The Dutch Senate has approved a legislative proposal that provides the Management Boards of listed companies with the possibility to invoke a statutory timeout right period (also referred to as: ''reflection period'') with a maximum of up to 250 days. The new bill will come into effect on 1 May 2021.
The Management Board of a listed company may invoke this reflection period with a maximum of up to 250 days in the following situations:
- If shareholders, individually or jointly, representing 3% of the issued share capital (or a lower percentage set in the articles of association) request the company to consider a proposal to appoint, dismiss or suspend one ore more members of the Management Board or the Supervisory Board or propose an amendment of the articles of association relating to this matter.
- In case a public offer for shares in the capital of a company has been made or announced, without an agreement about the offer having been reached with the company.
This Management Board decision should be contain a rationale and approved by the Supervisory Board.
The consequence of invoking a reflection period regarding 1) above is that the authority of the General Meeting to appoint, dismiss or suspend one ore more members of the Management Board or the Supervisory Board or to propose an amendment of the articles of association in relation to the aforementioned is suspended.
Regarding 2) above the Management Board should use the reflection period to collect the information it requires in order to come to a prudent decision regarding the offer.
This new legislation impacts both the Management Board of a listed company as well as the shareholders of a listed company.
Eumedion, the Dutch the corporate governance and sustainability forum for institutional investors, believes that the introduction of an additional statutory reflection period is unnecessary and disproportionate. In their view, Dutch listed companies already have sufficient options to effectively protect themselves against a hostile takeover and / or unwanted shareholder activism. While Eumedion was pleased to see that the House of Representatives made a number of positive adjustments (such as i.) preventing the reflection period from being invoked while other forms of protective measures are also active and, ii.) making it easier for certain shareholders to request the court to end the reflection period) it continues to believe that the introduction of the statutory reflection period is unnecessary and disproportionate.
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