Dutch corporate law update: legislative proposal for digital general meetings
The Netherlands takes a significant step toward modernizing corporate governance with new legislation enabling fully digital general meetings.
The Dutch House of Representatives (Tweede Kamer) has accepted the legislative proposal for the Digital General Meeting of Private Legal Entities Act (Wet digitale algemene vergadering privaatrechtelijke rechtspersonen), which aims to amend Books 2 and 5 of the Dutch Civil Code to facilitate the use of electronic communication tools at general meetings of Dutch legal entities. The proposal now awaits adoption by the Senate (Eerste Kamer).
Background and purpose
Access to and use of the internet has increased significantly in recent years. As a result of the pandemic, digital meetings have become integrated into the daily routine in many sectors of society and are no longer dispensable. The experiences gained during the COVID-19 pandemic with the Temporary COVID-19 Justice and Security Act (Tijdelijke wet COVID-19 Justitie en Veiligheid) have shown that the option for a digital general meeting is a valuable addition. Also from the business and association community, there is a strong call for a permanent legal regulation of a fully digital general meeting. Therefore, due to the advancing digitalization and technical developments, the legislator deems the time ripe for to facilitate and regulate the use of electronic communication tools at general meetings of Dutch legal entities.
The proposal contains three key measures: (1) amendments to Books 2 and 5 of the Dutch Civil Code to facilitate fully digital general meetings for public limited companies (NVs), private companies with limited liability (BVs), associations, owners' associations (VvEs), cooperatives and mutual insurance companies, alongside the existing possibility of partially digital (hybrid) general meetings; (2) additional conditions for the use of electronic communication tools at general meetings to ensure adequate support for digital meetings and enable participants to fully participate digitally; and (3) modernization of the rules for convening general meetings to simplify electronic convening.
Key features of the legislation
1. Fully digital meetings
The legislative proposal provides for the possibility for legal entities regulated in Book 2 of the Dutch Civil Code with members or shareholders (BVs, NVs, associations, cooperatives and mutual insurance companies) to hold a fully digital general meeting. The proposed regulation will also apply to VvEs.
The proposed regulation is optional and technology-neutral. Legal entities can choose whether they want to hold fully digital or hybrid meetings and which electronic communication tool they wish to use. The condition is that there must be support among members or shareholders, full participation of meeting participants must be possible, and participants must be identifiable and able to exercise voting rights.
2. Authorization requirements
The following requirements apply for holding digital general meetings for the following types of legal entities:
(a) NVs, BVs, Cooperatives and Mutual Insurance Companies:
For NVs, BVs, Cooperatives and Mutual Insurance Companies, fully digital or hybrid meetings will be possible if provided for in the articles of association. This requirement also aligns with the current legal regulation for hybrid general meetings and the condition that there must be support among members or shareholders.
The articles of association may include additional requirements or limitations for fully digital or hybrid meetings. This may include, for example, that the management board decides whether (and if so, under what conditions) the general meeting takes place digitally, or whether authorization from the general meeting is required, or that the possibility of fully digital meetings is excluded for certain resolutions.
(b) Associations and VvEs:
For associations and VvEs, the requirement of a basis in the articles of association is not imposed. Instead, it is regulated that the general meeting can grant authorization to the management board to hold a hybrid or fully digital meeting. By prescribing authorization, the intention is that the association enters into dialogue with its members and only with the consent of the members arranges for holding a digital or hybrid meeting.
(c) Listed Companies:
For listed companies, fully digital meetings are not allowed for the annual general meeting at which annual accounts are adopted, although a hybrid format remains possible if provided for in the articles of association. For other general meetings of listed companies, the provisions set forth in item (a) apply.
3. Emergency provisions
In deviation of the provisions set forth paragraph 2, the management board of NVs and BVs can decide to hold a fully digital meeting in the event of exceptional circumstances that seriously jeopardize the continuity of decision-making by the general meeting or the safety and health of those entitled to attend the meeting. This must be stated in the convening notice.
