30.
Are there restrictions on who can be the company's auditors?
France
Law stated as at 01-Apr-2011
Only legal entities or natural persons registered on a
special list can act as statutory auditors. This list provides for several
conditions regarding professional integrity and qualification, among others.
There
are several restrictions, for example:
· The office of statutory auditor is incompatible with
any employment, commercial business activity or activity that may restrict the
auditor's independence.
· Any former managers or employees of a company within
the last five years cannot be appointed as statutory auditors of that company.
Germany
Law stated as at 01-Apr-2011
Only auditors that are officially appointed by the
German Chamber of Auditors and auditing companies recognised as such by the
German Chamber of Auditors are eligible for the appointment as auditor. In
addition, auditors and auditing companies must have an effective certificate of
participation in quality controls. Auditors must fulfil certain requirements
under the German Auditor's Code (Wirtschaftsprüferordnung, WPO), for
example regarding independence and impartiality. A person cannot act as auditor
for a company if, for example:
· There is a suspicion of partiality due to business,
financial or personal relations.
· The person owns shares in the company being audited.
· The person is a legal representative, member of the
supervisory board or employee of the company being audited or an affiliate
thereof.
· The person played a part in the preparation of the
annual financial statements.
There
are further restrictions for auditors in relation to companies listed for
official trading. Restrictions apply to auditors and audit companies who:
· Provided legal or tax consultancy services to the
company that is being audited in the year to be audited.
· Have generated more than 15% of their revenue from the
company that is being audited in each of the preceding five years.
The
DCGK recommends that the supervisory board should obtain a declaration from the
auditor in relation to its business, financial, personal or other relations
with the company to determine its independence. The auditor must inform the
supervisory board of any conflicts of interest arising during the audit.
India
Law stated as at 01-Apr-2011
An auditor must be a chartered accountant within the
meaning of the Chartered Accountants Act 1949. The following persons cannot be
appointed as the company's auditor:
· A body corporate.
· An officer or employee of the company.
· A person who is a partner of, or who is employed by,
an officer or employee of the company.
· A person who is indebted to the company for an amount
exceeding INR1,000 or who has given any guarantee or provided any security in
connection with the indebtedness of any third person to the company for an
amount exceeding INR 1,000.
· A person holding any security of the company after a
period of one year from the date of commencement of the Companies (Amendment)
Act 2000.
The Netherlands
Law stated as at 01-Dec-2012
The general meeting typically appoints the company's
auditor. If the general meeting fails to appoint the auditor on time, the
supervisory board (or if the supervisory board is absent or fails to appoint
the auditor on time, the management board) can do so. The appointment of an
auditor cannot be restricted to a limited list of candidates and the
appointment can be withdrawn at any time by the general meeting or the company
body that appointed the auditor. An appointment of an auditor by the management
board can also be withdrawn by the supervisory board. The auditor may withdraw
its appointment itself. Withdrawal of the appointment can only be based on just
grounds and not on a difference of opinion regarding the methods of financial
reporting or the auditing process. The company informs the Authority on
Financial Markets of the withdrawal.
There
is no formal limit on the duration of the appointment of a company's auditor,
except for companies of public significance (including listed companies), where
audits cannot be conducted by individual auditors for a continuous period
longer than seven years, after which the auditor is not allowed to audit the annual
accounts for the same company for a two-year period. A draft European
regulation extends the latter to three years and introduces a maximum
appointment of an accounting firm to six years with a minimum of two years.
For
listed companies, the CGC recommends that the auditor should be appointed by a
general meeting and the supervisory board should nominate a candidate for this
appointment after consulting the audit committee and the management board. The
CGC states that the supervisory board and the audit committee should emphasise
that the auditing firm should arrange for frequent circulation of auditors in
charge of the auditing task and conduct a thorough assessment of the auditor at
least once every four years.
