Corporate governance

Corporate governance: the organization of management and supervision

Corporate governance concerns the structuring of management, supervision, and accountability within a company or organization. Good governance creates clarity regarding duties and powers, contributes to effective decision-making, protects against liability risks, and strengthens the confidence of financiers, shareholders, and other stakeholders. Poor or unclear governance, on the other hand, is often the seed of subsequent conflicts regarding powers, conflicts of interest, or negligence in supervision.

Who do we work for?

We advise a wide range of organizations. Our clients include listed companies and multinationals, SMEs and family businesses, private equity portfolio companies, foundations and associations, housing corporations and healthcare institutions, educational institutions, cultural institutions, and (semi-)governmental bodies. We provide support with both the initial establishment of governance and major reassessments following mergers, acquisitions, amendments to articles of association, or policy changes.

The governance model: one-tier or two-tier?

Dutch corporate law recognizes two governance models. In the classic two-tier model, the management board (Articles 2:129 and 2:239 of the Dutch Civil Code) is supervised by a separate Supervisory Board (Articles 2:140 and 2:250 of the Dutch Civil Code). In the one-tier model (Articles 2:129a and 2:239a of the Dutch Civil Code), there is a single management body comprising executive and non-executive directors. Both models have their advantages and disadvantages regarding decision-making speed, information asymmetry, and supervision. We advise on the choice between these two models and the corresponding statutory and regulatory structure.

Conflict of interest

An important part of corporate governance is the regulation concerning conflicts of interest. Articles 2:129 paragraph 6 of the Dutch Civil Code (NV) and 2:239 paragraph 6 of the Dutch Civil Code (BV) stipulate that a director shall not participate in deliberations and decision-making when he has a direct or indirect personal interest that conflicts with the interest of the company. Violation of this rule can lead to the voidability of the decision and, where applicable, to directors' liability. The Bruil case law of the Supreme Court has further clarified the test: it concerns a personal interest that carries such weight that the director is no longer able to use the interest of the company as a guideline.

The Dutch Corporate Governance Code

For listed companies, the Dutch Corporate Governance Code applies, with a comply-or-explain system. The Code was last revised in 2022 and contains principles and best practice provisions regarding, among other things, long-term value creation, risk management, board composition, remuneration, and shareholding. Non-compliance must be explained in the annual report. For non-listed companies, the Code does not apply directly, but the provisions can form a normative framework.

Sector-specific governance codes

Different (semi-)public sectors have their own governance codes. For housing associations, the Governance Code for Housing Associations (Aedes) applies; for healthcare, the Governance Code for Healthcare (Brancheorganisaties Zorg); for education, different codes per education sector; and for charities, the Recognition Scheme of the CBF. In addition, cultural institutions have the Governance Code for Culture. We advise on implementation and periodic reassessment.

Articles of association, regulations and decision-making

Articles of Association form the legal foundation of every legal entity. In addition, organizations use regulations for the Executive Board, the Supervisory Board, any committees (audit, remuneration, selection, and appointment), and the General Meeting. Regulations provide flexibility for matters not covered (or not exhaustively covered) in the Articles of Association. We draft Articles of Association and regulations, revise them in the event of amendments, and advise on decision-making issues such as quorum requirements, written decision-making outside of meetings, consent, and approval.

Corporate Governance and Supervision of Legal Entities Act (WBTR)

The Corporate Governance and Supervision of Legal Entities Act entered into force on July 1, 2021, and applies to associations, foundations, cooperatives, and mutual insurance companies. The Act regulates, among other things, the possibility of a Supervisory Board or a one-tier board for these legal forms, the rules regarding conflicts of interest, the liability of directors and Supervisory Board members, and the rules concerning dismissal. For many existing foundations and associations, the Act has implications for their articles of association and regulations.

Our working method

We begin by mapping out the current governance: articles of association, regulations, decision-making practices, any applicable governance codes, and the actual collaboration between the management board, supervisory board, and owners or members. Subsequently, we propose areas for improvement and guide their implementation, including amendments to the articles of association where necessary. For large organizations, we also provide governance reviews, evaluations, and training for the management board and the supervisory or executive board.