4. Technical requirements and safeguards
The starting point of the legislative proposal is that a digital general meeting mirrors the physical meeting as much as possible and that a digital meeting must meet the same or materially equivalent conditions as those of a physical meeting. This means that members and shareholders must be able to fully participate in the digital meeting, as if they were physically present at the meeting.
To ensure full participation and interaction as much as possible, it is mandatory that members and shareholders can follow the meeting directly with image and sound and that they can participate in the deliberations with image and sound. Therefore, the use of a two-way audiovisual communication tool is mandatory.
The proposed legislation requires that participants can, via electronic means of communication:
- be identified;
- exercise their voting rights in real time ("live" voting); and
- follow and participate in deliberations through a two-way audiovisual communication tool.
In the current regulation for hybrid meetings, being able to participate in the deliberations is not mandatory. In the new regulation, the rules for hybrid meetings and fully digital meetings are aligned. This means that members and shareholders who use the possibility to participate remotely online in a physical general meeting must also be able to speak (with image and sound).
5. Simplified convening procedures
There also appears to be a need to modernize the rules regarding convening for the general meeting. Here as well, advancing technology and social developments mean that convening electronically should also become the new legal standard. In this way, a large group of shareholders and other persons entitled to attend meetings can be reached effectively.
Under the new legislation, the requirement that shareholders must consent to receiving convening notices electronically (e.g., by email) is abolished. This makes it easier for companies to convene shareholders by email or other forms of electronic messaging that are readable and reproducible.
The option for NVs to convene general meetings by an electronically published announcement that is directly and permanently accessible until the general meeting no longer requires a basis in the articles of association. This requirement already does not apply for listed NVs, but will also no longer be applicable for non-listed NVs. In practice, this electronically published announcement can involve an announcement via email and/or, for example, publication on the company's website or another easily accessible website.
Convening notices for a fully digital or hybrid meeting must include information about the procedure for participating in the meeting electronically and exercising voting rights through an electronic communication tool. This information is mandatory. Failure to comply with this can be regarded as defective convening.
Benefits of digital meetings
The proposed changes can contribute to stimulating the involvement of (Dutch and foreign) members and shareholders in associations and companies. The use of electronic communication tools ensures that members and shareholders from all over the world (location-independent) can participate in the general meeting. This can have a positive effect on the number of shareholders and members participating in the general meeting.
In addition, digital meetings reduce the number of travel movements and are therefore an environmentally friendly, CO2-reducing and sustainable alternative. Holding a fully digital meeting can also result in time and cost savings for both participants in the general meeting and the legal entity itself. Participants save travel time and costs, and legal entities do not have to rent a hall or arrange catering services for organizing a physical meeting.
International context
In many other countries (including the United States, Canada, Denmark, Germany, Ireland, Spain, United Kingdom, South Africa and Australia), holding a fully digital general meeting is already (permanently) possible or legislation is in preparation. The introduction of a permanent regulation for a fully digital general meeting in Dutch law contributes to keeping the Dutch business climate attractive and competitive.
Compliance with European law
The legislative proposal is in accordance with Directive 2007/36/EC of the European Parliament and of the Council of 11 July 2007 on the exercise of certain rights of shareholders in listed companies (the Shareholder Rights Directive).[1] The directive contains rules regarding digital participation by shareholders in the general meeting of listed companies.
Next steps
The legislative proposal has been accepted by the House of Representatives and now awaits adoption by the Senate.
How we can assist
We recommend companies and associations to start considering whether and how to incorporate these new possibilities into their articles of association once the legislation is finalized.
Our corporate law team can assist with:
- Advising on the appropriate meeting format for your organization
- Reviewing and amending articles of association to allow for digital or hybrid meetings
- Assisting with compliance with the new technical and procedural requirement for digital or hybrid meetings
For questions about how this legislation affects your organization, please contact our legal experts.