One-tier board

Tuesday, 04 November 2008 14:56

One-tier management model set down in law In order to make Dutch trade and industry more attractive to the outside world the Dutch Council of Ministers has, at the proposal of Justice Minister Hirsch Ballin, approved the introduction of a legislative proposal to adopt the decision to have a joint board of executive and non-executive managers (a 'one-tier board'). Public and private limited companies will soon be able to choose a model entailing an Executive Board and a Supervisory Board (dualistic model) or the so-called 'one-tier' or monistic management model. Then roles within a firm's management can be shared among executive and non-executive directors. The role of Chairman of the Board may only be appointed to a non-executive director. Businesses falling under the so-called structure regulations and therefore being obliged by law to have a Supervisory Board will also get the opportunity to choose a monistic management model. Incidentally, in such a case supervision remains compulsory, but not in the form of a Supervisory Board. In the monistic model, directors get more information, and receive it sooner, than supervisory directors, whether or not they are occupied with the general line or (also) with the executive board. In addition to this, regulations have been introduced for the liability of directors in the event of improper management, and for the consequences of a conflict of interests within the management and the Supervisory Board for the company's decision-making. If a director or supervisory director has a personal interest that conflicts with the interest of the company, then the basic principle is that that person does not participate in the decision-making process. By means of these regulations, the cabinet wishes to increase the practicability of public and private limited companies in national and international business relationships. The competition of legal forms abroad is significant. Another factor is the European Court of Justice. With a degree of regularity, the rulings made by this court emphasize the right to freedom of establishment for companies and investors who wish to use foreign legal forms, in which (even) corporate law is not allowed to impose restrictions.