One-tier liability – A comparative study of liability of non-executive
directors in a one tier board structure –
Supervisor: Prof. Dr. A.F.M. Dorresteijn By: O.J.N. van Haastrecht Student no: 0456039 Master: Transnational Commercial Legal Practice, Utrecht University
2
Table of Content
1. Introduction
1.1. European Company law, “the flood”.
1.2. Scope of this thesis.
1.3. The Plan to Move Forward.
1.4. The SE, or European Public Company.
2. One-tier in a European perspective
2.1. One-tier board structure?
2.2. Tasks and liabilities of a non-executive director in a one-tier board structure.
2.2.1. Tasks
2.2.2. Liability
2.3. Requirements and consequences of utilizing an SE.
3. The German legal system
3.1. Requirements for an SE registered in Germany, after implementation of the
SEAG.
3.1.1. General standard of care
3.1.2. Liability
3.1.3. Negligence
3.1.4. Individual tasks
3.2. Consequences of utilizing an SE registered in Germany.
3
4. The Dutch legal system
4.1. Requirements for an SE registered in the Netherlands, after implementation
of
Bill No. 31763.
4.1.1. General standard of care
4.1.2. Liability
4.1.3. Negligence
4.1.4. Individual tasks
4.2. Consequences of utilizing an SE registered in the Netherlands.
5. Comparative synthesis
5.1. Requirements.
5.1.1. European requirements
5.1.2. German and Dutch requirements
5.1.2.1. German requirements
5.1.2.2. Dutch requirements
5.2. Consequences.
6. Summary and concluding remarks
Bibliography Primary literature
Secondary literature
Statutes
Jurisprudence
Websites.
Appendices
4
1. Introduction
With the birth of the European Union1, and its goal of a unified (internal) European
market, a subsequent need to diminish differences between Member State statutes
arose. In order to – ultimately – achieve an open market, an inherent obligation to
diminish, and ultimately abandon, internal differences concerning national restrictions of
free movement - and establishment - of companies was recognized.
Since the first – hesitant – steps, several Directives, Regulations and Decisions pertaining
to company law have been passed, the most recent of which allows a company to be
transformed into an European company structure in order to be given the option to be
registered in any Member State, whilst retaining its company structure, and without the
necessity of liquidation before relocation becomes an option.
1 The treaty signed in 1957 was the Treaty establishing the European Economic Community (the EEC
Treaty), often referred to as the Treaty of Rome. This treaty was renamed Treaty establishing the
European Community (the EC Treaty) by the Treaty of Maastricht in 1993, and later the Treaty on the
functioning of the European Union (TFEU) by the Treaty of Lisbon in 2009.
5
1.1 European Company law, “the flood”
Several bottlenecks remain regarding European company legislation, that require further
elaboration, such as an exploration into the feasibility of an European legal company
structure, its practicality and its usefulness, but also as to whether such a measure fits-in
with the EC Treaty’s subsidiarity principle;2 all for various and valid reasons. By no means
can the questions that have arisen as to European company law be summarized in a
quick account and – as has been put forward by several authors – European company
law is likely to cause “a ‘tsunami’ of studies and commentaries in legal literature”,3 while
– if further implemented – recent developments may perhaps also cause a revolution of
equal proportions in European company law.
Another question, equally valid and added gleefully to the ever-expanding ‘tsunami’,
concerns the potential of European company law for (ab)use as a vessel for the purposes
of the controversial concept of ‘forum shopping’. One might wonder whether or not the
European Public Company, despite the noblest of ambitions driving its original proposal,
may serve particularly well those who already profit or seek to profit from the regulatory
competition that is already taking place in the EU. While forum shopping in itself is too
broad a topic to dedicate but one research project to, several aspects of it can be
highlighted. Forum shopping opportunities for the European Public Company, provided
for within the SE-Regulation4 itself and under the national rules are particularly relevant
to look into.
2 Article 5 of the Treaty.
3 S.M. Bartman, „The SPE Revolution‟, European Company Law, Volume 5, Issue 6 (2008), p. 270.
4 Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company
(SE), „the SE-Regulation‟. Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute
for a European company with regard to the involvement of employees.
6
1.2 Scope of this thesis
The central research theme of this thesis will be to endeavour a review of the
consequences of forum shopping within the existing rules and highlight the differences
between Dutch and German regulations, concerning liability for non-executive directors,
which apply for the European public company.
More clearly defined;
“What are the differences concerning liability for non-executive directors as a result of
‘forum shopping’?”
The scope of this thesis will be limited, however, to the SE-Regulation and national
statutes concerning5 European public limited liability companies which have opted for a
One-Tier Board structure and will concentrate on liability for non-executive directors. It
will not touch upon other fields of law that are not governed by the aforementioned
Regulations. It is imperative to recognise that a number of issues have not been provided
for in European Regulations6; one can only assume that these will be subject to the
applicable national statutes, especially directors’ liability through various statutes, but
also the whole of labour statutes, statutes concerning taxes and a variety of other legal
issues.
In order to arrive at the most valid conclusion relating to the central question, it is
necessary to first introduce the terms used in this research paper. A short but vital
exploration into the European public company, the SE-Regulation and also the exact
5 Namely: Germany; Gesetz zur Einführung der Europäischen Gesellschaft (SEEG) and the Gesetz
zur Ausführung der Verordnung (EG) 2157/2001 des Rates vom 8. Oktober 2001 über den Statut der
Europäischen Gesellschaft (SE) – SE-Ausführungsgesetz. As well as the Gesetz über die Beteiligung
der Arbeitnehmer in einer Europäischen Gesellschaft – SE-Beteiligungsgesetz. The Netherlands; SE-
Regulation applies and the Wet van 17 maart 2005 tot uitvoering van verordening (EG) Nr. 2157/2001
van de Raad van de Europese Unie van 8 oktober 2001 betreffende het statuut van de Europese
vennootschap (SE) (Uitvoeringswet verordening Europese vennootschap) as well as the National rules
for public limited liability companies, Burgerlijk Wetboek, boek 2. 6 See also: The Societas Europaea (SE) in Europe, A promising start and an option with good
prospects by N. Lenoir, http://www.utrechtlawreview.org/ Volume 4, Issue 1 (March) 2008.
7
meaning of liability of non-executive directors – for the purposes of this research paper –
will be provided in chapter 2. When this clear foundation has been laid down, Chapter 3
will explore the German requirements concerning the use of the European Public
Company structure, followed by the Dutch requirements in chapter 4.
After this, it is imperative to analyze how the Commission has dealt with liability for the
board(s) of the corporate structure, and then look into the underlying discussion, in
order to complete the comparison of one-tier SEs in Germany and the Netherlands. To
this end, chapter 5 will 'compare' notes between the national and European systems of
law and the final chapter will present a short summary of this thesis, the conclusions and
a recommendation for further study.
8
1.3 The Plan to Move Forward
In its Plan to Move Forward7, the EC discussed at length the various topics of European
company law that require revision in light of promoting modernisation and enhancement
of harmonisation of corporate governance within the EU. The EC states that “growing
integration of the single market leads companies increasingly to do business across
national borders within the Union.”8 In any vibrant market the desire for legal entities to,
like citizens of the EU, move freely within the Union is an imperative the EC has not
chosen to ignore.9 Transfers of the corporate seat, as well as cross-border mergers, must
be facilitated through legal instruments presented by the EU. The SE-Regulation provides
for a solid legal instrument on the formation of a truly European company structure, but
the national rules – especially concerning liability – still apply.
Regardless of the implementation of the SE, therefore its impact on the position of non-
executive directors is deemed to be limited. This becomes clear if we consider that the
SE-Regulation only mentions liability in a perfunctory way. Considering that the SE is
unlikely to meet the demands of this particular branch of the business community, “a
new legal precedent at EU level” is the next step to be taken by the EC to serve the needs
of these directors.
7 Communication from the Commission to the Council and the European Parliament - Modernising
Company Law and Enhancing Corporate Governance in the European Union - A Plan to Move
Forward, May 21st 2003.
8 Ibid, page 20.
9 ECJ 9 March 1999, C-212/97 (Centros), ECJ 5 November 2002, C-208/00 (Überseering), and ECJ
30 September 2003, C-167/01 (Inspire Art).
9
1.4 The SE, or European Public Company
‘Every SE shall be an autonomous ship with different shapes and colors, depending on the
home port that is marked upon its funnel.’10
The European Commission has facilitated, through the SE Regulation11, the adoption of
the SE into the legal systems of her Member States12. Since the SE is a public company
with limited liability, it has requirements relating to its board(s)13.
The main characteristics of the SE are determined by the European SE-Regulation14 and
SE-Directive15 giving the SE its body – its nature. Important issues of governance, of the
formation process and of transformation into different corporate forms are, however,
mainly governed by national law.
Provisions governing the SE can be found on two levels: European and national. Article 9
of the SE-Regulation lays down which provisions are applicable to a specific problem of
substantive law. Its first paragraph establishes a hierarchy of norms with five levels.
According to Article 9 (1) (a) of the SE-Regulation, the SE-Regulation is at the top of the
hierarchy. The provisions of the SE-Regulation therefore supersede all national statute
within their scope of application whenever there is conflict.
According to the same paragraph,16 second in precedence are provisions in the articles of
association the SE Regulation explicitly allows for.
However, the provisions of the SE-Regulation and the stipulations of the articles of
association do not cover all areas of governance; they are incomplete.
In order to ensure an effective application, the SE-Regulation therefore expressly allows
and sometimes even requires the Member States to enact national statute applicable to
SEs registered in their country.
Which immediately raises the question of how ‘European’ the SE truly is17..
10
Lutter, AG 1990, 413, 414 (translated from German to English). 11
Supra note 4. 12
Ibid, article 9c. 13
Supra note 4, articles 38 and 43. 14
Supra note 4. 15
Directive 2001/86/EC, OJ L 294/22, 10.11.2001, „the SE-Directive‟. 16
Article 9, 1 (b) SE-Regulation.
10
2 One-Tier in a European perspective
2.1 One-tier Board structure.
Two types of structures for corporate governance in public limited liability corporations
appear to dominate; the One-Tier Board structure and the Two-Tier Board structure.
The One-Tier system differs from the Two-Tier system in that the highest authority of
management rests with a – single – administrative organ, rather than – two – separate
management and supervisory boards.18 The structure of corporate governance in
accordance with a One-Tier Board system still comprises three main organs, however;
the shareholders’ meeting, the board of directors and management. The shareholders
are the owner(s) of the company, whilst the directors are in charge of managing the
company. Management of day-to-day affairs is often delegated to sub-board executive
bodies, and it is also common to appoint a US-style CEO,19 who is a member of the board
of directors and is in charge of the sub-board executive organs assigned to
management.20
Essentially, a One-Tier Board structure implies that those exercising the management of
the company belong to the same board as those supervising it. Naturally, this does not
imply that management and supervisors are the same persons; in fact, it would be
advisable not to unite the function of CEO and chairman of the board of directors in one
17
See also: J. Reichert, Experience with the SE in Germany, in: Utrecht Law Review, volume 4, issue
1 (2008): p. 29. Available online via Utrecht Law Review, 2009, http://www.utrechtlawreview.org/, last
consulted: June 27th, 2011.
18 Id.
19 The CEO, or chief executive officer, reports to the board of directors and is in charge of total
management of a common. In the two-tier system, the term „chief executive officer‟ may refer to the
person presiding over the executive board, counterpart of the chairman presiding over the supervisory
board. Further reading: L. Donaldson, J.H. Davis, Stewardship Theory or Agency Theory: CEO
Governance and Shareholder Returns, in: Australian Journal of Management, volume 16, issue 1
(1991): pp. 49-65. Available online via The Australian Journal of Management, July 2008,
http://www.agsm.edu.au/eajm/, last consulted: June 27th, 2011.
20 P. Mäntysaari, Comparative Corporate Governance: Shareholders as a Rule-maker, Berlin (2005):
p. 399.
11
and the same person.21 To keep a separation intact within the company, the company
will ensure that the CEO is not ‘all-powerful’ in the sense that the person acting as CEO
will not be left to ‘supervisor’ himself. Keeping these roles separate is becoming
increasingly popular in the UK, where – as of 2003 – 95% of listed companies maintain
such a division, compared to less than 50% in 1985.22 In the US, this separation is much
less popular, namely because there is no corporate governance code that requires it.23
The board of directors in a one-tier structure is charged with providing the
entrepreneurial leadership of the company within a framework of control and risk-
assessment and –management. The board of directors is also responsible for ensuring
that the company’s obligations towards its shareholders are met and review of
management performance.24 To this end, most companies make a distinction between
executive and non-executive members of the board, where the executives are primarily
responsible for providing the aforementioned entrepreneurial leadership, and the non-
executives scrutinize the performance of the executives, posing a prime role in their
appointment and removal if necessary.25 This voluntary distinction, however, is entirely
different from the mandatory supervisory board in a Two-Tier structure in the sense that
appointment of the board of directors is usually carried out by the shareholders’
meeting, whereas the appointment of the supervisory board is usually carried out
21
For example, the Dutch Corporate Governance Committee, responsible for the principles of good
corporate governance in the Netherlands, strongly advises against this unification. See: III.8.1 of the
Corporate Governance Committee [Tabaksblat Committee], The Dutch corporate governance code:
Principles of good corporate governance and best practice provisions, December 9, 2003, via.
Monitoring Commissie Corporate Governance Code, De Nederlandse Corporate Governance Code,
September 15, 2008, available online via: Monitoring Commissie Corporate Governance Code,
December 10, 2008, http://www.commissiecorporategovernance.nl/, last consulted: June 27th, 2011.
Additionally, the English Financial Reporting Council also advises strongly against such unification,
requiring companies that do not comply to this principle to report to the council their motives. See: A.2
of the Financial Reporting Council, The Combined Code on Corporate Governance, June 29, 2008,
available online via: Financial Reporting Council, 2009, http://www.frc.org.uk/index.cfm, last consulted:
June 27th, 2011. Indeed, after implementation of a new statute in the Netherlands, it is prohibited to
appoint ANY executive director as chairman of the board, article 2:129a (1) DCC. 22
A. Kakabadse, N.K. Kakabadse, R. Barratt, Chairman and Chief Executive Officer (CEO): That
Sacred and Secret Relationship, November 4, 2006: pp. 7-10, via: Cranfield CERES, 2007,
https://dspace.lib.cranfield.ac.uk/, last consulted: June 27th, 2011.
23 Id.
24 Financial Reporting Council, op. cit., para. A.1.
25 Id.
12
through shareholders and employees alike, and appointment of management is usually
carried out by the supervisory board itself.26
Therefore, a One-Tier Board structure places more tasks and responsibilities within the
board of directors, uniting management and supervision in one board. This brings about
the necessary changes in appointment and responsibility when compared to a Two-Tier
Board structure. Besides this difference relating to structural issues, a One-Tier system
also alters the manner in which management and supervision function and interact,
simultaneously altering the division of responsibilities and – more importantly – liability.
26
Methods of appointment of members of the board of directors in a One-Tier Board structure on the
one hand, and appointment of members of the supervisory board and executive board on the other,
may vary depending on the respective companies‟ statutes and the jurisdiction of the country in which
they hold office, which is an entirely different discussion altogether. Further reading: P. Mäntysaari, op.
cit.: pp. 397-401, 407-409.
13
2.2 Tasks and liabilities of a non-executive director in a one-tier board structure.
In order to be able to concentrate on respectively tasks and liabilities, I will review the
subjects independently.
2.2.1 Tasks
Since experience with a One-Tier Board structure in the UK has been more crystallized,
as compared to other countries, and for having been under extensive scrutiny during the
last years I will draw from the accumulated experience of several committees in the UK.
Higgs27 has identified different approaches to the tasks of a non-executive director.
Leaning heavily on reports issued by different committees he highlights that: “the main
role of non-executive directors is twofold;
As regards the role played by non-executive directors, the Cadbury Committee
made the following observations28:
4.4 Whilst it is the board as a whole which is the final authority, executive and non-
executive directors are likely to contribute in different ways to its work. Non-executive
directors have two particularly important contributions to make to the governance
process as a consequence of their independence from executive responsibility.
Neither is in conflict with the unitary nature of the board.
27
Derek Higgs, Review of the role and effectiveness of non-executive directors, January 20, 2003: pp.
3-4 available online via: http://www.berr.gov.uk/files/file23012.pdf , last consulted: June 28th, 2011.