UK (England and Wales)
Law stated as at 01-Apr-2011
The auditors of a company must be statutory auditors
under the Companies Act 2006, that is, they must be members of a recognised
supervisory body (such as the Institute of Chartered Accountants in England
& Wales) and be eligible for appointment under the rules of that body, as
well as being appropriately qualified.
An
auditor cannot be an officer or employee of the company being audited or of an
associated undertaking (such as a parent or subsidiary company), nor a partner
or employee of such a person.
United States
Law stated as at 01-Dec-2012
If the corporation is a public company, the
corporation’s audit committee is responsible for hiring an independent
registered public accounting firm as its auditor. The auditor must then be
approved by the entire board and the retention of the firm is typically put
before the shareholders for ratification. While there is no requirement for the
company to rotate the accounting firm, the accounting firm must change the
audit partners responsible for co-ordinating and reviewing the corporation’s
audit every five years.
31. Are there restrictions on non-audit work that
auditors can do for the company that they audit accounts for?
France
Law stated as at 01-Apr-2011
Statutory auditors are prohibited from providing any
company audited by them, or any company controlled by or controlling that
company, with any consulting or other services not directly covered by the
scope of their assignment as statutory auditor.
Germany
Law stated as at 01-Apr-2011
Auditors are not subject to specific restrictions on
non-audit work they can do for the company they audit accounts for. However,
auditors cannot perform the following non-audit services if they are already
appointed for the auditing of accounts:
· Bookkeeping.
· Preparation of annual statements.
· Participation in internal audit.
· Provision of financial services or actuarial services.
In
addition, auditors of companies listed for official trading are not allowed to
provide legal or tax consultancy services to the company concerned. Other
non-audit services can be restricted as well if they resemble a participation
in the preparation of the annual financial statements.
The
European Commission is currently considering a prohibition of non-audit work in
a Green Paper dated 13 October 2010.
India
Law stated as at 01-Apr-2011
The Netherlands
Law stated as at 01-Dec-2012
Auditors must be registered as chartered accountants
or accountant-administrative consultants under the Accountants-Administrative
Consultants Act (Wet op de Accountants-Administratieconsulenten) and
must be independent of the company for which they audit accounts.
UK (England and Wales)
Law stated as at 01-Apr-2011
There are no statutory restrictions on other work that
auditors can do for a company, but professional rules impose some constraints.
Investors in listed companies are often wary of auditors carrying out such work
and the Code requires:
· An audit committee to decide what work is permitted
and what not.
· An explanation in the company's annual report as to
how auditor objectivity and independence is safeguarded.
United States
Law stated as at 01-Dec-2012
A public company’s auditors must be independent under
the federal securities laws and the rules of the Public Company Accounting
Oversight Board (PCAOB). Auditors of public corporations must also be
registered with the PCAOB. Certain relationships can disqualify an auditor from
being independent. The largest independent accounting firms audit a vast
majority of the largest public companies.
32. What is the potential liability of auditors to the
company, its shareholders and third parties if the audited accounts are
inaccurate? Can their liability be limited or excluded?
France
Law stated as at 01-Apr-2011
Statutory auditors are liable to the company and third
parties for any prejudice caused by misconduct and negligence committed in the
performance of their duties. They are bound by a best efforts obligation.
Statutory
auditors may incur criminal liability in the following cases:
· Breach of professional secrecy.
· Non-disclosure of criminal acts to the state
prosecutor (procureur de la république).
· Issuance or confirmation of false information on the
company's situation.
· Failure to mention major investments or acquisitions
of other companies located in France in their report.
· Issuance of inaccurate information in the report
submitted to the shareholders' meeting called to vote on the deletion of
shareholders' preferential subscription rights.
· Performance of acts that may infringe their
independence or breach of the applicable legal incompatibilities.
If
they breach their obligations, statutory auditors can also be subject to
disciplinary penalties (for example, a temporary ban or formal exclusion). They
can subscribe to professional liability insurance, although their liability
cannot be limited in any way.
