Welcome to Penrose Corporate Governance
Penrose specialises in Dutch corporate law and corporate governance. We advise and assist international entrepreneurs, shareholders and supervisory board members regarding corporate governance, the prevention of mismanagement, internal and external regulatory authorities, decision making and corporate liability. We also act as counsel in conflicts between shareholders, directors and/or supervisory board members. Hereafter, we have outlined some of the Dutch law corporate governance issues that we encounter on a daily basis.
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Bodies of the legal entity
Most companies in the Netherlands are legal entities. A legal entity is independently active in social and economic life and can acquire rights and undertake obligations as if it were an individual. The legal entity can, for example, open a bank account, rent a property, run a business, own inventory and conclude agreements. In short, the legal entity has an independent capital consisting of assets and liabilities.
Legal entities (such as a private limited company (B.V.), public limited company (N.V.), corporation and foundation) are established by a civil-law notary by notarial instrument and subsequently registered in the Dutch Chamber of Commerce trade register. Upon the incorporation of the company, the notary also draws up the articles of association for the company. The articles of association first describe the name, location and purpose of the company. In addition, the articles of association contain provisions on the company’s bodies and on internal governance. A body of a legal entity is a group of one or more persons to whom the law or articles of association have conferred decision-making powers regarding certain matters. Without bodies, a legal entity cannot do anything, meaning that persons are required in order to act. A company’s most important bodies are:
The Board of Directors
Any natural or legal person may be appointed executive director of a Dutch legal entity (public limited company, private limited company, corporation or foundation). A company’s Board of Directors consists of one or more executive directors. Statutory directors of a private limited company are, as a general rule, appointed, dismissed and suspended through the General Meeting of Shareholders, but this can sometimes be arranged differently (e.g. by the Supervisory Board).
Distribution of tasks among Board of Directors
The Board of Directors can draw up a distribution of tasks in which the tasks are divided between the executive directors themselves (e.g. a CEO, CFO, COO and CTO). In practice, certain tasks are also delegated by the Board of Directors, for example to the management. The Board of Directors remains ultimately responsible at all times. If the Board of Directors manages improperly, the executive directors run the risk of being held personally liable.
General Meeting of Shareholders
The General Meeting is made up of a company’s shareholders. There is at least one General Meeting each year (the Annual General Meeting, AGM). The General Meeting takes place after the shareholders have been convened for this purpose and addresses the items on the agenda in the convocation for the meeting. Each shareholder is entitled to attend and speak at the General Meeting. Each shareholder is authorised to vote at the General Meeting, unless they have non-voting shares. The shareholders can make agreements on the exercise of voting rights in a shareholders’ agreement. The Board of Directors and the Supervisory Board have an advisory role in the General Meeting of Shareholders.
Also, see our blog on the ins and outs of the shareholders resolution under Dutch law together with a template for such a resolution.
Powers relating to the General Meeting of Shareholders
The General Meeting has the power to make decisions on a number of important matters relating to the company. For example, the General Meeting has the power to decide on amendments to the articles of association, the dissolution of the company, legal merger or division, the issue of new shares and the adoption of the annual accounts. The General Meeting may not override the powers granted by law or by the articles of association. This means that the General Meeting may not replace the Board of Directors. Defining the company’s strategy remains a matter for the Board of Directors. In principle, the Board of Directors and the Supervisory Board are obliged to assist in providing the information requested by the General Meeting. Finally, the General Meeting can give instructions to the Board of Directors.
Supervisory Board tasks
Members of a company’s Supervisory Board have two main tasks. Firstly, the supervisory directors have to supervise the policy of the Board of Directors and the general course of affairs within the company. Secondly, the supervisory directors have to advise the Board of Directors. In performing their duties, the Supervisory Board members must take into account the interests of the company and its stakeholders.
Dutch specialists for Board of Directors, General Meeting of Shareholders and Supervisory Board
At Penrose, Dutch corporate lawyers specialised in the distribution of tasks among Board of Directors, powers relating to the General Meeting and Supervisory Board tasks are happy to work with you and answer any questions you may have. Our lawyers’ contact details are available here.