28 The Cadbury Report, formally entitled „The Report of the Committee on the Financial Aspects of
Corporate Governance‟ was published in December 1992, following the recommendations of the
Cadbury Committee. The establishment of the Committee in May 1991 by the Financial Reporting
Council, the London Stock Exchange, and the accountancy profession arose in response to the
occurrence of financial scandals in the 1980‟s involving UK listed Companies, which led to a fall in
investor confidence in the quality of company‟s financial reporting. available online via:
http://www.ecgi.org/codes/documents/cadbury.pdf , last consulted: June 28th, 2011.
14
4.5 The first is in reviewing the performance of the board and of the executive. Non-
executive directors should address this aspect of their responsibilities carefully and
should ensure that the chairman is aware of their views. If the chairman is also the
chief executive, board members should look to a senior non-executive director, who
might be the deputy chairman, as the person to whom they should address any
concerns about the combined office of chairman/chief executive and its consequences
for the effectiveness of the board. A number of companies have recognised that role
and some have done so formally in their Articles [of association, red.].
4.6 The second is in taking the lead where potential conflicts of interest arise. An
important aspect of effective corporate governance is the recognition that the specific
interests of the executive management and the wider interests of the company may
at times diverge, for example over takeovers, boardroom succession or directors’ pay.
Independent non-executive directors, whose interests are less directly affected, are
well-placed to help to resolve such situations.”
The Hampel Review29, six years later30, observed:
“3.8 Non-executive directors are normally appointed to the board primarily for their
contribution to the development of the company’s strategy. This is clearly right. We
have found general acceptance that non-executive directors should have both a
strategic and a monitoring function. In addition, and particularly in smaller
companies, non-executive directors may contribute valuable expertise not otherwise
available to management; or they may act as mentors to relatively inexperienced
executives. What matters in every case is that the non-executive directors should
29
The Hampel Report (January 1998) in 1998 was designed to be a revision of the corporate
governance system in the UK. The remit of the committee was to review the Code laid down by the
Cadbury Report (now found in the Combined). It asked whether the code's original purpose was being
achieved. Hampel found that there was no need for a revolution in the UK corporate governance
system. The Report aimed to combine, harmonise and clarify the Cadbury and Greenbury (which
addressed a growing concern about the level of director renumeration) recommendations,. available
online via: http://www.ecgi.org/codes/documents/hampel_index.htm , last consulted: June 28th, 2011.
30 Higgs has published a review several times. The original one dating from 1992. The author,
however, has utilized the Higgs review from 2003.
15
command the respect of the executives and should be able to work with them in a
cohesive team to further the company’s interests.”
In short, Higgs and Hampel viewed the non-executive director’s role as:
• making contributions to corporate strategy;
• monitoring the performance of executive management;
• satisfying themselves regarding the effectiveness of internal control;
• setting the remuneration of executive directors; and
• being involved in the nomination, removal and succession planning of senior
management.
This was integrated in the FRC Combined Code of Corporate Governance,31 which stated that
The effective non-executive director:
_ upholds the highest ethical standards of integrity and probity;
_ supports executives in their leadership of the business while
monitoring their conduct;
_ questions intelligently, debates constructively, challenges rigorously
and decides dispassionately;
_ listens sensitively to the views of others, inside and outside the
board;
_ gains the trust and respect of other board members; and
_ promotes the highest standards of corporate governance and seeks
compliance with the provisions of the Code wherever possible.
After several more reviews, the FRC published its revised combined code, to be applicable to
financial years beginning on or after 29 June 2010.32
31
The FRC Combined Code of Corporate Governance, version 2003, available online via:
http://www.ecgi.org/codes/documents/combined_code_final.pdf, last consulted June 28th 2011.
32 Information provided online via: http://www.frc.org.uk/corporate/ukcgcode.cfm, last consulted June
28th 2011.
16
Without going into the complete text33 provided by this council, the findings of them can be
summed up as follows:
The Tasks of a non-executive director in a one-tier board structure. Non-executive Directors’ main principle as part of their role as members of a unitary board,
should constructively challenge and help develop proposals on strategy.
Non-executive directors should scrutinize the performance of management in meeting
agreed goals and objectives and monitor the reporting of performance. They should satisfy
themselves on the integrity of financial information and that financial controls and systems
of risk management are robust and defensible. They are responsible for determining
appropriate levels of remuneration of executive directors and have a prime role in
appointing and, where necessary, removing executive directors, and in succession planning.
33
Available online via:
http://www.frc.org.uk/documents/pagemanager/Corporate_Governance/UK%20Corp%20Gov%20Cod
e%20June%202010.pdf, last consulted June 28th 2011.
17
2.2.2 liability
As was identified, directors owe duties to their respective companies to act with care
and skill, whereby the onset of insolvency brings additional vigilance duties into
operation, with the touchstone for liability being a failure to take appropriate steps to
preserve the availability of assets to ensure fulfillment of debt to the company’s
creditors.
Liability is, however, still a matter to be decided – and enforced – through national
legislation. Neither the SE-Regulation34 nor the Insolvency-Regulation35 have sought to
harmonise different applicable statute when dealing with liability in matters of
insolvency. As a result, liability for ‘common’ shortcomings in duties, by directors, will
have to be settled through national means by – national – civil action proceedings.
However, the SE-Regulation does present an interesting principle, through which liability
can be established. “An SE must be efficiently managed and properly supervised. It must
be borne in mind that there are at present in the Community two different systems for
the administration of public limited-liability companies. Although an SE should be
allowed to choose between the two systems, the respective responsibilities of those
responsible for management and those responsible for supervision should be clearly
defined.”36
As will become apparent, any responsibility, which is not clearly delegated to a director,
becomes the responsibility – and liability – for any and all directors...
34
Pre amble 20, SE-Regulation. 35
Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, OJ L 160/1
[Insolvency-Regulation], available online via:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:160:0001:0018:en:PDF,
last consulted: June 28th, 2011.
36 Pre amble 14, SE-Regulation, underscoring by author.
18
2.3 Requirements and consequences of utilizing an SE.
Why is the formation of a Societas Europaea (SE) of importance to the structure of the
company? In an internal European market, few companies limit their economic activities
to one country. The advantages of a truly international corporate structure would
therefore seem to be self-evident.
The SE is currently the most European of European corporate structures notwithstanding
that it borrows extensively from the statute(s) concerning public limited liability
companies in the Member State where its registered office is situated. It is not
fundamentally different from existing companies therefore, but it represents a
“European legal form of a specific and Community nature”,37 the legal personality of
which departs from solely national issues.38
The need for a supra national corporate structure was felt, at the Community level, and
is still emerging, on the corporate side, in order to be able to be dealt with as a single
(cost) entity,39 thereby reducing the ((hidden double-) cost40) obligations of companies,
as well as facilitating international mergers and ownership. On the Community side it is
another means of further harmonising different systems of national statute.41
37
According to the Judgment of the European Court of Justice in Luxembourg. See: ECJ, European
Parliament against the Council of the European Union, May 2, 2006, C-436/03. 38
N. Lenoir, The Societas Europaea (SE) in Europe: a promising start and an option with good
prospects, in: Utrecht Law Review, volume 4, issue 1 (2008); p. 31. Available online via Utrecht Law
Review, 2008, http://www.utrechtlawreview.org/publish/articles/000057/article.pdf, last consulted: June
28th, 2011.
39 See the Judgment of the European Court of Justice from February 25
th 2010, Case C-337/08, X
Holding BV v Staatssecretaris van Financiën, in which the Dutch authorities refused to grant the status
of single tax-entity to a domestically based company, and apparently are entitled to withhold this status
under articles 43 and 48 of the EC-Treaty. Available online via: http://eur-lex.europa.eu,
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62008J0337:EN:HTML, last consulted:
June 28th, 2011. For a more elaborate viewpoint on this, see also: F. Bolkestein, „The New European
Company: Opportunity in Diversity‟ in J. Rickford (ed.), The European Company, Developing a
Community Law of Corporations (Intersentia, 2003) at 43–44. It is worth pointing out that, unlike earlier
drafts, the Statute lacks any tax provisions at the EU level. Indeed, the tax position of the SE is
identical to any other national public limited company. See B. J. M. Terra and P. J. Wattel, European
Tax Law (Kluwer, 2001) at 429–430. 40
Id. 41
SE-Regulation, pre-amble points 1, 4 and 6.
19
One of the important advantages of the SE lies in the fact that no type of board structure
is mandatory.42 Therefore, a choice between a One-Tier and a Two-Tier Board structure
is entirely left to the discretion of ‘the owners’,43 enabling companies to continue to
function, after formation/merger into an SE, with a board structure that has already
proven to be effective for the respective companies, whilst, at the same time, utilizing a
supra national corporate structure.44
No dramatic changes can be foreseen because of this freedom of choice, as can be
concluded from the absence of a ‘torrent’ of transformations of existing corporate
structures into an SE.
National rules for corporate structure do not apply completely to the SE structure. For
instance the number of supervisory board members is not pre-determined. In the case of
companies, registered in Germany, this would almost certainly lead to a reduction of
supervisory board members.45
Also, national rules usually are more stringent than the provisions of the SE-Regulation,
with regards to representatives, (temporary) replacement of board members, liability,
etc.
However, to draft an international Regulation is to draft a compromise, and although the
SE-Regulation leans heavily on Germanic corporate legislation,46 the freedom of choice
42
As well as facilitating the single cost entity, supra footnote 40. 43
Article 38 (b) SE-Regulation. 44
After implementation of Bill no. 31763 in the Netherlands this choice can equally be made by
existing public (and private) limited liability companies. No doubt to keep national corporate structures
competitive. I will elaborate on this further in chapter 4. 45
Approximately 40% of all SEs in Europe nowadays were originally German companies. This can be
explained as the SE statute is inspired by German Company law and therefore more easily promoted
in Germany. Additionally and most importantly, the adoption of the statute allows groups to soften the
rules on collective co-determination by limiting the number of members of respectively the supervisory
board in a two-tier board structure or the management board in a one-tier board structure. N. Lenoir,
op. cit.: p. 3. 46
See for instance; Sebastian Mock, Harmonization, Regulation and Legislative Competition in
European Corporate Law, 3 German Law Journal (2002). Available online via:
http://www.germanlawjournal.com/index.php?pageID=11&artID=216, last consulted: June 28th, 2011.
And, more recently, Manuel Echenique Sanjurjo, Catalina Chalbaud Castellanos, The European
company: practical usefulness today, Butterworths Journal of International Banking and Financial Law,
20
for a One-Tier or a Two-Tier Board structure enables companies to streamline their
boards and complete structure to operate on a more efficient level, throughout the
entire European Community.
The consequences of opting for an SE therefore purport more freedom to establish a
company according to a company’s ‘best practice’ requirements. Less mandatory
requirements to be fulfilled on a day-to-day operation, as well as other advantages..47
October 1
st, 2010. Available online via: http://www.uria.com/eng/publications/art.asp?id=432, last
consulted: June 28th, 2011.
47 E.g. no need to liquidate a company before being able to move its registered seat to another
country, for various reasons. This, however, lies beyond the scope of this thesis.
21
3 The German legal system
In order to identify liability of non-executive directors, an understanding of the
requirements under German statute is necessary. First, a walkthrough of German
requirements will be undertaken, followed by the consequences of using an SE
registered in Germany for liability of non-executive directors.
Traditionally, the legal system of Germany is based on codified law.48 The German public
limited liability company (Aktien Gesellschaft, hereafter AG) is originally governed by the
rules, laid down in the German Civil Code (Bürgerlichen Gesetzbuch of 1900, hereafter
BGB). The BGB is influenced both by Roman and German legal traditions.49
More specifically, the AG is governed by the rules laid down in the public companies act
(Aktiengesetz, hereafter AktG).50 Through its various penal and repentance regulations it
can even be said to be a part of the (secondary) German Criminal Code (Nebenstrafrecht
bei dass Strafgesetzbuch, StGB).
With the implementation of the SE,51 and given the German tradition of implementing
European Law into its own system of laws, by drafting separate acts, new legislation was
necessary to allow the SE to be recognized in Germany.52 This became the SE
implementation act (SE-AusführungsGesetz,53 hereafter SEAG54). For an SE with a Two-
Tier Board structure, little differences with a ‘normal’ public limited liability company –
governed by the AktG – are discernable. However, for the One-Tier Board structure, a
48
As opposed to countries in which laws are implemented through „court-based‟ rules. However
interesting it is to compare laws and their development between these systems of law, elaboration
would be beyond the scope of this thesis. 49
This influence is recognized, but it would be beyond the scope of this thesis to elaborate further on
this, however. 50
Aktiengesetz vom 6. September 1965 [AktG] (BGBI). I S. 1089), full entry into force: September 6,
1965, as amended December 8, 2008 (BGBI. I S. 2369). Available online via: Bundesministerium der
Justiz, 2009, http://bundesrecht.juris.de/, last consulted: June 28th, 2011.
51 Supra note 4.
52 See note 57.
53 Gesetz zur Ausführung der Verordnung (EG) Nr.2157/2001 des Rates vom 8.Oktober 2001
über das Statut der Europäischen Gesellschaft (SE), SE-Ausführungsgesetz (SEAG). Available online
via: Bundesministerium der Justiz, 2009, http://bundesrecht.juris.de/, last consulted: June 28th, 2011.
54 Sometimes even referred to as the SEEG, the author uses the term SEAG, however.
22
structural change from the compulsory55 Aufsichtsrat (management board) and the
Vorstand (supervisory board) was needed..
55
Vierter Teil, Abschnitt 1, 2, and 4 AktG.
23
3.1 Requirements for an SE registered in Germany, after implementation of the
SEAG.
The AktG requires all AGs to operate with a management board, a supervisory board and
a shareholders’ meeting.56 However, with the implementation of the SE, the compulsory
Two-Tier Board structure in Germany, with its division into a management board
(Vorstand) and a supervisory board (Aufsichtsrat) had to be expanded to include to right
to opt for a One-Tier Board, in case of an SE registered in Germany. As was already
highlighted, instead of re-writing the entire AktG, the Germans have adopted this
European Regulation,57 into a new statute. The SEAG therefore states that an SE can opt
for a One-Tier Board structure58.
Identification of changes between requirements for an AG and requirements for an SE
registered in Germany has been undertaken in a step by step ‘journey’.59 To avoid
unnecessary lengthening of this thesis, only the changes of direct connection to liability
of non-executive directors will be presented here.
Furthermore, to assist the key point, the most important changes have been arranged in
the following matrices. All relevant articles of legislation are listed in Appendix I.60
Moreover, and in order to further aid understanding of the differences between the
statutory situation before the implementation of the SE, the following comparison will
be presented in a ‘before’ and an ‘after’ description. Whilst ‘before’ is intended to
56
Id. 57
See for an interesting opinion on this subject; European Court of Auditors - Opinion 3/2005 -
(05/12/2010). Available online via: http://www.dirlab.eu/news-detail.asp?clid=212, last consulted: June
28th, 2011. And also; Judgment of the Court (Second Chamber) of 18 July 2007, Commission of the
European Communities v Federal Republic of Germany, Case C-503/04. Available online via:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2007:211:0002:0002:EN:PDF,
last consulted: June 28th, 2011.
58 In fact they have devoted an entire paragraph to this “monistisches system”, Unterabschnitt 2
SEAG. More specifically, § 20 states that when an SE chooses to be governed by a one-tier board
structure, articles 76 to 116 will not be applicable and instead the following rules will apply. “Wählt eine
SE gemäß Artikel 38 Buchstabe b der Verordnung in ihrer Satzung das monistische System mit einem
Verwaltungsorgan (Verwaltungsrat), so gelten anstelle der §§ 76 bis 116 des Aktiengesetzes die
nachfolgenden Vorschriften.” 59
See Appendix I. 60
Id.
24
describe the statutory situation when only an AG was allowed as a means to utilize a
public limited liability company, with a compulsory Two-Tier Board structure, and ‘after’
describes the statutory situation when adoption of the SE statute enabled public limited
liability companies to opt for a One-Tier as well as a Two-Tier Board structure.61
3.1.1. General standard of care
Conclusion
Since the SEAG is silent on the general standard of care to be taken into account for non-
executive directors, it would seem that the “non-managing directors” currently operate
in a ‘void’, as a result of the fact that ‘their’ general standard of care is not codified. This,
however, is not the only omission, as will become evident when reviewing the individual
tasks.62
61
Always keeping in thought that „before‟ a One-Tier Board structure was prohibited for public limited
liability companies in Germany of course. Although this „option‟ is still – and expressly – forbidden for
ALL German public limited liability companies, see § 92 AktG. 62
See chapter 3.1.4.
board before after
Vorstand
The general standard of care to be taken into account by the directors is that of a diligent and prudent manager, whilst at the same time having a duty of confidentiality.