Germany
Law stated as at 01-Apr-2011
Auditors are obliged to perform their services
carefully, impartially and confidentially. If they are in breach of their
duties they are generally liable to the company and have to compensate the
company with regard to damages incurred. However, their liability is limited by
the HGB to EUR1 million in case of acting negligently (EUR 4 million for
companies listed for official trading) per audit. Further limitations or
exclusions of the liability by contract are prohibited.
Auditors
are liable to shareholders of the audited company and third parties if they
damage them intentionally. With respect to negligent behaviour, auditor's
liability to shareholders and third parties is in dispute in Germany: some
lower courts have decided that liability to third parties is possible, other
courts have decided otherwise.
Furthermore,
auditors are liable under criminal law if they knowingly include information in
the audit report that is misleading or false (for example, fraud and breach of
trust).
India
Law stated as at 01-Apr-2011
An auditor may be liable if, in any return, report,
certificate, balance sheet and so on, he makes a statement which:
· Is false in any material respect, knowing it to be
false.
· Omits any material fact.
A
company cannot indemnify an auditor against any negligence, default,
misfeasance, breach of duty or breach of trust of which he may be guilty in
relation to the company (section 201, Act).
The Netherlands
Law stated as at 01-Dec-2012
For unlisted companies, there are no restrictions on
non-audit work that can be done by auditors for the company.
For
listed companies, instructions to the auditor to provide non-audit services
must be approved by the supervisory board, on the recommendation of the audit
committee and after consulting the management board (CGC).
As
yet, there are no formal rules on the type of work that auditors can and cannot
do. However, as a general principle, an auditor linked to an organisation that
provides consulting and auditing services to the same company must show that he
is in a position to independently form an opinion on the accounts.
An
auditor cannot audit the accounts of any organisations of public significance
(including listed companies) if either (sections 23 and 24, Audit Firms
(Supervision) Act 2006 (Wet toezicht Accountantsorganisaties)):
· The accounting firm that is linked to the auditor was
involved in compiling and/or administrating the financial information that the
audit relates to in the two years before the period to which the audit relates.
· A significant part of the financial information to
which the audit relates has been compiled and/or administrated by the
accounting firm to which the auditor is linked.
· The auditor has audited the annual accounts for the
same company for seven consecutive years (see Question 30).
UK (England and Wales)
Law stated as at 01-Apr-2011
· Include anything which is materially misleading, false
or deceptive.
· Omit certain statements which may be required.
The
auditors also have a liability to the company if their work is negligent. They
may be in breach of the terms of their engagement letter with the company, and
of an implied term that they will act with reasonable skill and care.
Shareholders as a body may also have a claim for the auditors' breach of duty
and negligence. Claims by third parties against auditors may succeed if loss
has been caused by relying on the audit report and there is some relationship
between the third party and the auditors.
Auditors
may each year agree with a company that their liability is capped at a certain
amount, but the shareholders must consent to such a limitation at the AGM and a
court may, in the case of a particular claim, increase the limit to a figure
which is fair and reasonable. Few companies have entered into such agreements
which are in any event difficult to justify as likely to promote the success of
the company.
United States
Law stated as at 01-Dec-2012
Federal securities laws prohibit a corporation’s
auditors from performing certain services for their audit clients. The
following are prohibited non-audit services:
· Bookkeeping or other services related to the
accounting records or financial statements.
· Financial information systems design and
implementation.
· Appraisal or valuation services, fairness opinions or
contribution-in-kind reports.
· Actuarial services.
· Internal audit outsourcing services.
· Management functions or human resources.
· Broker or dealer, investment adviser or investment
banking services.
· Legal services and expert services unrelated to the
audit.
· Tax services during the audit engagement period to a
person (or an immediate family member) in a financial reporting oversight role
at an audit client generally.
· Any other service that the PCAOB determines is
impermissible.
All
other non-audit activities must be approved in advance by the corporation’s
audit committee.
Corporate social responsibility
33. Is it common for companies to report on social,
environmental and ethical issues? Please highlight, where relevant, any legal
requirements or non-binding guidance/best practice on corporate social
responsibility.
