Emergency legislation to facilitate the holding of virtual general meetings and corporate electronic decision making in the Netherlands during the Covid-19 crisis has been extended until 1 December 2020. This is likely to be extended again until 1 February 2021. Companies are advised to nevertheless review and if necessary amend their articles of association (Articles) to allow for virtual meetings and decision making in the future.
The legislation came into effect on 24 April 2020. In this overview we set out the elements of the legislation relevant for Dutch companies and their directors. The legislation also deals with other Covid related matters such as virtual court hearings and execution of notarial deeds. These are not dealt with in this overview.
Many Dutch companies have introduced measures in their Articles for electronic decision making and participation in meetings. However a general meeting is always required to be held physically and a number of companies had not taken advantage of the existing possibilities regarding electronic participation in their Articles. If the Articles or the law prescribe a certain method of decision making and these provisions are not adhered to then the legal validity of a decision can be challenged. This can have consequences for director liability and the invalidity of financial securities for example.
In addition Dutch law punishes directors who fail to publish annual accounts by the legislative deadlines. In this case, if the Company becomes insolvent, there is a presumption of mismanagement and that such mismanagement was an important cause of the insolvency. Under the Covid 19 Emergency law this is not the case if the Covid-19 outbreak is the reason for not publishing the most recent annual accounts on time. These particular provisions only lapse on 1 September 2023. The explanatory memorandum explains that this is because a claim for mismanagement can be brought in relation to the 3 year period preceding the insolvency.
The Covid-19 Emergency law gives companies and their directors in the Netherlands some breathing space in meeting the strict requirements of the law regarding the holding of meetings and the approval of annual accounts. We set out below the specific provisions of the Covid 19 emergency legislation relevant for Dutch corporate entities. The flexibility given to shareholders in respect of the casting of votes is also applicable to all holders of meeting rights such as depositary receipt holders or pledge holders with meeting rights. Similar provisions are made applicable to other legal entities such as associations (verenigingen) and cooperatives.
The Covid 19 Emergency law provides that any provisions in a company’s articles of association with the same content as the statutory provisions mentioned below as well as provisions that require the management to obtain the prior approval of another corporate body with regard to such provisions will not apply.