Aufsichtsrat
All members of a supervisory board are required to act in the (best) interests of the company and in the (best) interests of the employees; regardless of by whom they were nominated. They are subject to a comparable duty of care and confidentiality as applies to the directors.
Verwaltungsrat
The managing directors are responsible for the day-to-day administration of the company, whereas, if more than one director has been designated managing director, in conjunction with the other managing directors. The articles of association can determine to deviate from this point, although a deviation from statutory obligations for the Verwaltungsrat is to be considered null and void.
25
3.1.2. Liability
board before after
Vorstand
The directors are liable if they mismanage the company or act in breach of their duties or the articles of association of the company. This liability is thwarted if they acted in a valid manner of conduct to the company, or if the company waives liability. The waiving of liability can only be done after a period of three years has expired, and general liability expires after a period of five years.
Aufsichtsrat
The members of the supervising board have an equal duty as the members of the managing board. Moreover, the members of the supervising board have an extra care concerning non-disclosure of confidential briefs and meetings.
Verwaltungsrat
The rules concerning liability if they mismanage the company or act in breach of their duties or the articles of association of the company are applicable mutatis mutandis for the Verwaltungsrat.
Conclusion
No change here, apart from the fact that whereas the ‘old’ supervisory board had an
extra care concerning non-disclosure, compared to the ‘new’ board which seems to have
lost this extra care.
26
3.1.3. Negligence
board before after
Vorstand
If the directors were grossly negligent in their duty of care, creditors, who cannot obtain satisfaction of the company, are entitled to sue the directors.
Aufsichtsrat
According to German case law, the supervisory board is also competent to institute proceedings against the managing board for breaches of duty and in such cases inactivity of the supervisory board may constitute a breach of their own duties in relation to the company.
Verwaltungsrat
The same rules concerning duty of care and liability apply to each member of the Verwaltungsrat, as are laid down for members of the Vorstand. Any obligation, which isn’t specifically mentioned in this statute [SEAG, red], but otherwise constitutes an obligation for members of the Vorstand or the Aufsichtsrat, is to be considered inherent for the Verwaltungsrat.
Conclusion
A dramatic shift in liability can be discerned here. Whereas the ‘old’ supervisory board
only had a duty to institute proceedings or be held accountable for failure to do so, all
members of the ‘new’ board now face equal – and individual – liability for negligence
that the company is unable to satisfy. Furthermore, any obligation not specifically
mentioned in the SEAG statute, should be considered inherent. Thereby further
enhancing – individual – liability.
27
3.1.4. Individual tasks
Conclusion
Here, a further extension of liability is established. Whereas members of the ‘old’
supervisory board were expressly forbidden to let themselves be represented in the
fulfillment of their tasks, members of the ‘new’ board appear to be able to let
themselves be represented by replacements. The ‘void’, identified earlier extends
further because of the omission of any specification of individual tasks and a duty of care
for non-executive directors.
As a result, both negligence and liability extend further under the statute concerning the
SE, as compared to the situation under the ‘old’ statute concerning the AG. The
identified ‘void’ and the fact that any obligation not specifically mentioned in the SEAG is
to be considered inherent for the Verwaltungsrat will without doubt extend individual
liability for non-executive directors even further and will most certainly lead to extensive
jurisprudence.63
63
More changes than reviewed here and in the appendices were identified. Their discussion would fall
outside the scope of this research, however.
board before after
Vorstand
All competence, duties and (possible) liability are equally applicable for representatives of the management board.
Aufsichtsrat
No member of a supervisory board is allowed to let himself be represented in the fulfillment of his tasks.
Verwaltungsrat All obligations of the managing directors apply
equally for their substitutes.
28
3.2 Consequences of using an SE in Germany.
Early in 2009 two students set out to identify differences between One-Tier and Two-Tier
Board structures, as they were put in practice in the UK and Germany.64 Since some of
their conclusions can be applied in this thesis, I will borrow some of these findings.
“In Germany the Two-Tier system applies. Therefore, the managing
(administrative) board is supervised by the supervisory board. Whereas the
supervisory board only has a supervising function. However, this has
changed of late into a supervising combined with a consultancy function.
More recently, the role of the supervising board has been strengthened even
further because of changes in the AktG, whereby optional possibilities to define
transactions which were subjected only to its agreement have now changed into
obligatory possibilities. They have to hold meetings more frequently as a result.
Due to this amendment, the supervisory board is able to advice, to direct
and to participate in management decisions. The enlargement of
possibilities to supervise does carry the inherent danger of too much
influence on the management of the company. This is expressly forbidden.65
The question of independence of the two boards is something to be regarded
closely because of the mandatory division. For instance, a common practice
– under both the One-Tier and Two-Tier systems – is to make stock
exchange announcements as soon as the board of directors makes a decision
requiring disclosure. In Germany this legal situation means that a decision
has to be disclosed even if the supervisory board has not yet approved it.
This makes it difficult for the supervisory board to change a decision
already implemented by the managing board.
64
Q. van Dinteren & O. van Haastrecht, One-tier vs. two-tier – a comparative analysis –, paper 19
January 2009, University of Utrecht. 65
§ 111(4) AktG.
29
Through recent changes, the German legislator has diminished this
danger and even tried to incorporate one the main advantages of a One-
Tier system by obligating the supervisory board into a more active role of
consultancy whilst at the same time reminding all boards that a
symbiosis of the two boards is unwanted as well as illegal.”
The changes in legislation in Germany have culminated into a convergence of two
(previously mandatory) separate boards, if a company wishes to transform its structure
from an AG into an SE. Liability for non-executive directors has shifted rather
dramatically, consequently.
This can be illustrated further by looking at the changes in Germany, if a company wishes
to transform its structure from an AG into an SE.
1. Whereas there were two (mandatory) boards now only one board could remain,66
thus diminishing the number of board participants involved.
2. Whereas the numbers of participants in both boards were only limited to a
compulsory minimum, maximum numbers of participants have now been
established, thereby – possibly – further reducing the number of participants. The
less board participants involved within the management board of a company, the
higher the (individual) liability will become.67
3. Whereas a general supervision was prescribed under the rules of the AktG, the SEAG
specifically mentions a right to be informed fully, and simultaneously establishing
more responsibility and therefore liability. In line with this right is an obligation to
inform the other members of the Verwaltungsrat more diligently and frequently.68
4. Moreover, the right to empower certain specific persons with powers of
representation will automatically and equally extend liability to said persons.
66
§76(2), § 77(2)(3), § 78 (2), § 95 and 96 AktG, as well as § 23 (1) SEAG. 67
Id. 68
§ 47 (2) SEAG.
30
5. The role of the non-executive directors has been further elevated by establishing a
mandatory majority of said directors compared to executive directors.69
6. Furthermore, all members of the Verwaltungsrat have a general duty to safeguard
the prosperity of the company, whereas this was a specific task of the Vorstand and
only in exceptional cases a duty of the Aufsichtsrat.
7. Finally, all obligations for executive directors have been stated as being applicable to
their substitutes. Although this change cannot be said to influence liability too much,
because this ‘expanded’ applicability of obligations was already in place under the
rules for the AktG.
Given these changes, an increase of individual liability can be identified as being inherent
when an AG transforms itself into an SE and opts for a One-Tier Board structure. This
equally increases liability for non-executive directors, as compared to liability for
members of the traditional supervisory board. The consequences of which will be
expanded on further in the comparative synthesis...70
69
§ 40 (1) SEAG, 2nd
sentence. 70
See chapter 5.2.
31
4 The Dutch legal system
As is the case with Germany, the Netherlands are also a country in which, traditionally,
the legal system is based on codified law.71 Companies, registered in the Netherlands
are governed by the rules, laid down in the Dutch Civil Code (Burgerlijk Wetboek of 1994,
BW, hereafter DCC). The DCC is equally influenced both by Roman and German law
traditions.72
More specifically, the Dutch public limited liability company NV (Naamloze
Vennootschap,73 hereafter NV) is governed by the rules laid down in the corporate
bodies act (DCC, book 2, concerning Corporate Bodies74). However, unlike its German
counterpart, this act is not governed by criminal law per se, although various
government agencies can impose strict fines for not conforming to national legislation,
and its (human) perpetrator is still punishable under criminal law.
With the implementation of the SE,75 and given the Dutch tradition of implementing
European Law into its own existing76 system of laws, legislative changes were necessary
to allow the SE to be recognized in the Netherlands. This became the Statute for the
implementation of the Regulation concerning the SE (Uitvoeringswet verordening
Europese vennootschap).77
Apart from stating that certain rights are equally applicable for the SE in the
Netherlands,78 the most important article in this statute is article 23, which makes the
71
Supra note 49. 72
Supra note 50. 73
Comparable to the German AG, the French SA (Société Anonyme) and the plc. (Public Limited
Liability Company) in the UK. To name but a few. 74
Author‟s note: The Dutch refer to their articles of the DCC by making reference of their book
number, followed by the article number. Eg; article 129 of Book 2 would be referred to as: article 2:129
DCC. 75
Supra note 4. 76
Unlike the German tradition of implementing new laws, see also note 58. 77
Statute of March 17th, 2005, for the implementation of Regulation Nr. 2157/2001, concerning the
SE: “Wet van 17 maart 2005 tot uitvoering van verordening (EG) Nr. 2157/2001 van de Raad van de
Europese Unie van 8 oktober 2001 betreffende het statuut van de Europese vennootschap”. 78
See articles 6 (2), 11 (2), 12 and 16 of this statute.
32
appropriate changes of the Dutch Civil Code, to allow for recognition of this corporate
body, whilst simultaneously creating the possibility of opting for a One-Tier Board
structure.79
Simultaneously, the Dutch legislative body felt that in order for companies, founded in
accordance with Dutch statute, to remain competitive with the SE, necessary changes
were equally needed in national legislation. This resulted in Bill No. 31763, “Changes of
Book 2 DCC concerning management and supervision of plc’s and ltd’s” (Wijziging van
boek 2 van het Burgerlijk Wetboek in verband met de aanpassing van regels over bestuur
en toezicht in naamloze en besloten vennootschappen).80
As a Consequence, for an SE with a Two-Tier Board structure, the differences between a
‘normal’ public limited liability company – governed by the DCC – are nigh discernable.81
However, for the One-Tier Board structure, a fundamental shift in liability connected
with the compulsory82 division of executive directors and non-executive directors was
proposed…
79
This was already a possibility in the Netherlands for smaller public limited liability companies but
illegal for larger public limited liability companies. To keep this paper from expanding too excessively,
only large plc's will be focused upon. 80
Bill. 31763, kst-44507. Author‟s note: kst is the abbreviation for “kamerstuk”, which is comparable to
accounts of the legislative body in Common Wealth systems concerning the reading of bills, debating
about them and – possibly – proposing amendments for these bills. 81
Apart from the changes which have been assigned to both the SE and domestic plc‟s. 82
Which follows from the wording of article 2:158 (1) DCC; “The company has a board of non-
executive directors.” Leaving no room to opt for a One-Tier Board. Although it can be argued that a
choice could be made, following article 2:140 (1) DCC, the scope of this thesis will remain focused on
larger NVs, where this division was compulsory.
33
4.1 Requirements for an SE registered in the Netherlands, after implementation
of Bill No. 31763.
As before, a need to understand the requirements under Dutch statute is necessary, in
order to be able to identify (changes in) liability of non-executive directors. As was
performed with the German requirements, a walkthrough of Dutch requirements will be
undertaken, followed by the consequences of using an SE in the Netherlands for liability
of non-executive directors.
The DCC required83 all NVs to operate with a management board, a supervisory board
and a shareholders’ meeting.84 As said, for implementation of the SE-Regulation the
compulsory two-tier board structure had to be abandoned, which culminated in a
Statute to compel the Dutch legislative body to introduce into their existing statutes all
of the necessary changes to ensure correct implementation of the SE-Regulation.85
The nearly simultaneous introduction of Bill no. 31763, produces an interesting
comparison of the requirements for an SE and an option of transforming existing Two-
Tier Boards into a One-Tier Board in companies already founded according to Dutch
statute, as opposed to the situation of a previously mandatory Two-Tier Board structure.
Once more, a step by step ‘journey’ on the requirements for an SE within the
Netherlands has been undertaken.86 In order to assist the key point, the most important
changes have been arranged in the following matrices. All relevant articles of legislation
are listed in full in Appendix II.87 Again, the following will be presented in a ‘before’ and
83
Past tense because this obligation will be altered after implementation of Bill no. 31763, article
2:129a (1) DCC. 84
Article 2: 107 DCC. 85
Id. See also for an interesting opinion on this subject; European Court of Auditors - Opinion 3/2005 -
(05/12/2010). Available online via: http://www.dirlab.eu/news-detail.asp?clid=212, last consulted: June
28th, 2011. And also; Judgment of the Court (Second Chamber) of 18 July 2007, Commission of the
European Communities v Federal Republic of Germany, Case C-503/04. Available online via:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2007:211:0002:0002:EN:PDF,
Last consulted: June 28th, 2011.
86 See Appendix II.
87 Id.
34
an ‘after’ situation description. Whilst ‘before’ is intended to describe the legal situation
when the only option for a large NV was a compulsory Two-Tier Board structure, with a
management board (bestuur) and a supervisory board (raad van commissarissen), and
‘after’ describes the legal situation when the adoption of the SE statute and proposition
of Bill no. 31763 enables public limited liability companies to opt for a One-Tier Board
structure, consisting of a single board of executive and non-executive directors (One-Tier
Board).
In order to facilitate comparative analysis, the same order of identification, as was
undertaken with the German comparison, will be maintained.
35
4.1.1. General duties
Conclusion
In the Netherlands, the non-executive directors seem to be operating in a same ‘void’ as
is the case with non-executives in Germany. They are going to have to face an elevated
standard of care, since both the executive as well as the non-executive directors are
responsible for the day-to-day administration of the company. When discussing the
terms concerning negligence this will become more evident.
board before after
Bestuur
The general standard of care to be taken into account by the directors is that of a diligent and prudent manager whilst at the same time having a duty of confidentiality.
Raad van Commissarissen
All members of a supervisory board are required to act in the (best) interests of the company and in the (best) interests of the employees; regardless of by whom they were nominated. They are subject to a comparable duty of care and confidentiality that applies to the directors.
One-Tier Board
The managing directors are responsible for the day-to-day administration of the company, whereas, if more than one director has been designated managing director, in conjunction with the other managing directors. The articles of association cannot deviate from this point, and any deviation from statutory obligations for the One-Tier Board is to be considered null and void.
36
4.1.2. Liability
Conclusion
No dramatic changes here, since the 'old' rules concerning liability have been deemed
applicable in full for the One-Tier Board. General liability therefore would seem to be
unchanged.
board before after
Bestuur
They are liable in case they mismanage the company, and liability is fixed when the corporation faces bankruptcy, in case they mismanaged the company and the conduct of the management board is a probable cause of its bankruptcy. This liability is thwarted if they acted in a valid manner of conduct to the company. However, the company cannot waive this liability in case of bankruptcy. The liability for misconduct can only cover a period of a maximum of three years preceding a bankruptcy, and the general (internal) liability expires after discharge has been granted by the general meeting. General (external) liability expires after a period of twenty years, although liability for damages as a result of (negligent) conduct expires after a period of five years.
Raad van Commissarissen
The members of the supervising board have an equal duty as the members of the managing board. Moreover, the members of the supervising board have an equal care concerning non-disclosure of confidential briefs and meetings if and when an overriding interest demands this for the benefit of the corporation.
One-Tier Board
The rules concerning liability if they mismanage the company or act in breach of their duties or the articles of association of the company are applicable mutatis mutandis for the One-Tier Board.
37
4.1.3. Negligence
Conclusion
Monumental changes can be identified here. Not only does the 'old' liability for
negligence still apply, it has been expanded to include the 'old' liability that was
applicable for the other board. Thus, both the 'old' liabilities are now applicable to all –
individual – members of the One-Tier Board, regardless of the designated role of the
(non-) executive director. Furthermore, an additional expansion of individual liability can
be identified through the statement that obligations, that aren’t specifically mentioned
in the relevant statutes, as well as the articles of association, are to be considered
inherent for any and all members the One-Tier Board. This extends individual liability to
heretofore and unforeseen heights. Indeed, new obligations that have not even been
board before after
Bestuur
If the directors were grossly negligent in their duty of care, creditors, who cannot obtain satisfaction of the company, are entitled to sue the directors.