France
Law stated as at 01-Apr-2011
In listed companies the board's report to the
shareholders' meeting must include information on how the company deals with
the social and environmental impacts of its business activity. For fiscal years
closing after 1 January 2011, in listed companies, this board report must also
detail the company’s undertakings regarding sustainable development. For
certain large unlisted companies, the same details will also have to be given
but the decree regarding the thresholds for being a “large” company has not
been released yet.
In
practice, listed companies often also publish ethical codes of conduct on
social or environmental matters.
Germany
Law stated as at 01-Apr-2011
It is quite common for companies to report on social,
environmental and ethical issues. Directive 2003/51/EC amending Directives
78/660/EEC, 83/349/EEC, 86/635/EEC and 91/674/EEC on the annual and
consolidated accounts of certain types of companies, banks and other financial
institutions and insurance undertakings provides for the disclosure of such
non-financial issues and has been implemented in Germany. Under the HGB, certain
large public limited companies must include information regarding non-financial
performance indicators (in particular environmental and employee issues) in the
company's annual management report.
India
Law stated as at 01-Apr-2011
In India, most leading companies are involved in
corporate social responsibility (CSR) programmes in areas such as education,
health, creation of employment, development of skills and empowerment of weaker
sections of the society.
The
MCA has issued Voluntary Guidelines for Corporate Social Responsibility. These
Guidelines intend to encourage best practices in corporate social
responsibility and state that the CSR initiatives of Indian companies should
become integral to the overall business policy and aligned with the companies'
business goals.
The Netherlands
Law stated as at 01-Dec-2012
· The company for a breach of contract.
· Third parties in tort.
The
test that the courts apply is that liability of an accountant for defective or
deficient audit of the accounts arises if the accountant has not acted as
expected from a reasonably acting and skilled accountant in light of exercising
its task with due care while observing the interests of the party relying on
the accounts.
An
exclusion or limitation of liability agreed by the company with the auditor
does not affect the auditor's liability to third parties. Any limitation of
liability will not be accepted by the courts if the auditor has been grossly
negligent.
UK (England and Wales)
Law stated as at 01-Apr-2011
Larger listed companies commonly produce a corporate
social responsibility (CSR) report as part of their annual report and accounts
to demonstrate their CSR credentials.
Directors
must have regard to community and environmental issues and the interests of
employees when considering their duty to promote the success of their company (see Question 15, General duties). The business review in the annual directors' report
for a listed company must include information about the impact of the business
on the environment, together with information on employees and social and
community issues.
Under
the Code, a board should set the company's values and standards and ensure that
its obligations to its shareholders and others are understood and met.
Institutional shareholders also publish guidance on disclosures which they want
to see on environmental, social and governance risks, including whether these
are taken into account when deciding remuneration for senior executives.
United States
Law stated as at 01-Dec-2012
Auditors are potentially liable to the company,
shareholders and third parties if the audited accounts are inaccurate.
Generally, auditors cannot limit their liability to their audit clients because
these limitations are viewed as impeding their independence. It may, however,
be possible for auditors to limit in their engagement letter the punitive
damages an audit client can claim. An auditor can be held liable for negligent
misrepresentation to third persons when the auditor knows the third persons
will rely on the audit opinion or knows that the auditor's client intends for
third persons to rely on the audit opinion. An auditor can be liable to
shareholders for statements made either:
· In the audit or internal controls over financial
reporting opinion.
· In the context of a securities offering by a
corporation, under the 1933 Act, based on the financial statements and
attestation to the corporation’s internal controls over financial reporting
included in the corporation’s registration statement.
Company secretary
France
Law stated as at 01-Apr-2011
There is no requirement for a company secretary (secrétaire
général) to be appointed. In practice it is unusual for the company
secretary to sit on the board of directors.
Germany
Law stated as at 01-Apr-2011
India
Law stated as at 01-Apr-2011
Every company with a paid-up share capital of INR50
million must have a company secretary who does the following:
· Maintains the corporate and statutory records of a
company.
