu

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