Control and decision-making

Control in a Dutch company is distributed across layers rather than held in one place. Day-to-day management sits with the managing directors or, in a one-tier board, with the executive directors. Strategic and reserved matters sit with the full board, frequently subject to the approval of a supervisory board or of the non-executive directors. Shareholder-level matters sit with the general meeting, with supermajority and quorum requirements where the parties have agreed them.

A fourth layer sits outside the corporate structure and cannot be moved by agreement between the shareholders. The works council has advisory and consent rights under the WOR, and those rights attach to defined decisions regardless of where the articles or the shareholders' agreement place the power to take them. A control structure that maps only the first three layers can leave insufficient time for the works council process, so the works council position is mapped at the same time as the board and shareholder layers.

Reserved matter lists tend to grow over time. We help clients to draft concise, scenario-driven lists intended to protect the items genuinely requiring an additional layer of approval, without impeding decision-making. The starting point is not a precedent list but the set of decisions that would actually change the position of the party asking for protection, which usually means incurring debt above a defined level, issuing shares, disposing of a material asset, changing the nature of the business, entering into related-party transactions, and appointing or removing directors.

The second question is which corporate body holds each item, since a matter reserved to the general meeting and a matter reserved to the supervisory board produce different timetables and different consequences. Thresholds expressed as fixed figures age quickly and are better tied to a metric that moves with the company. Each item is also worth testing against the question of who will be in a position to exercise the right at the moment it is needed, because a consent right held by a party that cannot realistically withhold consent adds process without adding protection.

The most consequential drafting decision in Dutch governance is which restrictions go in the articles and which go in the shareholders' agreement. The articles operate at corporate level: they bind the company and its corporate bodies, they are public, and a breach can affect the validity of what was done. The shareholders' agreement operates contractually: it binds only the parties, it is private, and a breach gives a damages claim and possibly specific performance, but does not usually invalidate the act.

Anything that needs corporate effect, binding the company, its corporate bodies and every shareholder, including one who simply declines to cooperate, belongs in the articles. That includes class rights and differentiated voting and profit rights, the right of a meeting of holders of shares of a particular class to appoint a director, transfer restrictions under a blocking clause, approval requirements for management board decisions, and quorum and majority requirements. The class appointment right carries a statutory proviso of its own, in that every shareholder with voting rights must be able to participate in the appointment of at least one director. Anything that is genuinely a bargain between shareholders, and that the parties are content to enforce in damages, can sit in the agreement. Most well-constructed structures put the critical items in both.

Three mechanisms do most of the work at board level in a BV, and they are distinct from one another. The articles may subject management board decisions to the approval of another corporate body (article 2:239(3) DCC), which is how a reserved matters list acquires effect at corporate level. The articles may also provide that the board follows the instructions of another corporate body, and the board must follow them unless compliance would be contrary to the interests of the company and the business connected with it. For an NV the equivalent right is narrower, because instructions there are confined to the general lines of policy in areas defined in the articles. A director with a conflicting personal interest takes no part in the deliberation and the decision-making on the matter concerned.

The approval mechanism has a clear limit. Because article 2:240(3) DCC makes the authority to represent unlimited and unconditional, the absence of the required approval does not affect the authority of the board or of an individual director to represent the company, so a contract signed without the approval still binds the company towards its counterparty. The approval requirement operates internally: it creates a right to give or withhold approval, records the outcome, and a director who proceeds without it may incur liability. A shareholder that needs an effect against third parties has to look to a restriction on representative authority registered with the trade register instead.

A control structure is best run against scenarios before it is signed, since the situations that cause difficulty can be anticipated. Those scenarios include a shareholder who will not approve the budget, a director nominated by one shareholder who is asked to vote against that shareholder's interest, a shareholder who becomes insolvent, is acquired by a competitor or simply stops responding, and a general meeting that cannot achieve a quorum because a shareholder does not attend. Each of these situations is common, and each is straightforward to solve on paper in advance and expensive to solve once a dispute has arisen.

The other discipline worth applying is proportionality. Reserved matter lists tend to grow, because every negotiation adds items and none removes them. A list that requires shareholder approval for decisions the board should be taking offers a minority little protection, since it transfers operational responsibility to those who do not have the information to exercise it and can make responsibility for underperformance less clear.