Raad van Commissarissen
According to Dutch statute, the supervisory board is also competent to institute proceedings against the managing board for breaches of duty and in such cases inactivity of the supervisory board may constitute a breach of their own duties in relation to the company.
One-Tier Board
The same rules concerning duty of due care and liability apply to each member of the One-Tier Board, as are laid down for members of the Bestuur. Any obligation, which isn’t specifically mentioned in this statute [Statute for the implementation of the Directive concerning the SE, red], but otherwise constitutes an obligation for members of the Bestuur or the Raad van Commissarissen, is to be considered inherent for the One-Tier Board.
38
heard from could therefore become important in establishing liability through
negligence. A rather cryptic description that will most certainly be an important cause of
a “flood” of jurisprudence.
4.1.4. Individual tasks
board before after
Bestuur
All competence, duties and (possible) liability are equally applicable for representatives of the management board.
Raad van Commissarissen
The same is applicable for members of the supervisory board.
One-Tier Board All obligations of the managing directors
apply equally for their substitutes.
Conclusion
Again, an expansion of the individual tasks can be identified. Primarily because all tasks
of managing directors can be executed by their replacements. Furthermore,
replacements for managing directors can be either executive or non-executive, since no
obligation has been established that replacements for executive directors be the same
kind. Coupled with the expansion of – individual – liability for negligence, it is a safe
conclusion that liability has been extended rather dramatically.88
88
More changes were identified. However their discussion would fall outside the scope of this thesis.
39
4.2 Consequences of using an SE in the Netherlands.
The changes in legislation in the Netherlands differ from the changes identified in
Germany because not only have these changes culminated into a right of symbiosis of
two (previously mandatory) separate boards, on account of applicability of the SE-
Regulation, but even more so with regard to the fact that this right has been deemed
applicable to all (public) limited liability companies, regardless of establishment
according to national or European legislation, through introduction of Bill no. 31763.
Liability for non-executive directors of both the SE and NV has shifted spectacularly,
however.
Currently, executive directors and non-executive directors act on separate boards (the
managing board and supervisory board). Any public limited liability company wishing to
opt for a one-tier board,89 must by shareholder vote, amend its articles of association to
reflect this change in its corporate structure. A new feature is that the one-tier board can
be equally implemented by so-called ‘structure regime’ companies,90 which currently are
obligated to utilize two-tier boards.
In keeping with current legislation, both natural and legal persons may be appointed as
executive directors, but only natural persons may be appointed as non-executive
directors. After implementation, the bill limits the number of positions that directors
may hold: a person may not be appointed as (non-executive) director if he holds more
than one supervisory position with a large company,91 and a non-executive director may
not hold more than five supervisory positions92 (where chairmanship is regarded as two
89
In the Netherlands this can be effected, either by transforming the company into an SE or by altering
the articles of association to transform the current board structure of two separate boards into a One-
Tier Board. 90
Structuurvennootschappen, red. 91
Article 2:132a (1)(a) DCC. 92
Article 2:142a (1) DCC.
40
supervisory positions).93 All directors are appointed by the general meeting of
shareholders.
By introducing One-Tier boards, Dutch law permits ‘Anglo-American’ legal functioning of
management. Directors’ liability, however, is (wholly) different from such systems.
Executive directors are in charge of the daily operations of the company. However, both
executive and non-executive directors are responsible for the company’s general course
of affairs. Specific duties can be assigned to one or more directors who can adopt
resolutions required/necessary for the performance of that specific duty. But, certain
tasks may not be assigned to executive directors, including: determining executive
directors’ pay, serving as Chairman of the Board and supervising the performance of
directors’ duties.94
A new conflict of interest rule has also been included in the proposed statute. A
managing director who has a personal conflict of interest95 with a company transaction is
excluded from any deliberations and decision-making with respect to that transaction. If
all managing directors have a conflict of interest, the supervisory board will have to
adopt the resolution. If no supervisory board is installed or the supervisory board
members also have a conflict of interest, then the general meeting will have to adopt the
resolution, except when the articles of association state otherwise.
This new conflict of interest rule outwardly seems to diminish individual liability, but a
more specific set of rules also diminishes the chances of exculpation in case of
negligence. Even though a conflict of interest could exist, this does not prevent a director
of a duty to ensure the best interests of the company. If a need for action is required and
identified by a director with a conflict of interest and the other directors fail to take
action, it could be argued that action by the director with a conflict of interest is
93
Article 2:132a (1)(b) DCC. 94
Article 2:132a (1) DCC. 95
Direct or indirect, although the consequences for establishment of liability and the measure of
liability are currently under review by the legislative powers.
41
required, regardless of this conflict of interest, or be held accountable for failure to take
proper action.
As a result, after implementation of Bill no.13763, each director is liable for any duty not
specifically assigned to other director(s). Duties that are not specifically assigned to one
or more directors are therefore the responsibility of all directors, both executive and
non-executive. And a director can be held liable if a serious fault can be attributed to said
director. A director could, however, exculpate himself if no serious fault can be found on
his part and96 that he was not negligent in preventing the mismanagement from
happening. It is likely that a court will take into account the division of tasks and
allocation of duties when considering directors’ liability, therefore non-executive
directors should still be less likely to face liability claims than executive directors.
However, given the existence of one board only (in particular given the continued
collective responsibility of general affairs), non-executive directors will most likely face a
higher risk of liability than supervisory directors currently serving on the supervisory
boards in a two-tier system.
The Bill still has to be adopted by the Senate.,97 and earlier prognosis anticipated the
new rules to be effective after July the first of 2010. Since this thesis dates from July
2011, and adoption of the Bill has not been effected to date, prognoses are moot at this
point…
Moreover, and because of the magnitude as well as the sheer number of changes, a
brief conclusion will be presented at the end of this chapter.
Listed below are the key changes of the proposed new legislation:98
Creation of a statutory basis for the one-tier board model;
Changes to the rules on liability pursuant to Article 2:9 of the Dutch Civil Code (DCC);
96
Underscoring by author, to point out the fact that director‟s fault can be established through
negligence in preventing mismanagement from happening. 97
Eerste Kamer. 98
More key features are apparent, such as employment status of directors and gender representation.
Because of evident lack of importance for establishing liability, these changes will not be elaborated
upon.
42
New conflict of interest rules, replacing Articles 2:146/256 NCC;
Limitations on the holding by managing directors and supervisory directors of
additional directorships.
If a company opts for the one-tier model, this must be laid down in its articles of
association.
Where a one-tier model has been adopted, the executive directors will be
responsible for the company's day-to-day management. The general course of affairs
of the company will be the responsibility of all the directors, both executive and non-
executive.
All directors will be appointed by the general meeting of shareholders.
The following duties and powers may not be assigned to executive directors: the
determination of the remuneration of executive directors, occupying the position of
chairman of the board, the supervision of the performance by directors of their
duties, the making of nominations (binding or otherwise) regarding the
appointment/reappointment of executive directors and, in the case of structure
regime companies, the power to appoint executive directors.
Subject to the above limitations, it will be possible to assign different duties to
different directors in a one-tier board. Companies that choose to do so are therefore
advised to clearly delineate the duties and powers of each of their directors, to the effect
that determination of which director(s) is/are potentially liable becomes more transparent.
Where a structure regime company has adopted the one-tier model, significant
board decisions, e.g. a decision to make a major investment, will require the approval
of a majority of the non-executive directors.
In addition, it may be useful to briefly look at some of the practices commonly followed
in the UK and the US, for a better insight into the practice of One-Tier Boards.
Dutch statute follows the UK model of separating the roles of CEO and chairman of the
board, promoted by Adrian Cadbury in 1993.99 This model is gradually being introduced
in the US, signaling a departure from the "imperial CEO/chairman" model. In the UK, the
chairman of the board plays a major role in, amongst other things, communication with
the company's shareholders.
99
Supra footnote 28.
43
In both the UK and the US, heavy demands are placed on non-executive directors
with regard to nominations, introduction, training, evaluation, time allocation and
active participation in strategy development and risk management.
UK company boards usually consist of a chairman, four executive directors and five or
six non-executive directors; US boards usually have a CEO (no other executive
directors), a separate chairman and seven or eight non-executive directors.
In the US it is common practice to work through what are known as executive sessions,
i.e. meetings in which only non-executive directors participate and which are held before
and/or after each board meeting. A great deal of emphasis is placed on the importance
of working in committees consisting solely of non-executive directors. It is sometimes
said that company boards in the US are gradually being turned into two-tier or even
seven-tier boards.100
Because of the magnitude of shifting liability, I will briefly point out the differences as a
result of the new liability rules after implementation of bill no. 31763.
Article 2:9 DCC will be changed in order to provide that each director is responsible
for all duties that have not been assigned by law or under the articles of association
to one or more other directors. Therefore, any duties that have not been assigned to
one or more specific directors will be the responsibility of all the directors, both
executive and non-executive. It is advisable, therefore, to clearly define the duties of
each director. Consequently, if proof of serious culpability is identified of failure to
properly perform the duties of the board, this failure will be attributed to all of the
directors in conformity with the principle of collective liability.
Individual exculpation of a director is possible only if he proves that the failure was
not attributable to him and101 that he was not negligent in acting to prevent the
consequences of this mismanagement.
100
Because of the fact that each non-executive director has a team of experts working for himself, or
herself, of which he, or she, is the chief executive director, for lack of a better description. 101
Supra footnote 96.
44
If a director seeks to individually avoid liability on the grounds described above, the
duties and powers assigned to that director will be taken into account in the
assessment of his claim. For this reason, the liability exposure of a non-executive
director may be lower than that of an executive director, but higher than that of a
supervisory director.
Conclusion
After implementation of both the SE-Regulation and Bill no. 31763, non-executive
directors in a One-Tier Board structure are faced with a spectacularly expanded liability
regime through various reasons, the most important of which are an expansion of:
1. General duties;
2. Culpability through negligence; and,
3. Individual tasks.
Because of a less strict separation of duties and a more vague – general – description of
duties, individual liability is likely to expand even further.
45
5 Comparative synthesis
The differences in liability when opting for a one-tier board should be apparent by now.
What are the consequences of ‘forum-shopping’ and which country provides for the
more clearly defined norms for establishment of liability, however?
The answer for which can be determined after clear comparison between European
Directive as well as German and Dutch statutes...
5.1 Requirements
As was outlined in the scope of this thesis,102 in order to more clearly identify the
differences between liability of non-executive directors, a short walkthrough of
European requirements will be highlighted, followed by a reprisal of the specific national
requirements.
102
See chapter 1.2.
46
5.1.1 European requirements
The SE is governed by the rules laid out in the SE Regulation. Therefore, and to determine
who is responsible for what, it is imperative that a start is made by highlighting the relevant
passages. The following passages of the SE-Regulation are of special significance:
“Although an SE should be allowed to choose between the two systems, the respective responsibilities of those responsible for management and those responsible for supervision should be clearly defined.”103
“This regulation does not cover other areas of law such as taxation, competition, intellectual property or insolvency.”104
“In view of the specific Community character of an SE, the “real seat” arrangement adopted by this Regulation in respect of SEs is without prejudice to Member States’ laws and does not pre-empt any choices to be made for other Community texts on company law.”105
“(1) An SE shall be governed:106 (a) By this Regulation, (b) Where expressly authorised by this Regulation or, by the provisions of its
statutes or
(c) In the case of matters not regulated by this Regulation or, where matters are partly regulated by it, of those aspects not covered by it, by:
(i) The provisions of laws adopted by Member states in implementation of Community measures relating specifically to SEs;
(ii) The provisions of Member States’ laws which would apply to a public limited-liability company formed in accordance with the law of the Member State in which the SE has its registered office;
103
SE Regulation, pre-amble 14, underscoring by author. 104
SE Regulation, pre-amble 20, underscoring by author. 105
SE Regulation, pre-amble 27. 106
Article 9 (1)(2) SE Regulation.
47
(iii) The provisions of its statutes, in the same way as for a public limited-liability company formed in accordance with the law of a Member State in which the SE has its registered office.
(2) The provisions of laws adopted by Member States specifically for the SE must be in accordance with Directives applicable to public limited-liability companies referred to in Annex I. ”107
“(1) The administrative organ shall manage the SE. A Member State may provide that a managing director or managing directors shall be responsible for the day-to-day management under the same conditions108 as for public limited-liability companies that have registered offices within that Member State’s territory.”109 “The number of members of the administrative organ or the rules for determining it shall be laid down in the SE’s statutes. A Member State may, however, set a minimum and, where necessary, a maximum number of members. The administrative organ shall, however, consist of at least three members where employee participation is regulated in accordance with Directive 2001/86/EC.”110
“Members of an SE’s management, supervisory and administrative organs shall be liable, in accordance with the provisions applicable to public limited-liability companies in the Member States111 in which the SE’s registered office is situated, for loss or damage sustained by the SE following any breach on their part of the legal, statutory or other provisions inherent in their duties.”112
From these passages the conclusion is evident. A number of (minimum) requirements have
been settled at an intra-Community level, leaving Member States to arrange their own set of
national statutes to be applicable for the respective public limited-liability companies,113
including – one-tier managed - SEs.
The hierarchy of rules applicable is: 1. Regulation (Community level); 2. Articles of
association (Subject level); 3. National legislation (National level), where specifically
authorized. In cases not specifically authorized, the hierarchy of rules is: 1. Regulation; 2.
National legislation; 3. Articles of association. This is remarkable because by far, the
107
The applicable public limited-liability companies referred to in Annex I, and which are of
consequence for this thesis are:
Germany: die Aktiengesellschaft (AG);
The Netherlands: de naamloze vennootschap (NV). 108
Underscoring by author. 109
Article 43 (1) SE Regulation. 110
Article 43 (2) SE Regulation. 111
Underscoring by author. 112
Article 51 SE Regulation, underscoring by author. 113
Supra footnote 107.
48
hierarchy of intra-Community harmonization is Community level, National level, followed by
rules that can be laid down by the subject of the Community Regulation or Directive.
In this regard, the rules applicable to an SE are surprising because of the fact that certain
aspects can be arranged by the SEs themselves, in their articles of association, thereby
specifically bypassing national legislation. For shifts in liability, this – remarkable – option
seems non-relevant because of article 51 of the Regulation, which expresses that liability for
members management/supervisory board apply equally to members of the administrative
organ within an SE. No dramatic findings, it would seem, based on these findings.
However, article 51 of the Regulation specifically states that liability applies equally114 to
members of the administrative organ within an SE. As we have seen, in Germany and the
Netherlands, liability is anything but equally applicable to members of the administrative
organ within an SE, as compared with the respective management and supervisory boards.
Also, pre-amble 14, as well as articles 43 and 51, of the SE-Regulation could have its
repercussions for the legality of the rules applicable to SEs, registered in both Germany and
the Netherlands.115
Before answering the consequences for SEs registered in Germany or the Netherlands, a
brief recapitulation of German and Dutch requirements will be presented.
114
Underscoring by author. 115
See chapter 5.2 for an answer of the – possible – repercussions.
49
5.1.2 German and Dutch requirements
5.1.2.1 German requirements
Four requirements were found to be noteworthy, with regard to – changes in – liability:
1. General standard of care
The SEAG is silent on the general standard of care to be taken into account for non-
executive directors, it would seem that the “non-managing directors” currently
operate in a ‘void’, where their general standard of care is not codified.
2. Liability
No change here, apart from the fact that the ‘old’ supervisory board had an extra
care concerning non-disclosure and the ‘new’ board seems to have lost this extra
care.
3. Negligence
A dramatic shift in liability can be discerned here. Whereas the ‘old’ supervisory
board only had a duty to institute proceedings or be held accountable for failure to
do so, all members of the ‘new’ board now face equal – and individual – liability for
negligence that the company is unable to satisfy. Furthermore, any obligation not
specifically mentioned in the SEAG statute, should be considered inherent. Thereby
further enhancing – individual – liability.
50
4. Individual tasks
Here, a further extension of liability is established. Whereas members of the ‘old’
supervisory board were expressly forbidden to let them be represented in the
fulfillment of their tasks, members of the ‘new’ board appear to be able to let them
be represented by replacements. The ‘void’, identified earlier extends further
because of the omission of any specification of individual tasks and a duty of care for
non-executive directors.
Equally, negligence as well as liability both extend further under the statute
concerning the SE, than the ‘old’ statute concerning the AG. This ‘void’ will likely
extend individual liability for non-executive directors and will most certainly lead to
extensive jurisprudence.
