On 5 November 2019, the legislative proposal implementing the second shareholder rights directive in the Netherlands was approved by the Dutch senate. The bill's entry into force is expected shortly, considering the fact that the implementation deadline has already passed. The new legislation holds important changes with respect to companies' remuneration policy and remuneration accountability. The bill also contains rules on related party transactions and on transparency obligations for institutional investors and proxy advisers.
Directors' remuneration forms an important part of the bill. Listed companies will be obliged to provide a detailed and clear account of their remuneration policy and to publish such policy on their website. The remuneration policy must be tabled for general meeting approval every four years. This approval, except insofar as the articles provide otherwise, requires a special resolution (3/4 majority of votes cast). Companies will also be obliged to produce and publish a remuneration report, discussing the effectiveness of the remuneration policies implemented. This remuneration report must be available on the company website for ten years and must be put up for (advisory) approval by the general meeting. In large companies ('structuurvennootschappen'), both listed and non-listed, the works council representative on the supervisory board will automatically form part of the remuneration committee.
Related party transactions
The implementation bill also includes transparency rules regarding related party transactions, i.e. transactions with related parties not forming part of the normal course of business and agreed under normal market conditions (at arm's length). The company must publish all related party transactions as they occur. Related party transactions must also be approved by the supervisory board (or the non-executive directors in case of a one tier board).If a related party transaction was agreed as part of the normal course of business and did qualify as at arm's length, the company must periodically review these transactions internally, that is without publishing information regarding these transactions.
Institutional investors and proxy advisers
Also, the bill contains rules on transparency for institutional organisations, more specifically life insurance companies, pension funds and asset managers. Said organisations – insofar as they invest directly or indirectly in shares listed on a European exchange – will be obliged to publish their investment strategies as well as their engagement strategies regarding the companies they invest in. Moreover, institutional investors will be obliged to publish information regarding the contractual arrangements between them and their asset managers, except when they explain why they deviate from this obligation (comply or explain).
Lastly, the implementation bill contains certain rules regarding shareholder identification in custody chains and regarding electronic voting by shareholders in listed and non-listed companies.