Millions of people throughout the world rely on the performance of listed companies. The government therefore recognises the great importance of corporate governance and corporate supervision. Legislation must ensure good practice and integrity in the way that listed companies are run.
Supervision of listed companies
Corporate governance and the supervision of listed companies are very important to the Dutch economy. The Ministry of Finance has introduced a number of laws to protect the interests of consumers and businesses. It constantly seeks improvements in the laws. In particular, it seeks:
- greater transparency in annual reports;
- better accountability by supervisory boards;
- more protection for shareholders.
Listed companies are supervised by the Netherlands Authority for the Financial Markets (AFM) on behalf of the Ministry of Finance.
Corporate Governance Code (Tabaksblat Code)
In addition to the existing legislation on corporate governance, Dutch listed companies have drawn up their own code of conduct: the Corporate Governance Code. It explains how a company’s directors must be organised. Listed companies are not obliged to observe the code, but if they do not they must explain why.
Examples of the rules in the Corporate Governance Code are:
- a supervisory director may hold no more than five supervisory directorships;
- executive directors are appointed for a period of four years;
- a golden handshake may not exceed one year’s salary.
The code also lays down:
- how the executive board must account for its actions;
- how the executive board is supervised;
- the position of shareholders;
- the requirements placed on the external auditor.
The Corporate Governance Code was drawn up partly on the initiative of the Minister of Finance and came into force on 30 December 2004.
Compliance with the Corporate Governance Code
The Dutch Corporate Governance Code Monitoring Committee checks whether and how listed companies observe the code. It issues an annual compliance report of its conclusions.
Annual financial reports
All listed companies in Europe – including those in the Netherlands – must prepare their annual financial reports in accordance with International Accounting Standards (IAS) so that they can be compared with each other.
Supervision of audit reports
Listed companies in the European Union are also required to have their annual reports audited by an external audit firm. Audit reports are often the only assurance investors have on the reliability of annual reports. Audit firms that issue audit reports are therefore supervised in the Netherlands by the Authority for the Financial Markets (AFM).
Since 2008, EU member states have been required to carry out independent public checks of audit firms that issue audit reports. This European legislation has been included in the Act on the Supervision of Audit Firms (WTA) in the Netherlands.
Transparency and duty to provide information
Investors must be able to form a timely opinion on a company’s performance. Listed companies are therefore required to publish timely and accurate information (on, for example, an acquisition). Under the European Transparency Directive, all listed companies in the European Union have the same duty to provide information. The Netherlands has transposed the Directive into the Financial Supervision Act (WFT).
A listed company must publish a prospectus when it issues tradable securities. A prospectus provides information on why securities are being issued and how many. Companies in the Netherlands may list securities on the stock exchange only if the prospectus has been approved by the AFM. Approval of prospectuses is governed by the European Prospectus Directive and is laid down in the Dutch Financial Supervision Act (WFT).
Disclosure of power of control and equity interests
Listed companies in the Netherlands are required to disclose interests of more than 5 % in their equity and voting rights . The AFM enters these interests in a public register. Executive and supervisory directors must also inform the AFM of the interests they hold in the companies they are associated with.
The duty to disclose power of control and equity interests in a company is laid down in the Financial Supervision Act (WFT).
Acquisition of listed companies
Listed companies must also comply with rules on the acquisition of other businesses. They include:
- the offer document must be approved in advance by the Netherlands Authority for the Financial Markets (AFM). The information that has to be included in the offer document is laid down in the Public Offer Decree (BOB);
- the offerors must inform the market, shareholders and employees of the acquisition’s progress;
- immediately a party holds more than 30% of the voting rights in a listed company, it must make a public offer for the outstanding shares. The European Acquisition Directive has been transposed into the Financial Supervision Act (WFT) in the Netherlands.