5.1.2.2 Dutch requirements
Four requirements were found to be noteworthy, with regard to – changes in – liability:
1. General standard of care
In the Netherlands, the non-executive directors seem to be operating in a same ‘void’
as is the case with non-executives in Germany. They are going to have to face an
elevated standard of care, since both the executive as well as the non-executive
directors are responsible for the day-to-day administration of the company.
2. Liability
No change here, since the 'old' rules concerning liability have been deemed
applicable in full for the One-Tier Board. General liability is therefore unchanged.
3. Negligence
Not only does the 'old' liability for negligence still apply, it has been expanded to
include the 'old' liability that was applicable for the other board. Thus, both the 'old'
liabilities are now applicable to all – individual – members of the One-Tier Board,
regardless of the designated role of the (non-) executive director. Furthermore, an
additional expansion of individual liability can be identified through the statement
that obligations, that aren’t specifically mentioned in the relevant statutes, as well as
the articles of association, are to be considered inherent for any and all members the
One-Tier Board.
51
4. Individual tasks
Again, an expansion of the individual tasks can be identified. Primarily because all
tasks of managing directors can be executed by their replacements. Furthermore,
replacements for managing directors can be either executive or non-executive, since
no obligation has been established that replacements for executive directors be the
same kind.
Thereby concluding the specific arrangements for liability in general – European –
regulatory terms, as well as applicable to SEs registered in Germany and the Netherlands.
The consequences of which should be fairly apparent by now, although a few
noteworthy remarks still remain..
52
5.2 Consequences
Focusing solely on the specifics concerning liability, liability in both Germany and the
Netherlands appears to be unchanged, apart from some – minor – extra care
considerations. However, liability is not established on the basis of just the – clear cut –
specifics concerning liability. The quintessence is, as usual, ‘hidden’ in rules which appear
to concern anything but liability...
Unlike Germany, the Netherlands have a more limited tradition of organizing and
formalizing its statutes. Thereby leaving conscious omissions to be dealt with by the
subjects of Dutch legislation themselves. Granted, the SE-Directive also specifically
warrants its subjects to deal with matters in their own articles of association. However, it
could be argued that the Netherlands have left too many omissions in order to comply
with pre-amble 14 of the Regulation.
Stating that any and all tasks not specifically allocated to a(n non-)executive director
become the responsibility of all directors cannot be said to meet the requirements of
clearly defining the respective responsibilities of those responsible for management and
those responsible for supervision, as can be seen in pre-amble 14 of the Regulation.
Furthermore, articles 43 and 51 of the SE-Regulation state that members of a One-Tier
Board, as compared to members of a Two-Tier Board, should be responsible under the
same conditions and liable in accordance with the provisions applicable to public limited-
53
liability companies in the Member States in which the SEs registered office is situated.
Apparently, by extending liability for members of a One-Tier Board, both Germany and
the Netherlands seem to have placed public limited-liability companies founded in
accordance with national statute in a better position than SEs, which have their
registered office in the same Member States. Germany, because liability extends further
for members of a One-Tier Board than for members of a Two-Tier Board. Two-Tier
Boards are still mandatory for all public limited liability companies which are founded
according to German statute.
The Netherlands to a lesser degree, because extension of liability has been applied to all
companies, regardless of the company structure. However, the omissions are still too
widespread to be able to comply with pre-amble 14 of the Regulation.
Both Member States have arguably infringed upon the obligations inherent in the SE-
Regulation, as well as forsaken the spirit with which the Regulation has sought to
harmonise national differences of corporate legislation. Infringed because of instead of
bringing the different statutes closer to harmonization, a further divergence would
appear to have been reached.
Apart from these transgressions, which Member State is the more favourable for
registering its office of an SE, in terms of – the risk of – establishment of the liability? The
answer for which is not as apparent as would seem.
Clearly, the Netherlands have a wider encompassing description of individual liability, on
account of the vague principle of collective liability.
Germany, however, can also “boast” its own set of vague descriptions because of
(deliberate?) omissions in their statute concerning SEs. Therefore, in Germany, members
of a One-Tier Board also have to take into account that liability is vastly extended as
compared to liability for members of the supervisory board under the “old” rules.
However, a contest between parties is no contest unless a winner is declared.
Keeping this in mind, I would have to conclude that the best option – regarding liability –
for “forum-shopping” – would have to be the Netherlands. Granted, the principle of
54
collective liability does not sound appealing at all, however, the options for – individual –
exculpation are also superior. This is a direct result of the vague – general – responsibility
for all members of a One-Tier Board, which – incidentally – equally results in better ways
for exculpation on account of lack of – individual – fault and negligence. In my opinion,
Germany has expanded liability too far by extending the duty of instituting proceedings,
or failure to do so, to an individual liability for all damages as result of negligence which
the company itself is unable to satisfy.
Generally, exculpation for liability, regardless of registered office in Germany or the
Netherlands, remains an good option because both Member States failed to accurately
implement the obligations laid down in the SE-Regulation. Consequently, both Member
States currently 'utilize' statutes that are contrary to European harmonisation efforts,
and therefore also in breach of the obligations of the Treaty. To which ‘height’ of
exculpation this leads, I will leave in the hands of capable German and Dutch litigators,
for now.
However, when this consideration is identified by litigators in both Member States, it
should be interesting to see the consequent developments through national legislative
bodies and courts, as well as the possible actions and repercussions that can be instated
by the European Community itself...
55
6 Summary and concluding remarks
As we have seen, The SE-Regulation is yet another addition in an already “flooded” area
of European legislation for public limited liability companies. The SE-Regulation enables
public limited liability companies to utilize a framework for a company that is governed
foremost by European Statute but mostly still by internal rules and/or national statute.
This results in a company structure with a European dimension which applies in all
Member States, as opposed to the various national company structures which are
governed ‘just’ by internal rules and national statutory law. However, a European single
corporate structure is currently unattainable. Moreover, the risk of ‘forum-shopping’ by
using the SE is also obvious. Although ‘forum-shopping’ is not the scope of this thesis, it
can be said that there may be such risks because liability of non-executive directors in a
One-Tier board structure differs among Member States.
In chapters 1 and 2 the framework concerning the European company is discussed as
well as the One-Tier Board structure and the tasks and liability of non-executive
directors.
In chapters 3 and 4 the consequences of opting for a One-Tier Board structure in
Germany and the Netherlands are explored.
Finally, in chapter 5 the results were compared. The conclusion of which is that the SE-
Regulation does not bring the various legal systems closer to each other.
It is, therefore, no surprise that liability, especially of non-executive directors, remains
divergent from Member State to Member State.
56
As was seen in chapter 3, Germany offers a clear division of liability for non-executive
directors. Although it would seem that accountability cannot be waived, once it has been
established.
As was seen in chapter 4, in the Netherlands, it is unclear where individual accountability
begins and ends. The exception to this being when accountability is highly regularized
internally in the articles of association.
Furthermore, by diminishing the number of members of corporate management, the
responsibility is increased because of a rise in individual tasks, and accountability on an
individual level is elevated because less members of the One-Tier Board can be held
accountable and fewer members could be forced to pay for possible damages.
Germany has preserved a maximum number of members that can constitute the One-
Tier Board. The Netherlands have left this number to the discretion of companies
themselves, leading, theoretically, to a large number of members of (non-)executives.
In practice, however, companies like to keep the board of directors as small as possible.
As a consequence, no country can be said to be the preferred Member State to register a
company, in terms of liability of non-executive directors.
However, by extending culpability to include all damages which the company itself is
unable to satisfy to individual members of the One-Tier Board, simply for failing to
institute proceedings, Germany has left the door open to litigate exponentially. What is
failure to institute proceedings? Instituting proceedings too narrowly?, instituting
proceedings too late?, instituting proceedings too early?. To name but a few of the most
obvious ‘pitfalls’ that will rise as a result of this extension.
The Netherlands have also come up with a rather extended culpability regime for non-
executive directors, as compared to the situation before the SE-Regulation and the
introduction of new legislation. Whereas culpability had to be attributed to specific
members of a board, now culpability could be attributed to members of the One-Tier
Board collectively. Even then, a non-executive director could disculpate himself by
57
proving that he was not negligent and at fault. Equally not an easy task, but one which
could be achieved with relatively more chances of success than its German counterpart.
Both Member States could also be facing charges for failure to implement the obligations
– laid down in the SE-Regulation – correctly, however. Instead of harmonizing legal
systems further, as is the general purpose of the SE-Regulation and can be identified in
the Pre-amble, the result ultimately ‘stranded’ with the addition of yet another structure
which companies can utilize. A structure with the most European character, to date, but
still different in every Member State. Member States remain too focused on
implementing European efforts at harmonization into their own national systems of law
and should actually try to ‘transform’ the diverging systems into a European – single –
legal structure.
It is evident that SEs can decide which country they should register in. Non-executive
directors have a say in this which is close to nothing. The same goes for companies under
national law. What remains is that non-executive directors are at liberty to choose which
company they could (come to) work for. In this regard this thesis can be consulted to
determine which statute offers the least extended and/or crystallized system of liability.
Thereby leaving the choice of employment according to whichever system of law fits
best to directors’ own discretion.
<><><><><><><><>
58
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The Treaty on the European Union and the Treaty establishing the European
Community, „the EC-Treaty‟, as last amended by the Treaty of Lisbon, No
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Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a
European company (SE), „the SE-Regulation‟.
Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for
a European company with regard to the involvement of employees, „the SE-
Directive‟.
Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency
proceedings, „the Insolvency-Regulation‟.
German
Gesetz zur Einführung der Europäischen Gesellschaft (SEEG)
Gesetz zur Ausführung der Verordnung (EG) 2157/2001 des Rates vom 8.
Oktober 2001 über den Statut der Europäischen Gesellschaft (SE) – SE-
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Gesetz über die Beteiligung der Arbeitnehmer in einer Europäischen
Gesellschaft – SE-Beteiligungsgesetz.
64
Aktiengesetz vom 6. September 1965 [AktG] (BGBI). I S. 1089), full entry into
force: September 6, 1965, as amended December 8, 2008 (BGBI. I S. 2369).
Dutch
Wet van 17 maart 2005 tot uitvoering van verordening (EG) Nr. 2157/2001 van
de Raad van de Europese Unie van 8 oktober 2001 betreffende het statuut
van de Europese vennootschap (SE) (Uitvoeringswet verordening Europese
vennootschap), Statute of March 17th, 2005, for the implementation of
Regulation Nr. 2157/2001, concerning the SE.
Burgerlijk Wetboek, boek 2, Dutch Civil Code, DCC
Bill no. 31763, kst-44507.
Statute concerning Works Councils (Wet op de Ondernemingsraden, WOR).
Statute concerning European Works Councils (Wet op de Europese
ondernemingsraden, WEOR).
Commercial Registers Act (Handelsregisterwet) 2007.
65
Primary Jurisprudence118
ECJ 9 March 1999, C-212/97 (Centros).
ECJ 5 November 2002, C-208/00 (Überseering).
ECJ 30 September 2003, C-167/01 (Inspire Art).
ECJ, European Parliament against the Council of the European Union,
May 2, 2006, C-436/03.
Judgment of the European Court of Justice from February 25th 2010,
Case C-337/08, X Holding BV v Staatssecretaris van Financiën.
Judgment of the Court (Second Chamber) of 18 July 2007,
Commission of the European Communities v Federal Republic of Germany,
Case C-503/04.
Bundesgerichtshof, 15 November 1982, Neue Juristische Wochenschrift 1983,
991 (=BGHZ 85, 293).
Bundesgerichtshof, 21 April 1997, Neue Juristische Wochenschrift 1997, 1926
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Dutch High Court, of 21st January 1955, NJ 1959, 43, “Forumbank”.
Dutch High Court, of 16th July 2010, no publication yet, “Asmi”.
Dutch High Court, of 13th July 2007, NJ 2007, 434, “ABN-AMRO”.
Dutch High Court, of 21st February 2003, JOR 2003, 57, “HBG”.
118
Supra footnote 116.
66
Secondary Jurisprudence119
HR 30 november 2007, RvdW 2007, 1027 (Blue Tomato)
AG Köln, 19 February 2008, ZIP 2008, p. 423 [PIN group].
AG München, 4 May 2004, ZIP 20/2004, p. 962 (F.R.G.).
AG Nuremberg, 15 August 2006, 8004 IN 1326-1331/06.
BGH 13 December 2007, IX ZB 238/06.
BGH 27 November 2003, NZI 2004, 140.
BGH 30 January 1970, BGHZ 53, 181.
Bolam v Friern Hospital [1957] 1 WLR 583.
C-1/04, Staubitz-Schreiber, [2006], ECR I-701.
C-81/87, Daily Mail, [1988], ECR I-05483.
C-210/06, Cartesio, [2008], nyr.
C-341/04 Eurofood IFSC Ltd., [2006], ECR I-3813.
C-411/03, Sevic [2005], ECR I-10805.
Court of Appeal (Civil Division) 27 July 2005, [2005], EWCA Civ. 974 [Shierson
v Vlieland-Boddy].
Hall v Brooklands Auto-Racing Club [1933] 1 KB 205.
Hans Brochier Holdings Ltd. v Exner. 2007 BCC 127.
High Court of Justice (Chancery Division Companies Court), 15 July 2005,
[2005], EWCH 1754 (Ch).
119
Supra footnote 117.
67
HR 19 March 2004, NJ 2004, 295.
Kammergericht Berlin, 11 February 1997, IPRax 1998, p. 360.
LG Cologne 25 November 1985, RIW 87, p. 54.
LG Rottweil 28 January 1985, IPRax 1986, p. 110.
LG Stuttgart 31 July 1989, IPRax 1991, p. 118.
McQuire v Western Morning News [1903] 2 KB 100.
OLG Bavaria 7 May 1992, IPRax 1992, p. 389.
OLG Bavaria 18 July 1985, IPRax 1986, p. 295.
OLG Hamm, 4 October 1996, IPRax 1998, p. 358.
Rb Roermond, 17 November 2008, JOR 2009/55.
Re Daisytek-ISA Ltd. [2003] BCC 562.
TGI Nanterre, 15 February 2006, B.C.C. 681.
Tribunale di Rimini, 6 April 2004, Giurisprudenza Italiana, 2005, p. 1199.
Aberdeen Ry v Blaikie [1854] 1 Macq HL 461.
Boardman v Phipps [1967] 2 AC 46.
Canadian Aero Service v O‟Malley [1973] 40 DLR (3d) 371.
Re City Equitable Fire Insurance Co [1925] Ch 407.
Clark v Workman [1920] 1 It R 107.
Coleman v Myers [1977] 2 NZLR 225.
Dawson International plc v Coats Paton plc [1989] SLT 655.
Dorchester Finance Co v Stebbing [1989] BCLC 498.
Howard Smith Ltd v Ampol Ltd [1974] AC 832.
Industrial Development Consultants v Cooley [1972] 1 WLR 443.
Norman v Theodore Goddard [1991] BCLC 1027.
Pervical v Wright [1902] Ch 421.
Regal (Hastings) Ltd v Gulliver [1942] All ER 378.
Re Smith & Fawcett Ltd [1942] Ch 304.
Re W & M Roith Ltd [1967] 1 WLR 432.
68
Primary Websites120
http://www.utrechtlawreview.org/.
http://www.agsm.edu.au/eajm/.
http://www.commissiecorporategovernance.nl/.
http://www.frc.org.uk/index.cfm.
https://dspace.lib.cranfield.ac.uk/.
http://www.berr.gov.uk/files/file23012.pdf.
http://www.ecgi.org/codes/documents/cadbury.pdf.
http://www.ecgi.org/coeds/documents/hampel_index.htm..
http://www.ecgi.org/codes/documents/combined_code_final.pdf.
http://www.frc.org.uk/corporate/ukcgcode.cfm.
http://www.frc.org.uk/documents/pagemanager/Corporate_Governance/UK%2
0Corp%20Gov%20Code%20June%202010.pdf.
http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2000:160:0001:0018:en:PD
F.
http://www.utrechtlawreview.org/publish/articles/000057/article.pdf.
http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62008J0337:EN:HTML.
http://www.germanlawjournal.com/index.php?pageID=11&artID=216.
http://www.uria.com/eng/publications/art.asp?id=432.
120
Supra footnote 116.
69
http://bundesrecht.juris.de/.
http://www.dirlab.eu/news-detail.asp?clid=212.
http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2007:211:0002:0002:EN:P
DF.