· Sends out the notices for the board and shareholders
meetings and drafts the minutes thereof.
· Co-ordinates with the statutory auditors and the
internal auditors.
The Netherlands
Law stated as at 01-Dec-2012
The DCC does not require companies (listed or
unlisted) to report on social, environmental or ethical issues. Although not
required and not based on general guidelines or best practice recommendations,
many listed companies publish a report (social report) that addresses these
issues. Collective labour agreements sometimes impose an obligation to publish
annual social reports on certain companies in certain sectors, mostly
semi-governmental or care institutions.
UK (England and Wales)
Law stated as at 01-Apr-2011
The company secretary is increasingly seen as the
guardian of the good governance of a company and as a semi-independent adviser
to the board. Under the Code, the company secretary "should be responsible
for advising the board through the chairman on all governance matters".
The secretary is also responsible for good information flows within the board
and its committees and between senior management and the non-executive
directors, as well as facilitating the induction of new directors and further
training.
The
Code requires that the secretary's appointment and removal should be decided on
by the full board.
United States
Law stated as at 01-Dec-2012
Public companies often highlight their achievements
related to social and ethical responsibilities in their annual reports or on
their corporate websites. These disclosures are largely driven more by best
practices and pressure from “watchdog” organisations than legal requirements.
However, there are general disclosure requirements for certain of these matters
as well as more extensive disclosure requirements on environmental matters and
the potential impact of climate change.
Institutional investors and shareholder groups
35. How influential are institutional investors and
other shareholder groups in monitoring and enforcing good corporate governance?
Please list any such groups with significant influence in this area.
France
Law stated as at 01-Apr-2011
Institutional investors and other shareholder groups,
representing over 80% of the shareholders of CAC 40 companies, are influential
in monitoring and enforcing best practice in corporate governance. Their
growing strength as shareholders of French listed companies has led to the
adoption of new corporate governance codes.
ADAM,
led by Colette Neuville, is the main organisation in France dedicated to
protecting the rights of listed companies' minority shareholders.
Germany
Law stated as at 01-Apr-2011
Institutional investors and shareholder groups are
becoming more and more influential in Germany. International institutional
investors currently own more than 50% of the shares of AGs listed on the German
Index DAX. International and German institutional investors (for example, DWS)
influence corporate governance not only with their voting rights but also
through meetings with the management and supervisory boards. Investment
associations such as DSW or SdK disclose their voting behaviour and therefore
influence the decisions at shareholder meetings. The European Commission is
currently considering the introduction of a code of conduct for institutional
investors based on the model of the UK Stewardship Code 2010.
India
Law stated as at 01-Apr-2011
Active participation by the shareholders in monitoring
and enforcing good corporate governance is still emerging in India.
Institutional investors with a significant shareholding in Indian companies are
developing the practice of questioning the corporate governance practices of a
company.
The Netherlands
Law stated as at 01-Dec-2012
Dutch corporate law does not recognise the position of
a company secretary. Tasks normally associated with a company secretary are the
responsibility of the management board.
The
CGC recognises the company secretary who assists the supervisory board in the
actual organisation of the affairs of the supervisory board (information,
agenda, evaluation, training programme, and so on). The company secretary is,
either on the recommendation of the supervisory board or otherwise, appointed
and dismissed by the management board, after obtaining the approval of the
supervisory board. The company secretary can also assist the management board,
and need not necessarily be an employee of the company.
UK (England and Wales)
Law stated as at 01-Apr-2011
The Code encourages boards to talk to their
shareholders and the related Stewardship Code requires institutional
shareholders to engage with the companies in which they invest. On certain
corporate governance related issues such as directors' remuneration or the split
of responsibilities between a chief executive and the chairman, institutional
investors often make their views known and are prepared to vote against
remuneration reports and directors in protest.
The
following trade bodies and shareholder advisory bodies are most vocal:
· Association of British Insurers (ABI), whose members
hold nearly 15% of the shares listed on the London Stock Market.
