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Netherlands: What happened in 2018 and significant events in 2019

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Netherlands: Year in Review 2018 and Year to Come 2019 summarise some of the major developments in The Netherlands last year, and a selection of key changes that we anticipate over the coming year. There are links to further reading, where available.

Key updates to

31

pieces of legislation in 2018 and 2019

Significant legal and regulatory events in 2019

Explore the tabs below to review the key developments you need to be aware of in 2019

Corporate
Employment
Financial Regulation
Capital Markets
Restructuring & Insolvency
Banking
Dispute Resolution
Tax

Corporate

Statutory response time: The Dutch Government is considering introducing a statutory response time of 250 days for management boards of listed companies in the event of a hostile takeover or other actions by activist shareholders to allow them to identify and consider the interests of the company and its stakeholders. The draft legislative proposal has been delayed, as the Council of State has been asked to comment on certain European law aspects of this proposal.

Central shareholders’ register: A legislative proposal is pending to introduce a central shareholders’ register for Dutch companies. This register will be public and contain certain details of shareholders. The register would be kept by the Dutch Chamber of Commerce and updated with information of share transactions by Dutch civil law notaries. The Dutch Government is reconsidering the costs and additional benefits of this register, as well as questions of access and privacy.

Encouragement for long-term shareholder engagement: By 10 June 2019, Directive 2017/828/EU (SRD II) must have been implemented in Dutch law. SRD II aims to encourage long-term shareholder engagement and amends Directive 2007/36/EC (SRD I). The draft bill implementing SRD II includes provisions on the form and content of Dutch listed companies’ remuneration policy and annual remuneration reports and gives shareholders a vote on these reports. The bill also includes provisions on the disclosure of related party transactions, transparency obligations for institutional investors, asset managers and proxy advisors and provisions to identify shareholders, facilitate the transmission of information and the exercise of shareholder rights.

Abolishment of bearer shares: A legislative proposal to abolish bearer shares of non-listed Dutch limited liabilities companies (naamloze vennootschappen) is pending. When implemented it will only be possible to issue bearer shares which are represented by a global certificate and deposited with, and transferred electronically through a securities intermediary. Bearer shares not deposited with a securities intermediary must be replaced by registered shares before 1 January 2021 and will, if not done so, convert to registered shares by operation of law as of that date. Shareholders’ rights will be suspended until the bearer shares have been handed in to the company. The company will receive replacement registered shares for any bearer shares not replaced in time. Until 1 January 2026, holders of cancelled bearer shares are entitled to a corresponding number of such replacement registered shares, but not to any accrued dividend and other rights.

Employment

Balanced Labour Market Act: A legislative proposal to change Dutch dismissal laws was sent to Parliament on 7 November 2018. Amongst others: (i) it amends the accrual of the statutory severance, which will start accruing from the first day of employment (currently: after two years) and which will be reduced after ten years of employment; (ii) the probationary period for indefinite term contracts is extended to five months (currently: two months); (iii) the maximum number of fixed terms contracts is extended to three contracts within three years (currently: three contracts within two years) and (iv) dismissal will become possible on a combination of grounds (currently: only one ground is possible), although in such cases the court may award a higher statutory severance. The proposed date of entry into force is 1 January 2020.

Financial Regulation

MLD5: Although MLD4 has not yet been fully implemented in the Netherlands, the Fifth Anti-Money Laundering Directive (MLD5) is set to supplement and amend MLD4. One of the changes pursuant to MLD5 is the fact that virtual currencies will be brought into the scope of the EU anti-money laundering regulation. MLD5 should be transposed into Dutch law by 10 January 2020.

Recovery and Resolution of Insurers Act: The Recovery and Resolution of Insurers Act (Wet herstel en afwikkeling van verzekeraars) is expected to come into force in 2019. The act seeks to protect policyholders by enhancing and expanding the scope of regulatory instruments regarding the recovery and resolution of insurers.

Capital Markets

Prospectus regulation: The remaining parts of the EU Prospectus regulation are due to be implemented in July 2019. Key areas of change will be the exemptions from the requirement to produce a prospectus, the treatment of risk factors and the regime for secondary issuances.

Restructuring & Insolvency

Business Continuity Act I: A proposed amendment of the current regime under the Business Continuity Act I includes the debtor’s right to request the court to appoint a silent administrator (and a supervisory judge) prior to the commencement of formal proceedings. The silent administrator will, in principle, be appointed as liquidator in subsequent bankruptcy proceedings. The silent administrator can prepare the commencement of such proceedings (including a possible going concern sale to be executed swiftly upon the commencement of the proceedings).