Secondary Websites121
http://www.iod.com/intershoproot/eCS/Store/en/pdfs/presentation_directors_lia
bilities_neville_bain.pdf
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bilities_roger_barker.pdf
http://www.iod.com/intershoproot/eCS/Store/en/pdfs/presentation_directors_lia
bilities_roger_barker.pdf
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orp_gov_code_200224.pdf
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ve.pdf
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K_Model_of_Corporate_Governance.pdf
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df
http://www.gowpartners.com/pdfs/HiggsReport.pdf
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dq=The%20role%20of%20the%20non-
executive%20director&lr=&pg=PA66#v=onepage&q=The%20role%20of%20th
e%20non-executive%20director&f=false
121
Supra footnote 117.
70
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Executive-Director-2005.pdf
http://ssrn.com/abstract=754292
http://ssrn.com/abstract=557313
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let_02-25.pdf
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bonn.de/kraehmer/Lehre/SeminarSS09/Papiere/Fama_Jensen_Separation_o
wnership_control.pdf
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code-sets-the-Netherlands-on-track.html
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http://www.ey.com/UK/en/Services/Assurance/External-Audit-Services/Audit---
Companies-Act-2006
http://www.ecgi.org/codes/documents/higgs.pdf
71
Appendix I German changes
Once again, ‘before’ is intended to describe the legal situation when only an AG was
allowed as a means to utilize a public limited liability company, with a compulsory Two-
Tier Board structure, and ‘after’ describes the statutory situation when adoption of the
SE statute enabled public limited liability companies to opt for a One-Tier Board
structure.122
Before and after
Before; Vorstand
The management board (Vorstand) is responsible for the management of the company
and for dealing with third parties.123
Before; Aufsichtsrat
The main functions of the supervisory board (Aufsichtsrat) are to appoint and dismiss the
members of the managers, general supervision of the managing board and approval of
the accounts and other transactions as set out in the articles of association.124
122
Supra footnote 61. 123
§ 76(1) AktG „Der Vorstand hat unter eigener Verantwortung die Gesellschaft zu leiten.“. 124
A. Dorresteijn, I. Kuiper, G. Morse, European Corporate Law, Deventer (1994); § 6.31.
72
After; Verwaltungsrat
The management board125 (Verwaltungsrat) leads the company, lays down the rules of
corporate governance and guards their implementation.126
Before; Vorstand
It consists of one of more individuals,127 while legal persons cannot be members of the
managing board.128 If it exists of more than one member, all the members will have to
act jointly when representing the company unless expressly laid down in the articles that
there is no such obligation.129
Before; Aufsichtsrat
The supervisory board consists of a minimum of three members and a maximum of 21
members, depending on the size of the company.130 One third of the members must be
employee representatives if the company employs more than 500 people and one half if
it (including its subsidiaries) employs in excess of 2000 people.131
After; Verwaltungsrat
The minimum number of members of the Verwaltungsrat is three,132 although the
articles of association can determine otherwise. This minimum is obligatory, however, if
the SE has a share capital of more than 3 000 000 Euro.133 A maximum number for
125
The Author utilizes management board again, for lack of a better term. In fact the „new‟
management board can be said to be a symbiosis of the „old‟ management board and the supervisory
board. 126
§ 22 (1) SEAG. 127
A division is made for a choice of more than one persons when the company has a net value
(Grundkapital) of more than €3 million; §76(2) AktG. 128
§ 76(2)(3) AktG. 129
§ 77(2)(3), § 78 (2) AktG. 130
§ 95 and 96 AktG. 131
Id. 132
§ 23 (1) SEAG. 133
Id.
73
members of the Verwaltungsrat has been established.134 Nine for SE’s with share capital
of no more than 1 500 000 Euro, fifteen for SE’s with share capital of more than 1 500
000 but no more than 10 000 000 Euro and twenty-one for SE’s with share capital of
more than 10 000 000 Euro.135
Employee participation remains unchanged with the entry into force of the SEAG.136
Before; Vorstand
The members of the management board are appointed and dismissed by the supervisory
board.137
Before; Aufsichtsrat
Members of the supervisory board are appointed by the shareholders’ meeting, for a
(renewable) period of four years.138
After; Verwaltungsrat
The appointment of members of the Verwaltungsrat has to be fulfilled in fashion of the
[employee participation] Directive.139 Article 101 (2) AktG remains mutatis mutandis in
full force.140 Assistants for members of the Verwaltungsrat cannot be appointed,
although a replacement member for members of the Verwaltungsrat can be appointed.
This, however, has to be implemented on the same time as the appointment of the
134
Id. 135
As was already applicable to „normal‟ public limited companies in Germany, see §§ 95-96 AktG. 136
§ 23 (2) SEAG. Although an entire part (Teil 3) has been committed to this subject. Clearly this
article was considered too summary to be regarded as being sufficiently explanatory. 137
§ 84(1)(3) AktG. 138
§ 101 and 102 AktG. 139
§ 28 (1) SEAG. Article 43 (3) SE-Regulation: The member or members of the administrative organ
shall be appointed by the general meeting of shareholders. The members of the first administrative
organ may, however, be appointed by the statutes. This shall apply without prejudice to Article 47 (4)
or to any employee participation arrangements determined pursuant to Directive 2001/86/EC. 140
§ 28 (2) SEAG, concerning the detachment of members of the Aufsichtsrat.
74
members of the Verwaltungsrat.141 Compensation and the granting of credits both fall
under the same rules as those for members of the Aufsichtsrat.142
Removing members of the Verwaltungsrat can only be effected by the general meeting
of shareholders.143 Any member of the Verwaltungsrat, put in place by the general
meeting of shareholders, can be removed and replaced by another person at any time by
the original members who were authorized to nominate the original candidate(s).144
Moreover, the judicial authorities are empowered to remove a member of the
Verwaltungsrat, by request of the Verwaltungsrat, if and when a pressing need arises.145
Ultimately, the same rules apply for removing members of the Verwaltungsrat, thereby
replacing the original members.146 In case the Verwaltungsrat does not consist of the
minimum required members, an obligation for the court arises - upon request by a
member of the Verwaltungsrat or a shareholder of the company – to elevate the number
of members up to the minimum required numbers.147
Before; Vorstand
The managing board has the exclusive right of management of the company,148 which
includes the keeping of accounts and the setting up of a risk management system.149
Before; Aufsichtsrat
141
§ 28 (3) SEAG. 142
§ 37 (1)(2) SEAG, in conjunction with §§ 113 – 115 AktG. 143
§ 29 (1) SEAG, although establishing a majority has been left to determine in the articles of
association by each individual company. Generally a three quarters majority of all votes has to be met
for any lawful decision. 144
Or equally by the general meeting of shareholders if the „dispatchers‟ are no longer present, § 29
(2) SEAG. 145
§ 29 (3) SEAG, and although it sounds rather cryptic, that‟s exactly the wording the German
authorities used; “wenn in dessen person ein wichtiger Grund vorliegt.”, which will – obviously – give
rise to an avalanche of jurisprudence. 146
§ 29 (4) SEAG. 147
§ 30 (1)-(4) SEAG. 148
§ 76(1) AktG, see also footnotes 17 and 19. 149
§ 91 AktG.
75
The supervisory board’s main functions are to appoint and dismiss the managers, general
supervision of the management board and approval of the accounts and other
transactions as set out in the articles of association.150 In exceptional cases, the
supervisory board can call general meetings of the company, something that is normally
reserved for the managing board.151
After; Verwaltungsrat
The management board (Verwaltungsrat) leads the company, lays down the rules of
corporate governance and guards their implementation.152
The executive director(s) has to present the Verwaltungsrat the annual financial
statements and the business report without delay, after they have been established.
Simultaneously, the executive director(s) have to present the Verwaltungsrat with a
recommendation of allocating the annual profits.153 All members of the Verwaltungsrat
have the right154 to be informed fully of propositions and internal audits, as well as
members of an internal audit-committee, if one should exist.155 §§ 171 (1)(2) AktG
applies mutatis mutandis, for the appraisal of the annual financial statements by the
Verwaltungsrat.156
Before; Vorstand
The managing board has to represent the company in relation to third parties. If a
management board of more than one person is installed, they can act jointly or 150
§ 111(1)(2) AktG. 151
§ 111(3) AktG. 152
Supra footnote 123. 153
§ 47 (1) SEAG. 154
This equally pertains a duty to be adequately informed. 155
§ 47 (2) SEAG. 156
§ 47 (3) SEAG.
76
individually.157 Once the board is installed, this competence cannot be diminished
(Vorsagen der Einschränkung des Kompetenz).158
Before; Aufsichtsrat
Together with the management board, the supervisory board represents the company
judicially and extra-judicially.159
After; Verwaltungsrat
The (executive) directors represent the company in judicial as well as non-judicial
proceedings.160 If more than one director is installed, only in conjunction can they
represent the company. Unless the articles of association state otherwise.161 If a
declaration of intention is required for presentation of the company, than a presentation
to the (executive) director is sufficient.162 The articles of association can also determine
that (executive) directors can only represent the company – alone or together – in
conjunction with a ‘prokurist’.163 The group of (executive) directors that possesses power
of representation can empower individuals to represent the company in specific tasks or
groups of tasks.164 The Verwaltungsrat represents the company towards the (executive)
directors.165 (Executive) directors can only represent the company, legally, if their
signature is accompanied by the addition of the words; “(executive) director”.166 The
power of representation of executive directors cannot be restricted.167 However, in
157
§ 78(1)(2)(3) AktG. Although a simultaneous obligation exists to notify the commercial register of
any and all changes made in the competence of the managing director(s) in §81 AktG. 158
§ 82 AktG. 159
§ 112 AktG. 160
§ 41 (1) SEAG. 161
§ 41 (2) SEAG. 162
Id. 163
§ 41 (3) SEAG, a word which is not easily translated, but meaning; a person who has been
designated to represent the company and has been given (specific) powers of representation, e.g. a
senior manager. 164
§ 41 (4) SEAG, which simultaneously identifies liability concerning the empowered representative. 165
§ 41 (5) SEAG. 166
§ 42 SEAG. 167
§ 44 (1) SEAG.
77
relation to dealings with the company itself, as well as all bodies of the company,
executive directors are obligated to accept the instructions and restrictions which – in
light of the applicable governing rules for the SE – have been instated by the general
meeting of shareholders, the articles of association or the Verwaltungsrat.168 If and when
a vital executive director is found to be wanting in his169 tasks and obligations, the court
has to send this director away upon request by a claimant,170 thereby establishing
liability.
Before; Vorstand
When dealing with third parties, in corresponding in writing, an obligation exists to
specifically mention the correct name of the company.171
Before; Aufsichtsrat
An obligation exists to communicate any and all changes in the composition of the
supervisory board to the chamber of commerce.172 At the chamber of commerce, the
board can be scrutinized by the court, regarding its legality.173
After; Verwaltungsrat
All changes in executive directors, the Verwaltungsrat as well as their representatives,
including their powers of representation are to be registered in the register of
companies.174 An additional obligation applies for new executive directors to explicitly
ensure full disclosure of any circumstance that opposes their installation as well as an
168
§ 44 (2) SEAG. 169
Or her. 170
§ 45 SEAG. §§ 85 (1, second sentence)(2)(3) AktG are applicable mutatis mutandis. 171
§ 80(1)(2) AktG. 172
§ 97, 98, 99 AktG. 173
§ 106 AktG. 174
§ 46 (1) SEAG. Changes in powers of representation could only encompass an extension, supra
footnote 158.
78
unimpeded obligation to provide information in front of the courts.175 Finally, good
references and/or testimonials have to be appended within their insertion into the
register of companies.176
All letters, addressed to specific recipients, have to state unmistakably; the legal status of
the company, the registered office, the registration office and the number under which
the company is known in the register of companies. As well as the names of all executive
directors and the chairman of the Verwaltungsrat.177 §§ 80 (2)(4) AktG apply mutatis
mutandis.178
Before; Vorstand
The managing board is obligated to follow the (express) wishes of the shareholders
meeting, as well as obligated to ask approval of the shareholders meeting in all decisions
which have to be decided upon by a majority of the shareholders meeting.179
Before; Aufsichtsrat
The supervisory board is obligated to elect a president and a representative, in case this
president is unable to attend.180 It decides by majority decision. The company itself can
decide what a majority is, although if and when a supervisory board meeting is not based
on a legal or internal rule, a majority can only exist if half of the voting members are
present.181
After; Verwaltungsrat
The Verwaltungsrat chooses and installs one or more managing director(s). Members of
the Verwaltungsrat can be chosen for this position, as long as a majority of the
175
§ 46 (2) SEAG. 176
§ 46 (3) SEAG. A rule which has been declared applicable straight from the AktG, § 81 (2). 177
§ 43 (1) SEAG, dealing exhaustively with the subject of obligatory and correct identification for
Aktiengesellschaften, see also footnotes 161-163. 178
§ 43 (2) SEAG. 179
§ 83 AktG. 180
§ 107 AktG. 181
§ 108 AktG.
79
Verwaltungsrat does not consist of managing directors. The installation of all managing
directors has to be registered in the register of companies.182 If more than one managing
directors of the Verwaltungsrat have been installed, they can adopt articles of
incorporation183 for themselves, so long as the articles of association are silent on this
subject or have conceded this authority to the Verwaltungsrat. Decisions concerning the
articles of incorporation for the Verwaltungsrat have to be made unanimously by the
managing directors of the Verwaltungsrat.184 Managing directors can be laid off by a
decision of the Verwaltungsrat, if the articles of association don’t determine otherwise.
The normal rules of employment apply.185
Before; Vorstand
A general prohibition of additional jobs, functions, etc., can only be set aside after
approval of the shareholders meeting.186 If any member of the managing board breaks
this rule, he can be held accountable.187
Before; Aufsichtsrat
Only individuals can be members of a supervisory board, and only insofar as an individual
does not exceed the number of ten in memberships of supervisory boards in different
companies.188 No one can be a member of a management board and a supervisory
board.189 Although an exception to this rule exists when a managing board is missing a
director. However, this replacement of a managing director can only last for up to one
year.190 No legal entities are allowed.191
182
§ 40 (1) SEAG. 183
The Articles of Incorporation (sometimes also referred to as the Certificate of Incorporation or the
Corporate Charter) are the primary rules governing the management of a company, and are filed with
a state or other regulatory agency. In this case, therefore, the register of companies. 184
§ 40 (4) SEAG. 185
§ 40 (5) SEAG. 186
§ 84(1) AktG. 187
§ 84(2) AktG. 188
§ 100 AktG. 189
§ 95 and 105(1) AktG. 190
§ 105(2) AktG.
80
After; Verwaltungsrat
A restriction for members of the Verwaltungsrat remains for:
1. Anyone who is already a member of a Verwaltungsrat or an Aufsichtsrat in ten other
commercial companies;
2. Anyone who is already a lawful representative of a dependant trading company of
the SE;
3. Anyone who is a representative of another company who has any affiliation of its
Aufsichtsrat/Verwaltungsrat, Vorstand or an executive director.192
The share of employee participation,193 and finally a general restriction for participation
by (active?)194 lawyers.195
Before; Vorstand
The management board is obligated to inform the supervisory board of all facts that
become known to them in their daily managing tasks, as well as any information that
could have an impact on the company as a whole.196
Before; Aufsichtsrat
The supervisory board has to supervise the managing board.197 To be able to adequately
supervise, the supervisory board has full access to any and all forms of information
concerning the daily conduct of the management board. Is also has the right to examine
and verify the information it is provided.198
191
§ 100 AktG. 192
§ 27 (1) SEAG. 193
§ 27 (2) SEAG. 194
The statute remains silent on this point. Although this omission does seem to suggest grounds for
future litigation, none could be identified. 195
§ 27 (3) SEAG, “Eine juristische person kann nicht Mitglied des Verwaltungsrats sein”. 196
§ 90 AktG, whereas this obligation is stronger if the corporation is a mother company, and
something could adversely affect one of its daughter companies. 197
§ 111 (1) AktG. 198
§ 111 (2) AktG.
