Supervisory board - in the Netherlands

What is the supervisory board - of a company in the Netherlands?

A supervisory board in The Netherlands is legally responsible for monitoring the actions and policy crafted by the management board in a company, but must assess the general operation of a company.

Duties of a supervisory board in the Netherlands

The members of the supervisory board must fulfill the following duties:

1. monitoring the management board and the company as a whole
2. representing the company in times where a conflict of interest persists for members of the management board, which prevents them from carrying out their duties in line with the interests of the company
3. maintain relations and communication with the works council (if it exists)
4. in companies of a substantial size, the supervisory board may also be responsible for the appointment and dismissal of managing directors
5. monitor the financial status of the company.

In monitoring the management board, the supervisory board is also under an obligation to advise the managing directors. This generally involves them offering strategic advise or drawing their attention to current issues plaguing the company’s viability or progress.

The supervisory aspect this board must undertake can be quite broad, which can consequently place a great deal of strain on them. In carrying out their duties, the board may seek expert advice on behalf of the company. This must be conducted in both a professional and timely manner.

Authority of a supervisory board in the Netherlands

What is the authority of the supervisory board of a company under corporate law the Netherlands?

The supervisory board is granted the authority to oversee those who manage the company. They should be familiar with all aspects of the company and in larger companies can even dismiss members of the management board. The supervisory board is required to meet on a regular basis, generally the necessity of this is dependent on the circumstances the company finds itself in.

The supervisory board does not always move with one voice, and disagreement between the members in their meeting must be clearly recorded and documented. This places the board in a clear position if questions of liability or removal arise.

Appointment and removal of a supervisory board in the Netherlands

How are supervisory directors appointed in the Netherlands? The appointment of supervisory directors is often handled in a general meeting, by way of a resolution. The company’s Articles of Association will also play a role, often containing additional criteria or stating further consent that must be obtained from other corporate bodies. For instance, holders of a certain class of shares may be given appointment powers under the company’s governing policy. Companies of a substantial size in The Netherlands will have to honour the works council’s right to give recommendations on a third of the appointments to the supervisory board. For an appointment to be legitimate in the general meeting, there must be an absolute majority of the votes (anything above 50%) representing at least a third of the issued share capital. If this is not achieved, an additional meeting must held to reach a consensus.

In line with the so-called ‘points regulations’ under Dutch law, a member of the board may not hold positions on more than five supervisory boards or any equivalent position of power within a company. If this rule is breached, a resolution granting such appointment can be deemed invalid providing such positions were accepted after the Management and Supervision (Public and Private Companies) Act entered into force in January, 2013.