On 21 April 2020 in view of the COVID-19 outbreak the Dutch Parliament approved the “Temporary act COVID-19 Justice and Security” (Tijdelijke wet COVID-19 Justitie en Veiligheid) (the COVID-19 Act).
1. INTRODUCTION & BACKGROUND
1.1 On 21 April 2020 in view of the COVID-19 outbreak the Dutch Parliament approved the “Temporary act COVID-19 Justice and Security” (Tijdelijke wet COVID-19 Justitie en Veiligheid) (the COVID-19 Act).
1.2 Dutch corporate law contains (often in conjunction with articles of association) statutory provisions relating to the procedure of decision making of Dutch legal entities, as well as various reporting obligations and deadlines. However, in these times of social distancing it may be problematic to follow such procedural rules to the letter, especially if the law or articles of association do not provide for the option to vote or hold meetings electronically.
1.3 To avoid any discussion in relation to the validity of corporate resolutions adopted during a lockdown and to avoid the postponement of any required meetings which could lead to a breach of statutory deadlines, the COVID-19 Act permits certain deviations from such statutory procedural provisions. Among other things, the COVID-19 Act contains various temporary measures related to procedures for meetings of corporate bodies (such as general meetings of shareholders, member meetings and board meetings) and various reporting obligations of Dutch legal entities. This provides legal entities and their shareholders or members comfort as to the validity of their resolutions and compliance with their statutory obligations.
2. WHAT CHANGES FOR COMPANIES?
2.1 The most relevant provisions of the act related to Dutch legal entities are included in sections 5 to 25 of the COVID-19 Act, of which we highlight the following:
- Provisions in articles of association relating to physical meetings of the management board, supervisory board or general meeting can temporarily be disapplied (section 5 of the COVID-19 Act).
- Organising general meetings (sections 6, 10 to 14, 17 to 21 of the COVID-19 Act): Electronic communication means may be used for general meetings, even if the articles of association require a physical meeting (e.g. for associations and Dutch listed companies). Under the COVID-19 Act, the management board may now resolve to hold a general meeting exclusively via a live streaming service (audio or visual), provided that members or shareholders (as the case may be) have the opportunity to ask questions (in writing or electronically) in relation to the agenda items at least 72 hours in advance of the meeting. These questions will then be answered during the meeting. Voting can also be done electronically (e.g. per e-mail).
- Deadlines for the preparation of annual accounts (sections 7 to 9 and 16 of the COVID-19 Act): The Dutch Civil Code contains various deadlines for drawing-up annual accounts (depending on the type of legal entity). In principle, the relevant deadline can be extended by means of a resolution of the general meeting. Pursuant to the COVID-19 Act, the management board may now also resolve to extend the deadline for drawing-up the annual accounts instead of the general meeting. For associations and cooperatives, the deadline may as always be extended with a maximum of four months and for limited liability companies (naamloze vennootschap, NV) and private companies with limited liability (besloten vennootschap, BV) with a maximum of five months.
We note that the statutory deadlines for listed companies in relation to periodic reporting obligations (sections 5.25c and 5.25d of the Dutch Financial Supervision (Wet op het financieel toezicht)) have not been extended. However, in accordance with a public statement of the European Securities and Markets Authority (ESMA) , the Dutch supervisory authority AFM has announced to exercise forbearance if, as a result of the corona crisis, listed companies are unable to make their financial reports generally available in good time and at the same time also to file them with the AFM, subject to the listed company timely informing the AFM in case of a delay.
- Legal presumption directors’ liability (sections 15 and 22 of the COVID-19 Act): Dutch law provides that in principle, in the event of violation of statutory bookkeeping duties and the duty to timely publish the accounts, liability of directors of a BV or NV is presumed in the event the company is declared bankrupt. However, if the accounts are published late due to the corona outbreak the COVID-19 Act negates this statutory presumption, provided the managing directors demonstrate that the breach of their reporting duties is due to COVID-19.
3. TIMELINE MEASURES
3.1 The COVID-19 Act came into force on 24 April 2020. Sections 5 to 25 of the COVID-19 Act (excluding sections 15 and 22 in relation to directors’ liability) have retroactive effect as from 16 March 2020 onwards.
3.2 The COVID-19 Act will be in force until 1 September 2020, after which it may be extended with consecutive periods of two months each. The provisions in relation to directors’ liability will stay into force until 1 September 2023.
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Last reviewed: 06 May 2020