81
After; Verwaltungsrat
The rules of informing the Verwaltungsrat, by the managing directors, are the same as
those for the Aufsichtsrat. Hereby establishing an obligation to inform the
Verwaltungsrat on matters of; the intended policy of the company and other principles in
its day-to-day operation, expected rate of return for the company and specifically the
stockholder equity, the turnover, all matters that can be of substantial impact to the
equity of the company.199 The rules concerning benefits for members of the Vorstand,
non-competition clauses and extensions of credit are equally applicable for the
Verwaltungsrat.200
If and when the Verwaltungsrat approves the annual accounts, the annual financial
statements are considered to be established, insofar as the Verwaltungsrat does not
leave the establishment to the general meeting. The decision(s) of the Verwaltungsrat
has to be included in the statement concerning the annual proceedings.201 The general
meeting establishes the annual accounts, if the Verwaltungsrat does not establish the
annual accounts themselves, or if the Verwaltungsrat does not approve the annual
accounts.202 After sending the executive directors the statement concerning the annual
proceedings, the Verwaltungsrat has to call a general meeting without delay, to present
the established year results, the statement of annual profits and the decision of
allocating those profits.203 The obligations – laid down in §§ 175 (2-4) and 176 (2) apply
mutatis mutandis. The Verwaltungsrat has to present the obligatory documents to the
general meeting and elaborate on them. It also has to define its position on negative
results and/or losses, which influenced the year results.204 For the implementation of §§
308 – 318 AktG the executive directors step in, instead of the Vorstand.205 For the
199
§ 40 (6) SEAG, in conjunction with § 90 (1) AktG. 200
§ 40 (7) SEAG. See also §§ 87 – 89 AktG. 201
§ 47 (5) SEAG. 202
§ 47 (6) SEAG. 203
§ 48 (1) SEAG. 204
§ 48 (2) SEAG. 205
§ 49 (1) SEAG.
82
implementation of §§ 319 – 327 AktG the executive directors step in, instead of the
Vorstand.206
Before; Vorstand
When drawing up (bi-) annual accounts or when becoming aware of losses of half of the
net value of the company, the managing board is obligated to inform the shareholders
meeting immediately.207 The competence to authorize payments is equally stopped
when the solvability of the company is in danger, or has been seriously hampered by a
(too) excessive indebtedness. Apart from the obligation to continue to pay for ‘normal’
conduct of business.208
Before; Aufsichtsrat
The supervisory board has a duty to call a general meeting if and when the prosperity of
the company demands it.209 Duties of the management board cannot be allotted to the
supervisory board. However, the articles of association as well as the supervisory board
can determine specific actions undertaken by the management board to be void unless
specifically authorized by said articles or board. If authorization is withheld by the
supervisory board then the management board can obtain authorization from the
general meeting.210
After; Verwaltungsrat
The management board has an obligation to call a general meeting of shareholders when
the prosperity of the company demands this.211 All members of the Verwaltungsrat can
request a meeting of the Verwaltungsrat, with specification of the objective and the
206
§ 49 (2) SEAG. 207
§ 92(1) AktG. 208
§ 92(2) AktG. 209
§ 111 (3) AktG, see also footnotes 150 and 151. 210
§ 111 (4) AktG. 211
§ 22 (2) SEAG.
83
reasons for calling this meeting. This meeting will have to be called by the chairman of
the Verwaltungsrat and will have to take place within two weeks of its calling.212 If the
chairman does not comply with the request, then the member can call a meeting of the
Verwaltungsrat on its own. With an equal obligation to specify the objective and the
reasons for calling this meeting, as well as an agenda.213
The management board has a duty keep accounts of daily business, especially to identify
possible dangers to its continuity.214 If the management board discerns losses, when
preparing yearly or half-yearly figures or become likely in the day-today managing of the
company, of losses in totaling half of the share-capital, then the management board has
an obligation to call an general meeting of shareholders215 immediately, and the
managing directors are under obligation to inform the chairman of the Verwaltungsrat
without delay. The same goes for any company which finds itself in a situation of
insolvency,216 or if and when a situation of insolvency or over-indebting of the company
could arise than article § 92 (2) AktG apply.217 218
Before; Vorstand
The general standard of care to be taken into account by the directors is that of a diligent
and prudent manager whilst at the same time having a duty of confidentiality.219
Before; Aufsichtsrat
All members of a supervisory board are required to act in the (best) interests of the
company and in the (best) interests of the employees; regardless of by whom they were
nominated.220
212
§ 37 (1) SEAG. 213
§ 37 (2) SEAG. 214
§ 22 (3) SEAG. 215
§ 22 (5) SEAG. 216
§ 40 (3) SEAG. 217
This prohibits the management board members to authorize any payments, outside of the
payments which are compatible with the usual standard of a normally operating company. 218
§ 22 (5) SEAG. 219
§ 93(1) AktG.
84
They are subject to a comparable duty of care and confidentiality that applies to the
directors.221
After; Verwaltungsrat
The managing directors are responsible for the day-to-day administration of the
company, whereas, if more than one director has been designated managing director, in
conjunction with the other managing directors. The articles of association can determine
to deviate from this point, although a deviation from statutory obligations for the
Verwaltungsrat is to be considered null and void.222
Before; Vorstand
They are liable if they mismanage the company or act in breach of their duties or the
articles of association of the company.223 This liability is thwarted if they acted in a valid
manner of conduct to the company, or if the company waives liability.224 The waiving of
liability can only be done after a period of three years has expired,225 and the general
liability expires after a period of five years.226
Before; Aufsichtsrat
The members of the supervising board have an equal duty as the members of the
managing board. Moreover, the members of the supervising board have an extra care
concerning non-disclosure of confidential briefs and meetings.227
220
Bundesgerichtshof, 15 November 1982, Neue Juristische Wochenschrift 1983, 991 (=BGHZ 85,
293). 221
§ 116 AktG. 222
§ 40 (2) SEAG. 223
§ 93(2)(3) AktG. 224
§ 93(4) AktG. 225
§ 93(4) AktG. 226
§ 93(6) AktG. 227
§ 116, coupled with § 93 AktG.
85
After; Verwaltungsrat
The rules concerning liability if they mismanage the company or act in breach of their
duties or the articles of association of the company are applicable mutatis mutandis for
the Verwaltungsrat.228
Before; Vorstand
If the directors were grossly negligent in their duty of care, creditors, who cannot obtain
satisfaction of the company, are entitled to sue the directors.229
Before; Aufsichtsrat
According to German case law, the supervisory board is also competent to institute
proceedings against the managing board for breaches of duty and in such cases inactivity
of the supervisory board may constitute a breach of their own duties in relation to the
company.230
After; Verwaltungsrat
The same rules concerning duty of due care and liability apply to each member of the
Verwaltungsrat, as are laid down for members of the Vorstand.231
Any obligation, which isn’t specifically mentioned in this statute [SEAG, red], but
otherwise constitutes an obligation for members of the Vorstand or the Aufsichtsrat, is
to be considered inherent for the Verwaltungsrat.232
228
§ 40 (8) SEAG. See also footnotes 219, 223-226 and 229. 229
§ 93(5) AktG. 230
Bundesgerichtshof, 21 April 1997, Neue Juristische Wochenschrift 1997, 1926 (=BGHZ 135,244),
see also: § 111(3) AktG: „Der Aufsichtsrat hat eine Hauptversammlung einzuberufen, wenn das Wohl
der Gesellschaft es fordert..“; A general duty „for the benefit of the company“ can be perceived when
looking at this case and this paragraph. 231
§ 39 SEAG. 232
§ 22 (6) SEAG.
86
Before; Vorstand
Lastly, all competence, duties and (possible) liability are equally applicable for
representatives of the management board.233
Before; Aufsichtsrat
No member of a supervisory board is allowed to let himself be represented in the
fulfillment of his tasks.234
After; Verwaltungsrat
All obligations of the managing directors apply equally for their substitutes.235
233
§ 94 AktG, “Die Vorschriften für die Vorstandsmitglieder gelten auch für ihre Stellvertreter.“ 234
§ 111(5) AktG. 235
§ 40 (9) SEAG.
87
Appendix II
Dutch changes
Again, ‘before’ is intended to describe the statutory situation when the only option for a
large NV was a compulsory two tier board structure, with a management board (bestuur)
and a supervisory board (raad van commissarissen), and ‘after’ describes the statutory
situation when the adoption of the SE statute enabled public limited liability companies
to opt for a one tier board structure, which became a single board of executive and non-
executive directors, hereafter One-Tier Board.
In order to facilitate comparative analysis, the same order of identification will be
maintained, as was performed in appendix I.
Before and after
Before; Bestuur
The management board (Bestuur) is responsible for the management of the company,
subject to limitations mentioned in the articles of association and for dealing with third
parties, subject only to limitations of the statute.236
236
Article 2:129 (1) DCC „Behoudens beperkingen volgens de statuten is het bestuur belast met het
besturen van de vennootschap.“, in conjunction with article 2:130 (1)(3) DCC „het bestuur
vertegenwoordigt de vennootschap, voor zover uit de wet niet anders voortvloeit. Bevoegdheid tot
vertegenwoordiging is onbeperkt en onvoorwaardelijk, voor zover uit de wet niet anders voortvloeit.“.
88
Before; Raad van Commissarissen
The main functions of the supervisory board (Raad van Commissarissen) are general
supervision of the managing board and approval of the accounts and other transactions
as set out in the articles of association,237 as well as to appoint and dismiss the members
of the managing board, if and when this task was appointed to the supervisory board by
the articles of association.238
After; One-Tier Board
The management board (One-Tier Board) leads the company, lays down the rules of
corporate governance and guards their implementation.239
Before; Bestuur
It consists of more than one individuals.240 All the members will have to act jointly when
representing the company unless expressly laid down in the articles of association that
there is no such obligation.241
Before; Raad van Commissarissen
The supervisory board consists of a minimum of three natural persons. If and when this
minimum number is not met, the Raad van Commissarissen takes immediate steps to
elevate the number to the minimum numbers of requirement.242
After; One-Tier Board
237
Articles 2:140 (2)(3) DCC. 238
Article 2:140 (3), in conjunction with article 2:134 (1) DCC. 239
Article 2:129a (1) DCC. 240
Article 2:129 (2) DCC, and although this obligation is not mentioned in so much words, the wording
is obvious, following from the phrase: “the articles of association can grant more than one vote to a
specifically mentioned director. One director cannot be empowered to out-vote the other directors
combined.” This leads me to conclude that a minimum of three directors is compulsory, regardless of
the size of the company. 241
Article 2:130 (2) DCC. 242
Article 2:158 (2) DCC, in conjunction with article 2:164a (1) DCC.
89
The minimum number of members of the One-Tier Board is two,243 one or more non-
executive directors and one or more executive directors, non-executive directors have to
be natural persons and the chairman of the board cannot be an executive director.244 A
maximum number has not been codified.
Employee participation remains unchanged with the entry into force of Bill No. 31763.245
Before; Bestuur
The members of the management board are appointed246 and dismissed247 by the
shareholders’ meeting, unless this competence has been transferred to the supervisory
board.
Before; Raad van Commissarissen
Members of the supervisory board are appointed by the shareholders’ meeting,248 for a
(renewable) period of four years.249
After; One-Tier Board
The appointment of members of the One-Tier Board has to be fulfilled in fashion of the
DCC.250 To this end, Article 132 (1) DCC has been amended in order to be applicable to
the One-Tier Board.251 Assistants for members of the One-Tier Board cannot be
243
Article 2:129a (1) DCC. 244
Id. 245
Curiously, employee participation cannot be found in the DCC, whereas this has been codified;
1. In the Statute concerning Works Councils (Wet op de Ondernemingsraden, WOR) for national
companies, see article 2 (1) WOR;
2. In the statute concerning European Works Councils (Wet op de Europese
ondernemingsraden, WEOR), for international (European based) companies, see article 1 (1)
WEOR.
Both articles place the obligation of institution of a works council (employee participation) on the
number of employees, 50 for national companies and a minimum of 150 for international
companies, rather than share capital. This curiosity is identified but further digression is beyond
the scope of this thesis.. 246
Article 2:132 (1) DCC. 247
Article 2:134 (1) DCC. 248
Article 2:158 (4) DCC, in conjunction with article 2:164a (1) DCC. 249
Article 2:161 (1) DCC. 250
Article 2:132 (1) DCC, after amendment by Bill No. 31763. 251
Id.
90
appointed, although a replacement member for members of the One-Tier Board can be
appointed. This, however, has to be implemented in the articles of association.252
Compensation and the granting of credits both fall under the same rules as those for
members of the Raad van Commissarissen.253
Removing members of the One-Tier Board can be effected:
1. By the general meeting of shareholders;254
2. By the joint members of the One-Tier Board, when concerning the removal of (an)
executive director(s).255
Ultimately, the same rules apply for elevating the minimum required members of the
One-Tier Board, as the rules that are applicable to the Raad van Commissarissen.256
Before; Bestuur
The managing board has the exclusive right to management of the company, expect for
limitations according to the articles of association,257 which includes the keeping of
accounts258 and the setting up of a risk management system.259
Before; Raad van Commissarissen
The supervisory board’s main functions are to appoint and dismiss the managers,260
general supervision of the management board and approval of the accounts and other
transactions as set out in the articles of association.261 Equally, the supervisory board can
252
Article 2:134 (4) DCC. Alternatively, the obligation to contain rules of replacement for absent
members has been altered in a „hard‟ choice, whereas the old article contained a compulsory
obligation through the word “must”... 253
Article 2:145 DCC. 254
Article 2:132 (1) DCC. 255
Article 2:134 (1) DCC, after implementation of Bill no. 31763 a new first sentence will be appended
granting powers of removal to the joint members of the One-Tier Board. 256
Article 2:129a (1) DCC, in conjunction with Article 2:158 (2) DCC. 257
Article 2:129 (1) DCC. 258
Article 2: 10 (1) DCC. 259
Article 2:141 (2) DCC. 260
Article 2:162 DCC. 261
Article 2:164 (1) DCC, although the reservation of article 2:164 (2) DCC would seem to suggest
that members of the Bestuur board could easily circumvent this obligation because of the lack
consequences for the powers of representation should the Raad van Commissarissen NOT be
91
call general meetings of the company, a competence that is shared with the managing
board.262
After; One-Tier Board
The management board (One-Tier Board) leads the company, lays down the rules of
corporate governance and guards their implementation.263
The company itself, although implicitly this obligation would have to be implemented by
the executive member(s) of the One-Tier Board, has to present the One-Tier Board the
annual financial statements and the business report within eight days, after they have
been established.264 The director(s) has (have) to present the One-Tier Board with a
recommendation of allocating the annual profits.265 All members of the One-Tier Board
have the right266 to be informed fully of propositions and internal audits, as well as
members of an internal audit-committee, if one should exist.267 As can be seen, articles
2:392 and 394 DCC apply mutatis mutandis, for this obligation rests on the company,
regardless of the board structure.268
Before; Bestuur
consulted. Liability can only be established if members of the Bestuur board are culpable for not
following this obligation. 262
Article 2:109 DCC. 263
Article 2:129a DCC, although the „rigid‟ distribution of powers is released in this type of board, and
powers can be allocated to whomever is best fit for the implementation of the powers of
leading/controlling the company. 264
Article 2:394 (1) DCC. See also the ruling by the Dutch High Court, of 6th February 2004, JOR
2004/67 in the case concerning “Reinders”. 265
Article 2:392 (1)(c) DCC. 266
This, again, pertains an equal duty to be adequately informed. 267
Article 2:141 (1) DCC, although this is a conclusion of the author because no change could be
identified after the amendment of Bill. 31763! 268
Supra footnotes 264 and 265.
92
The managing board has to represent the company in relation to third parties.269 If a
management board of more than one person is installed, they can act jointly or
individually.270 Once the board is installed, this competence cannot be diminished
(although the company itself can invoke limitations to this competence on grounds of
statutory limitations).271
Before; Raad van Commissarissen
Together with the management board, the supervisory board represents the company
judicially and extra-judicially.272
After; One-Tier Board
The (executive) directors represent the company in judicial as well as non-judicial
proceedings.273 If more than one director is installed, the articles of association can state
that they can represent the company alone or in conjunction with other directors.274
Unless the articles of association determine something aberrant.275 For, article 2:130 (4)
mentions the fact; “that the articles of association can determine that other persons
apart from the (executive) directors can be empowered to represent the company.276
Therefore, the group of (executive) directors that possesses power of representation can
empower individuals to represent the company in specific tasks or groups of tasks.277 The
269
Article 2:130 (1) DCC. 270
Article 2:130 (2) DCC. 271
Article 2:130 (3) DCC. 272
Article 2:146 DCC, which imposes an obligation to leave representation to the supervisory board on
grounds of conflicting interests. This article, however, will become void with the implementation of bill
no. 31763, whereas articles 2:129 (6) and 140 (5) DCC, will replace this obligation with an obligation to
refrain from participating in deliberations and decisions in case of conflicting interests. 273
Article 2:130 (1)(4) DCC, since this clearly states that “the management board” represents the
company. 274
Article 2:130 (2) DCC. 275
Article 2:130 (4) DCC. 276
Id. 277
Id.