Directors' liability: governance as protection

Good corporate governance is the first line of defense against directors' liability within corporate law . Every director is obliged, pursuant to Article 2:9 of the Dutch Civil Code, to properly perform their duties. A high threshold applies to internal liability towards the legal entity: there must be improper management for which the director seriously blamed , assessed on the basis of all the circumstances of the case (Supreme Court, Staleman/Van de Ven). Factors such as the nature of the activities, the available information, and the internal division of tasks are taken into account here. Moreover, management is a collective responsibility: in principle, every director is liable for the whole, unless they demonstrate that they are not personally seriously at fault and that they were not negligent in taking measures to avert the consequences (exculpation). Clear governance, documented decision-making, and a sound information and archiving policy are therefore not a formality, but the evidence with which a director later defends themselves. For the question of liability itself, we refer to our page on directors' liability; from a governance perspective, we focus on the preventive structure.

Discharge, governance and the limits of indemnification

The general meeting may grant the board discharge for the policy pursued, usually upon the adoption of the annual accounts. However, a granted discharge is only effective for facts evident from the annual accounts or otherwise known to the meeting, and exclusively concerns internal liability under Article 2:9 of the Dutch Civil Code. Liability towards third parties or the bankruptcy trustee (for example, pursuant to Article 2:248 of the Dutch Civil Code in the event of bankruptcy) remains unaffected. We advise on the drafting of discharge resolutions, indemnities, and directors' liability insurance, and ensure that the governance surrounding accountability and approval is structured in such a way that the discharge actually has value.

Risk management and internal control

A core pillar of modern governance is a functioning system of risk management and internal control. The Dutch Corporate Governance Code 2022 explicitly places the responsibility on the board to identify and manage risks in a timely manner with a view to continuity and long-term value creation. The absence of, or a poorly functioning, risk management system can in itself contribute to the judgment that there has been improper performance of duties. We assist in establishing risk policies, internal control procedures, escalation lines, and reporting thereof to regulators, both for large organizations with an audit committee and for SMEs where the director personally maintains control.

The role of the general meeting and shareholders

Governance is not only about management and supervision, but also about the position of the owners. The general meeting has statutory powers regarding the appointment and dismissal of directors and supervisory board members, the adoption of the annual accounts, amendments to the articles of association, and the approval of far-reaching management decisions (Article 2:107a of the Dutch Civil Code). In addition, the articles of association may grant approval rights and powers of instruction. We advise on the balance between decisive management and appropriate shareholder control, and on decision-making involving multiple shareholders or voting agreements. Should the collaboration break down, this aligns with our expertise in shareholder disputes.

Shareholders' agreement and articles of association aligned

The shareholders' agreement and the articles of association are the two documents that shape the governance between owners. Articles of association are public, apply to the company and everyone, and are amended by means of a notarial deed. A shareholders' agreement is a private agreement between shareholders that is flexible but, in principle, only operates between the parties under the law of obligations. Common topics include decision-making and veto rights, an obligation to offer shares and a blocking arrangement, good leaver and bad leaver clauses, tag along and drag along, and dispute resolution mechanisms. We draft both documents in conjunction so that they reinforce each other and do not contradict one another, for a start-up with two founders just as well as for a multi-layered private equity structure.

Division of tasks, delegation, and decision-making within the board

In the case of a multi-member board, a clear division of tasks is essential, both for effectiveness and for the liability position. Although the board remains collectively responsible, certain tasks may be assigned to individual directors by or pursuant to the articles of association; this internal division of tasks plays a role in the assessment of serious misconduct under Article 2:9 of the Dutch Civil Code. We establish the division of tasks, portfolios, power of representation (Articles 2:130 and 2:240 of the Dutch Civil Code), and internal approval thresholds in the articles of association and the Board Regulations, and advise on decision-making in cases of divided votes, absence, and impediment.

Governance for every scale: from international corporation to the baker on the corner

Good governance is not reserved for listed companies. In our mixed teams, lawyers and in-house counsel work together, enabling us to serve both complex corporations and small business owners. For an international group, governance means a well-thought-out holding structure, group regulations, an audit committee, and coordination with foreign companies. For the local baker or family business, however, it means simple, understandable articles of association, clear agreements between owners, and documented decision-making processes that prevent disputes and liability. We scale our advice to the actual need: no more governance than necessary, but enough to provide peace of mind, clarity, and protection.