· National Association of Pension Funds (NAPF), whose
members are also heavy investors in listed companies.
· Pensions and Investment Research Consultants (PIRC),
an independent research and advisory consultancy used by some institutional
shareholders.
United States
Law stated as at 01-Dec-2012
The company’s general counsel (or an assistant
counsel) is often also the company secretary and in this capacity:
· Attends board meetings.
· Assists the board with respect to corporate governance
issues.
· Prepares minutes of the meetings.
· Maintains corporate records, among other things.
Whistleblowing
36. Is there statutory protection for whistleblowers
(persons who disclose criminal activity or serious malpractice within a
company)?
France
Law stated as at 01-Apr-2011
Subject to criminal penalties, statutory auditors must
disclose to the state prosecutor any criminal facts revealed to them in the
context of their assignment and must inform the authorities of any fact or
decision justifying their intention to refuse to grant certification for the
accounts.
The
Data Protection Authority (Commission Nationale de l'Informatique et des
Libertés) (CNIL) publishes a list of guidelines giving conditions for
whistleblowing mechanisms. Companies must:
· Restrict the scope of such proceedings to a specific
field (particularly accounts and anti-corruption measures).
· Not encourage anonymous denunciations.
· Set up a specific organisation to gather and handle
alerts.
· Inform the person concerned as soon as any evidence
has been saved.
Any
employee alerting either his employer or the authorities regarding corruption
he discovered in the course of the performance of his duties is protected by
law against any penalties, dismissal or other discriminatory measures.
Germany
Law stated as at 01-Apr-2011
Whereas some statutory provisions for civil servants
exist, there is no general statutory protection for whistleblowers in Germany.
However, draft laws are being discussed. Labour courts and the constitutional
court have decided that whistleblowing should not have negative effects under
civil law. Until a general statutory protection is issued the legal position
remains unclear.
India
Law stated as at 01-Apr-2011
Clause 49 of the Listing Agreement imposes a
non-mandatory requirement on listed companies to have a whistleblowing policy.
A company may establish a mechanism for employees to report to the management
concerns about unethical behaviour, actual or suspected fraud or violation of
the company's code of conduct or ethics policy. This mechanism could also
provide adequate safeguards against victimisation of employees who use the
mechanism and direct access to the chairman of the audit committee in
exceptional cases.
There
is no other statute in force, which provides statutory protection for
whistleblowers.
The Netherlands
Law stated as at 01-Dec-2012
Institutional investors and other shareholder groups
monitor corporate governance, but, considering they have limited legal tools to
enforce good corporate governance, their influence is limited.
Special
interest groups that assert influence and monitor on behalf of shareholders are
more active in monitoring corporate governance than institutional investors and
shareholder groups. Examples of these special interest groups are:
· Deminor BV.
· Eumedion.
· The VEB (Vereniging van effectenbezitters).
The
Committee involves a number of institutional investors with its annual
corporate governance review on a voluntary basis.
UK (England and Wales)
Law stated as at 01-Apr-2011
The Public Interest Disclosure Act 1998 protects
individuals who make disclosures of information in the public interest and
allows for compensation to be awarded in the case of victimisation or
dismissal. The information may relate to a criminal act, health and safety
breaches or environmental damage, among other things.
The
Code requires the audit committee to keep under review arrangements whereby
staff may raise in confidence concerns on improprieties in financial reporting
and other areas.
United States
Law stated as at 01-Dec-2012
Institutional investors and other shareholder groups
have become increasingly influential in monitoring and enforcing best practices
in corporate governance. Many large investors have established corporate
governance guidelines that they want corporations in which they invest to
follow and have published these guidelines on their websites. In addition,
there are institutional advisory firms, such as Institutional Shareholder
Services Inc (ISS) and Glass, Lewis & Co, LLC, which recommend how
shareholders should vote on matters proposed to shareholders in corporations’
proxy statements.