93
power of representation of executive directors cannot be restricted.278 However, in
relation to dealings with the company itself, as well as all bodies of the company,
executive directors are obligated to accept the instructions and restrictions which – in
light of the applicable governing rules for the SE – have been instated by the general
meeting of shareholders, the articles of association or the One-Tier Board.279 If and when
an executive director is found to be wanting in his280 tasks and obligations, the court has
to send this director away upon request by a company,281 which could also establish
liability.
Before; Bestuur
When dealing with third parties, in corresponding in writing, an obligation exists to
specifically mention the correct name of the company.282
Before; Raad van Commissarissen
An obligation exists to communicate any and all changes in the composition of the
supervisory board to the chamber of commerce,283 within a week after facts become
known which have to be registered.284 At the chamber of commerce, the board can be
scrutinized by an accountant, regarding its accuracy.285
After; One-Tier Board
278
Supra footnote 271. 279
Article 2:129a (1) DCC, 1st and 2
nd sentence.
280 Or her.
281 Article 2:131 DCC.
282 Article 2:75 (1) DCC.
283 Articles 5 (a) [article 6 (1)(a) if only the seat is registered in the Netherlands], 18 (1) and 20 (2)
Handelsregisterwet 2007 “Act of the register of the Dutch Chamber of Commerce 2007”. 284
Article 20 (2) Handelsregisterwet 2007. 285
Article 41 (1) Handelsregisterwet 2007, and although this seems less „stringent‟ than the German
equivalent (the court can scrutinize the board(s), regarding its legality), an expert can do this more
efficiently.
94
All changes in executive directors in the One-Tier Board, as well as their representatives,
including their powers of representation are to be registered in the register of
companies.286 An obligation applies primarily for owners of public limited liability
companies to be registered into the register of companies.287 An equal obligation for
directors can be derived on the basis of keeping good (accurate) registers and being able
to establish the origin of the registered data.288
All letters, addressed to specific recipients, have to state unmistakably; the legal status of
the company, the registered office, the registration office and the number under which
the company is known in the register of companies. As well as the names of all executive
directors and the chairman of the One-Tier Board.289
Before; Bestuur
The managing board is encouraged to follow the (express) wishes of the shareholders
meeting, as well as obligated to ask approval of the shareholders meeting in all decisions
which have to be decided upon, by statute, by the shareholders meeting,290 although
lack thereof does not impede the powers of representation of the board or its
members.291
Before; Raad van Commissarissen
286
Supra footnote 284. 287
Articles 9 (d) and 10 Handelsregisterwet 2007. 288
Article 16 (1) Handelsregisterwet 2007. 289
Supra footnotes 283 – 287. Although this is only applicable to Dutch public limited liability
companies, Bill no. 31948 will change the obligations to include the SE. Incidentally, Bill no. 31948
changes the supervision placed upon public limited liability companies from before their formation to a
recurrent supervision. 290
Article 2:107 (1) and 107a (1) DCC. 291
Article 2:107a (2) DCC. See also the plethora of rulings given by the Dutch High Court concerning
this „encouragement‟, of which the following are noteworthy; “Forumbank”, “Asmi”, ABN-AMRO” and
“HBG”. Respectively: 21st January 1955, NJ 1959, 43 Forumbank; 16
th July 2010, no publication yet,
Asmi; 13th July 2007, NJ 2007, 434, ABN-AMRO; 21
st February 2003, JOR 2003, 57.
95
The supervisory board can be empowered to elect a president and a representative, in
case this president is unable to attend.292 It decides by majority decision.293 The company
itself can decide what a majority is.294
After; One-Tier Board
The general meeting chooses and installs the managing director(s),295 as well as the non-
executive directors.296 Members of the One-Tier Board can be chosen for the position of
managing director, as long as a majority of the One-Tier Board does not consist of
managing directors.297 The installation of all managing directors has to be registered in
the register of companies.298 Managing directors can be laid off by a decision of the One-
Tier Board, if the articles of association don’t determine otherwise. The normal rules of
employment apply.299
Before; Bestuur
A general prohibition of additional jobs, functions, etc., is only been codified with the
implementation of bill 31763, it mentions specifically that a general obligation exists for
anyone who:
292
Article 2:140 (3)(4) DCC. 293
Implied in article 2:140 (4) DCC. 294
Id. 295
Article 2:132 (1) DCC. 296
Id. 297
Implied in article 2:129a (1) DCC. 298
Supra footnotes 283 – 287. Although this is not specifically dealt with in the revised DCC, the
assumption is made here that a European obligation cannot lead to less accountability, given the –
minimum – harmonization obligation(s). 299
This – interestingly – implies that the normal rules of employment are NOT applicable in the case of
(managing) directors. Indeed, article 2:134 (3) DCC specifically states that revival of an employment
contract CANNOT be ordered by the judge.
96
1. Is already a member of a One-Tier Board or an Raad van Commissarissen in two other
corporations;300
2. If any member of the managing board breaks this rule, he can be held accountable.301
Before; Raad van Commissarissen
Only individuals can be members of a supervisory board,302 with a maximum of
memberships of supervisory boards in five different companies.303 No one can be a
member of a management board and a supervisory board.304 However an exception to
this rule can exist when a managing board is missing a director and the articles of
association mention this exception specifically.305 No legal entities are allowed.306
After; One-Tier Board
A restriction for members of the One-Tier Board remains for:
1. Anyone who is already a member of a One-Tier Board or a Raad van Commissarissen
in two other corporations;307
2. Anyone who is already a chairman of a management board of a corporation or a
chairman of a One-Tier Board;308
The incompatibilities for members of the One-Tier Board are further restricted by stating
that any person whom is a member of an auditing commission equally is prohibited from
pursuing a membership of the One-Tier Board of any corporation.309
300
Article 2:132a (1)(a) DCC. 301
Article 2:132a (1)(b) DCC. 302
Article 2:140 (1), 2nd
sentence DCC. 303
Article 2:142a (1) DCC, plus all the incompatibilities listed in article 2: 160 DCC. 304
This follows directly from article 2:160 (a) DCC, referring to all employees of the company.
Managing directors are employees. 305
Article 2:134 (4) DCC, which no longer states an obligation to contain regulations for this sort of
situation. See also footnote 252. 306
Supra note 302. 307
Article 2:132a (2) DCC. 308
Id. 309
Id.
97
Before; Bestuur
The management board is obligated to inform the supervisory board of all facts that
become known to them in their daily managing tasks,310 as well as an obligation to
inform the Raad van Commissarissen before being able to make a decision that could
have an impact on the company as a whole.311
Before; Raad van Commissarissen
The supervisory board has to supervise the managing board.312 To be able to adequately
supervise, the supervisory board has full access to any and all forms of information
concerning the daily conduct of the management board. Is also has the right to examine
and verify the information it is provided.313
After; One-Tier Board
The rules of informing the One-Tier Board, by the managing directors, are the same as
those for the Raad van Commissarissen.314 Hereby establishing an obligation for the
executive directors to inform the non-executive directors of the One-Tier Board on
matters of; the intended policy of the company and other principles in its day-to-day
operation, expected rate of return for the company and specifically the stockholder
equity, the turnover, all matters that can be of substantial impact to the equity of the
company.315 The rules concerning remuneration for members of the Bestuur,316 non-
310
Article 2:141 (1) DCC, in order for the supervisory board to be able to effectively supervise. 311
Article 2:164 (1) DCC. 312
Article 2:140 (2) DCC, as well as article 2:164 (1) DCC, although this does not preclude the
management board from being able to represent the corporation! 313
Article 2:141 (1) DCC, see also footnote 252 which clearly shows two sides of the same obligation. 314
Article 2:164a (3)(4) DCC. 315
Id. 316
Article 2:129a (1) 3rd
sentence, and (2) DCC.
98
competition clauses317 and extensions of credit are equally applicable for the One-Tier
Board.318
If and when the One-Tier Board drafts the annual accounts, the One-Tier Board is
obligated to deposit the annual financial statements at the offices of the corporation.319
The final establishment of the annual accounts is left to the general meeting.320 The
decision(s) of the One-Tier Board has (have) to be included in the statement concerning
the annual proceedings.321 After sending the statement concerning the annual
proceedings, the One-Tier Board has to call a general meeting within 6 months, to
present the established year results, the statement of annual profits and the decision of
allocating those profits.322 The obligations – laid down in articles 107 (1-2) and 107a DCC
apply mutatis mutandis. The One-Tier Board has to present the obligatory documents to
the general meeting and elaborate on them.323 It also has to define its position on
negative results and/or losses, which influenced the year results.324 For the
implementation of all responsibilities for members of the management board, the
executive directors step in, instead of the Bestuur.325 Also, for the implementation of all
responsibilities for members of the supervisory board the non-executive directors step
in, instead of the Raad van Commissarissen.326
Before; Bestuur
When drawing up (bi-) annual accounts or when becoming aware of losses of equal or
less than half of the net value of the company, the managing board is obligated to inform
317
Article 2:129 (6) DCC. 318
Supra note 261. 319
Article 2:101 (1) DCC, as well as an obligation for the corporation to make the annual accounts
available to all share and certificate holders, see article 2:102 (1) DCC. 320
Article 2:101 (3) DCC. 321
Article 2:392 (1)(b)(c) DCC. 322
Article 2:108a, in conjunction with 2:109 DCC. 323
Supra footnotes 264, 265 and 321. 324
Id. 325
Article 9 (2) DCC, as well as 2:129a (1) DCC, which clearly shows a „lack‟ of division of
responsibilities for executive- and non-executive directors.. Moreover, the responsibility is placed on
any and all directors of the One-Tier Board. 326
Id.
99
the shareholders meeting within three months.327 The competence to authorize
payments is equally stopped when the solvability of the company is in danger, or has
been seriously hampered by a (too) excessive indebtedness. Apart from the obligation to
continue to pay for ‘normal’ conduct of business.328
Before; Raad van Commissarissen
The supervisory board has a duty to call a general meeting if and when the prosperity of
the company demands it.329 Duties of the management board can no longer be allotted
to the supervisory board.330 However, the articles of association can determine that
(members of) the supervisory board can undertake specific actions in case of absence of
(members of) the management board.331 If authorization for (proposed) actions is
withheld by the supervisory board this does not limit the powers of representation of the
management board, however.332
After; One-Tier Board
The One-Tier Board has an obligation to call a general meeting of shareholders when
discerning losses of equal or less than half of the net value of the company .333 All
members of the One-Tier Board can request a meeting of the One-Tier Board.334 This
327
Article 2:108a, in conjunction with 2:109 DCC. 328
Article 2:129 (5) DCC, ALL directors have to focus their fulfillment of tasks in the best interests of
the corporation and its company. 329
Article 2:9 (2) in conjunction with 2:109 and 2:140 (2) DCC. 330
Article 2:146 has been revoked, and article 2:134 (4) no longer has a compulsory obligation to
regulate absence of (members of) the management board. 331
Article 2:134 (4) and 2:151 (1) DCC. 332
Article 2:164 (2) DCC. 333
Article 2:108a DCC. 334
Article 2:109 DCC.
100
meeting will have to be called by (any member of) the One-Tier Board335 and will have to
take place within three months of becoming aware of the aforementioned losses.336 Its
calling cannot be done any later than fifteen days before the general meeting will take
place.337 If the One-Tier Board does not comply with this obligation, then any
stockholder, after having been empowered by the appropriate judge, has the right to call
a general meeting on its own.338
The One-Tier Board has a duty keep accounts of daily business, especially to identify
possible dangers to its continuity.339
Before; Bestuur
The general standard of care to be taken into account by the directors is that of a diligent
and prudent manager whilst at the same time having a duty of confidentiality.340
Before; Raad van Commissarissen
All members of a supervisory board are required to act in the (best) interests of the
company and in the (best) interests of the employees; regardless of by whom they were
nominated.341
They are subject to a comparable duty of care and confidentiality that applies to the
directors.342
After; One-Tier Board
The managing directors are responsible for the day-to-day administration of the
company, whereas, if more than one director has been designated managing director, in
335
Article 2:113 (2) DCC. 336
Article 2:108a DCC. 337
Article 2:115 DCC. 338
Article 2:112 in conjunction with 2:110 (2) and 2:111 DCC. 339
Article 2:10 (1) DCC. 340
Article 2:9 (1)(2) DCC. 341
Article 2:140 (2) DCC. 342
Article 2:149 and therefore also 2:9 (1)(2) DCC.
101
conjunction with the other managing directors.343 The articles of association cannot
deviate from this point, and any deviation from statutory obligations for the One-Tier
Board is to be considered null and void.344
Before; Bestuur
They are liable in case they mismanage the company,345 and liability is fixed when the
corporation faces bankruptcy, in case they mismanaged the company and the conduct of
the management board is a probable cause of its bankruptcy.346 This liability is thwarted
if they acted in a valid manner of conduct to the company.347 However, the company
cannot waive this liability in case of bankruptcy.348 The liability for misconduct can only
cover a period of a maximum of three years preceding a bankruptcy,349 and the general
(internal) liability expires after discharge has been granted by the general meeting.350
General (external) liability expires after a period of twenty years,351 although liability for
damages as a result of (negligent) conduct expires after a period of five years.352
Before; Raad van Commissarissen
The members of the supervising board have an equal duty as the members of the
managing board.353 Moreover, the members of the supervising board have an equal care
concerning non-disclosure of confidential briefs and meetings if and when an overriding
interest demands this for the benefit of the corporation.354
343
Article 2:9 (1)(2) DCC. 344
Id. 345
Article 2:9 (2) DCC. 346
See the statutory presumption of negligence mentioned in article 2:138 (1)(2) DCC. 347
Article 2:9 (2) DCC. 348
Article 2:138 (6), 2nd
sentence DCC. 349
Article 2:138 (6), 1st sentence DCC.
350 Although discharge has not been codified, it follows from the regulations in articles 2:101 (3) and
2:138 (6) DCC, as well as the legislative history in the Netherlands. See also: Asser/Maeijer/Van
Solinge & Nieuwe Werne 2-II 2009, „Rechtspersonenrecht, De Naamloze en besloten Vennootschap“,
Kluwer, Deventer. 351
Article 3:306 DCC. 352
Article 3:310 (1) DCC. 353
Article 2:149, in conjunction with article 2:9 (1)(2) DCC. 354
Article 2:107 (2) DCC.
102
After; One-Tier Board
The rules concerning liability if they mismanage the company or act in breach of their
duties or the articles of association of the company are applicable mutatis mutandis for
the One-Tier Board.355
Before; Bestuur
If the directors were grossly negligent in their duty of care, creditors, who cannot obtain
satisfaction of the company, are entitled to sue the directors.356
Before; Raad van Commissarissen
According to Dutch statute, the supervisory board is also competent to institute
proceedings against the managing board for breaches of duty and in such cases inactivity
of the supervisory board may constitute a breach of their own duties in relation to the
company.357
After; One-Tier Board
The same rules concerning duty of due care and liability apply to each member of the
One-Tier Board, as are laid down for members of the Bestuur.358
355
Supra footnotes 345-352. Noteworthy in this aspect is the lack of division in liability for executive-
and non-executive directors. See also footnote 325. 356
Article 2:139 DCC, which follows from the words: “severally liable to third parties” [hoofdelijk
aansprakelijk tegenover derden]. 357
Articles 2:149 – 150 DCC. A general duty „for the benefit of the company“ can be perceived when
looking at these articles, which justifies the conclusion that if „the benefit oft he company“ demands
proceedings against (former) members oft he management board, they should do so. 358
Article 9 (1)(2) DCC.
103
Any obligation, which isn’t specifically mentioned in this statute *Statute for the
implementation of the Directive concerning the SE,359 red], but otherwise constitutes an
obligation for members of the Bestuur or the Raad van Commissarissen, is to be
considered inherent for the One-Tier Board.360
Before; Bestuur
Lastly, all competence, duties and (possible) liability are equally applicable for
representatives of the management board.361
Before; Raad van Commissarissen
The same is applicable for members of the supervisory board.362
After; One-Tier Board
All obligations of the managing directors apply equally for their substitutes.363
359
Supra note 77. 360
This follows from the formulation of the words in article 9 DCC, which only mentions the obligations
for “any and all directors”, without specifying if the director is executive or non-executive. 361
Article 2:151 (1)(2) DCC. 362
Articles 2:9 (1)(2), 149 and 151 (1)(2) DCC. 363
Articles 2:9 (1)(2) and 151 (1)(2) DCC.
