25 Jan 2019 Position paper on 250-day reflection period for boards of listed NV-companies (law proposal consultation round)

Kemperink Maarschalkerweerd Wouters filed a position paper with the Ministry of Justice in the context of the consultation process for the law proposal on the introduction of a reflection period for boards of listed NV-companies. Such reflection period should provide Dutch listed companies additional protection against activist shareholders and hostile bidders. The question whether listed NV-companies actually need such additional defence mechanism has been subject of debate in the Netherlands the past few years.

In short, the law proposal provides for:

• The introduction of a maximum 250-day reflection period, that may be invoked by the listed NV-company in case of (i) a shareholder proposal for appointment, dismissal or suspension of members of the management board and/or the supervisory board, or (ii) a hostile bid which is announced or made on the (depositary receipts for) shares in the company.
• The suspension of the power of the general meeting to appoint, dismiss and/or suspend management board and/or supervisory board members during the application of the reflection period. 
• The introduction of a statutory rule in accordance with Supreme Court case law, which provides that the policy and the strategy of a (listed) NV-company are defined by the management board.

Our key comments to the law proposal, as reflected in further detail in our position paper, are as follows:

• The proposed reflection period provides for a useful and effective tool to protect listed NV-companies from activist shareholders that put pressure on the board to change or abandon the company’s strategy by proposing the appointment, suspension or dismissal of board members.
• The proposed reflection period is ineffective in the situation of a hostile bid, as the reflection period and thus the suspension of the power of the general meeting to appoint, dismiss or suspend board members, will automatically end at the moment the offer has been declared unconditional by the hostile bidder. Accordingly, the hostile bidder will continue to be able to change the composition of the board of the target company as from the settlement date.
• The envisaged redefinition of statutory law on the duties of the management board in relation to the policy and the strategy of the company should also apply to private BV-companies.

Read the full position paper (in Dutch)