In
addition, traditional shareholder activists, such as large pension funds,
continue to be a powerful influence and are often successful in encouraging
corporations to adopt their desired practices. These institutional investors
often submit shareholder proposals in corporate governance policies.
Institutional
shareholders and hedge funds are increasingly engaging corporations in
discussions of their perspectives on matters affecting the corporation, such as
capital structure, use of capital, strategic investments and acquisitions. In
2012, 49 of the Top 100 US Companies included governance related shareholder
proposals in their proxy statements (2012 S&S Corporate Governance
Survey).
Reform
37. Please summarise any proposals for
reform and state whether they are likely to come into force and, if so, when.
France
Law stated as at 01-Apr-2011
Germany
Law stated as at 01-Apr-2011
On statutory level, there are currently no pending
reforms in relation to corporate governance. Draft laws to protect
whistleblowers are being discussed (see Question 36).
The
DCGK is reviewed and updated annually. However, no updates were issued by the
German Corporate Governance Code Commission in 2011 to give enough time to
companies to implement the latest amendments.
One
of the most discussed issues is the necessity of a fixed women's quota for
corporate bodies. The German Corporate Governance Code Commission is also
following the developments regarding the Green Paper on the European Corporate
Governance Code issued by the European Commission.
India
Law stated as at 01-Apr-2011
Clause 49 of the Listing Agreement is amended from time
to time but there are no immediate plans to introduce a new corporate
governance code.
However,
SEBI has indicated in a press release of February 2011 that it proposes to make
a recommendation to the MCA to "suitably amend" the Companies Bill
2009, "to disallow interested shareholders from voting on special
resolutions in relation to prescribed related party transactions".
The Netherlands
Law stated as at 01-Dec-2012
The
Flexible Private Company legislation is aimed at making private companies more
flexible. The bill was adopted and entered into force on 1 October 2012.
Before
introduction of the bill, the legal regime for non-listed public companies and
private companies was almost equal, with minor differences mainly regarding capital
and shares. The Flexible Private Company amends the DCC to create a different
legal regime for private companies with important differences. The main
features of private companies include:
· Greater structural freedom for shareholders, with the
following safeguards:
o a balanced system of protection for creditors;
o a more effective exit right for minority shareholders
who lack manoeuvrability.
· Founders of a BV deciding themselves on the extent of
its financing, if any. This means that companies will no longer be required to
put together EUR18,000. The minimum amount will be one share of EUR0.01.
· Scrapping capital protection rules.
· Creditors will be protected by means of a payment test
in which the management board must assess whether, following a proposed payment
to shareholders, the company will still be able to keep paying its due and
short-term debts. If insufficient care is taken in making these payments, then
the managing directors can be held liable, the shareholders must return the
payments received (see Question 16, Other).
· Aside from depositary receipts, a BV will be able to
issue any kind of shares as long as these shares at least have voting rights or
entitlements to profit.
· Other participations may be issued. However, they will
not qualify as shares and will grant only contractual rights and not corporate
rights to their holder.
· Simplification of the dispute settlement procedure.
The
Amendment Management and Supervision has been adopted and will enter into force
as of 1 January 2013. During development of this bill the government announced
a repair law, clarifying a number of elements of the Amendment Management and
Supervision and introducing additional changes to the DCC (Reparation Act). The
Amendment Management and Supervision will enter into force at the same time as
the Reparation Act, as of 1 January 2013.
The
main changes, in addition to the amendments to the DCC, of both the Amendment
Management and Supervision and the Reparation Act are as follows:
· Introduction of the possibility of a one-tier board
structure with both executive and non-executive directors. The articles of
association must provide for the basis of a one-tier board. Tasks of the
executive and non-executive directors in a one-tier board as well as the power
to adopt resolutions regarding these tasks may be allocated under or pursuant
to the articles, but the general meeting must specify whether a director is an
executive or a non-executive director.
· Allocation of the following tasks to the exclusive
control of the non-executive directors:
o the position of the chairman of the board;
o remuneration of executive directors;
o nomination of directors for appointment;
o supervision of the performance of the board.
· Allocation of tasks can contribute, in certain
circumstances, to exoneration of an individual director.
· Other tasks that have not been allocated fall within
the responsibility (and therefore liability) of the management board as a whole.
· The relationship between the company and a director
will no longer be considered an employment relationship (seeQuestion 10, Directors employed by the
company). However, the Amendment does not state
what the nature of the relationship will be.
· Under similar (but not the same) principles in the
CGC, a person that is appointed as managing director cannot have more than two
supervisory positions or be a chairman of the supervisory board with companies
that are not exempted from certain prescriptions for the annual accounts due to
their size. Similarly, a person that is appointed as supervisory or
non-executive director cannot have more than five supervisory positions (the
role of chairman of the supervisory board counts as two) with companies that
are not exempted due to their size. The criteria for this exemption are (two
out of three for two consecutive years):
o asset value is no more than EUR17.5 million;
o net turnover is less than EUR35 million;
o yearly average number of employees is less than 250
persons.
Group companies that are part of the consolidated
accounts must be taken into account.
· A temporary part of the Amendment Management and
Supervision (effective until 1 January 2016) provides for a division of positions
of at least 30% men and 30% women on the management board and supervisory
board. Companies that are not exempted from prescriptions for annual accounts
due to their size, similar to those applicable to the quota of supervisory
positions, should take the gender quota into account when appointing,
nominating or drafting profiles of new directors.
To
remedy trends of increasing remuneration in times of financial recession
(qualified as "perverse incentives"), the government wants to combat
excessive remuneration and bonuses of company directors, especially of
financial and listed companies. It empowers the supervisory board to (partially
or completely) claw back bonuses granted to managing directors on the basis of
incorrect information about the achieved goals, and to adjust and reclaim
bonuses or variable remuneration if that remuneration would be unfair and
unreasonable. This is similar to the provision of the CGC for listed companies.
However, it is now also applied to any public company and banks and insurance
companies that are private companies, as well as financial companies under the
Wft. The draft legislation is currently being amended with a focus on combating
incentives for unjust opinion forming regarding take-over situations and to increase
the base of support of the general meeting and works council of the
remuneration policy. The draft legislation is still under debate and subject to
amendments. It is unclear when this act is expected to come into force.
The
draft legislation on corporate governance (Amendment Corporate Governance) aims
to incorporate a number of recommendations of the Committee by amending the
DCC, the Wft and other legislation. The main elements of the legislative
proposal concern the lowered notification threshold of shareholders of listed
companies from 5% to 3%. In addition, listed companies can demand information
about the identity of their shareholders from relevant institutions and
intermediates. In addition, the threshold for shareholders of listed companies
to put items on the agenda will be raised to 3% (see Question 25). Short positions will qualify for the calculation of
shareholdings in listed companies and may trigger threshold notifications. The
act has been adopted. This act is expected to come into force as of 1 July
2013.
UK (England and Wales)
Law stated as at 01-Apr-2011
Following a wide-ranging review which led to the
Companies Act 2006, there are no proposals for major company law reform in the
near future.
Government
and regulators are consulting on changes to company reporting, with the aim of
simplifying requirements so that company accounts and reports give a clearer
picture of a company's business and prospects.
Following
the Davies Report on Women on Boards, proposals are currently under
consultation for voluntary quotas for the number of female directors on the
boards of FTSE 350 companies. No decision on how this will be implemented is
expected until the second half of 2011.
United States
Law stated as at 01-Dec-2012
The global financial crisis has increased activity and
interest by regulators, legislators and the private sector in enhancing US
public companies' corporate governance practices. In this context, the role of
US public company boards continues to be under intense scrutiny. There are
numerous initiatives pending in the US Congress and being considered by the
SEC, including further SEC rulemaking in response to the requirements of the
Dodd-Frank Act. Many of the proposed initiatives and recently approved rule
changes are aimed at giving shareholders a greater say in the governance of the
public corporations in which they invest.
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