Pre-insolvency restructuring plans: A bill on pre-insolvency restructuring plans aims to introduce a statutory regime governing such plans adopted outside formal insolvency proceedings. The proposed regime provides for a cramdown in relation to creditors and shareholders dissenting to a restructuring supported by a majority of creditors and shareholders in the relevant class of creditors. A composition plan can be offered to individual classes. 

EU insolvency harmonisation directive: The EU is expected to agree its position on the proposed EU Directive on business insolvency reform (the EU insolvency law harmonisation project).
Read more here and here...

Banking

Non-assignment and non-pledge clauses: In commercial trade, clauses which prohibit the assignment of or the grant of a pledge over receivables have become increasingly customary. As a consequence, such receivables cannot be used by the creditor for financing purposes. This practice reduces the availability of credit (notably for borrowers in the SME sector). A bill has been prepared to invalidate non-assignment and non-pledge clauses in relation to monetary payment receivables which originate in the performance of a trade or profession and which are to be made available for financing purposes.

EU NPL reforms: The EU package of proposed new measures includes a proposal for an EU Directive on credit servicers, credit purchasers and the recovery of collateral. The proposed regime purports to provide banks with an efficient mechanism of out-of-court value recovery from secured loans and aims to encourage the development of secondary markets where banks can sell their NPLs to investors and make use of specialist credit servicers.

Dispute Resolution

Litigating in English: In 2017 the Dutch Government published a draft legislative proposal for the establishment of a Netherlands Commercial Court (NCC) and a Netherlands Commercial Court of Appeal (NCCA), both in Amsterdam. Parties involved in international commercial disputes may agree on litigating before these new courts, which will have English as the working language. The court registry fee will be higher than for regular proceedings conducted in Dutch. The Dutch House of Representatives approved this proposal in summer 2018. The Dutch Senate is currently debating this proposal and it is expected that the NCC and NCCA will start in early 2019.

Mass claims in collective actions: Under Dutch law, a foundation or association that represents a certain group of persons may only initiate a class action for declaratory relief before the Dutch courts. However, a legislative proposal allowing for redress of mass damages in collective actions is currently under debate in the Dutch Parliament and introduces several changes to the current system. Most notably, pursuant to the legislative proposal, legal entities which meet certain requirements, such as sufficient funding and internal supervision, may start a collective damages action on behalf of a certain group of persons. An increase in class actions can be expected when the proposal is accepted and implemented. Furthermore in April 2018, the EU Commission proposed a “Directive on representative actions for the protection of the collective interests of consumers” that shall introduce a right of collective redress across the EU. It remains to be seen what impact the legislative project of the EU, when completed, will have on Dutch law.

Read our global guide to Collective Redress. 

Tax

Reduction of Dutch corporate income tax rates: It is proposed to gradually reduce the corporate income tax rates from 20 per cent (first bracket: taxable amount up to and including EUR 200,000) and 25 per cent (second bracket: taxable amount exceeding EUR 200,000) to 15 per cent (first bracket) and 20.5 per cent (second bracket) in 2021. The proposed corporate income tax rates for 2019 are 19 per cent (first bracket) and 25% (second bracket), and the proposed corporate income tax rates for 2020 are 16.5 per cent (first bracket) and 22.55 per cent (second bracket).

Reduction of benefits for incoming expatriates: Under the special tax (30%-ruling regime) for incoming expatriates, a tax-free allowance of the employee’s Dutch-sourced remuneration can be granted to qualifying incoming expatriates employed by a Dutch employer. It is currently proposed to reduce the 30% ruling regime from eight to five years. Transitional rules are proposed for existing 30%-rulings to remain applicable in 2019 and 2020. 

Implementation ATAD: As from 1 January 2019 it is proposed to limit the deduction of net interest payments to the highest of (i) 30 per cent of the taxpayer’s adjusted profit, or (ii) EUR 1,000,000. Any non-deductible net interest as a result of the application of the earning stripping rule may be carried forward to subsequent years. The Dutch implementation of the earning stripping rule will be stricter than the minimum standard required under the ATAD. The earning stripping rule will (i) not include a so-called group-escape, (ii) also apply in stand-alone situations, and (iii) financial institutions will not be excluded from the scope of this measure. The implementation of the earning stripping rule is complemented by the abolishment of certain existing interest deduction limitation rules.

“Implementation of EU directives and rules continues to be an important driver for legislative proposals in the Netherlands, in particular in the field of investor and data protection, anti-money laundering rules and long-term shareholder engagement. The contemplated establishment of the Netherlands Commercial Court and the Netherlands Commercial Court of Appeal will offer an interesting option for resolving commercial disputes.”

Jan Willem de Boer, Managing Partner,The Netherlands

Jan Willem de Boer

Significant legal and regulatory events in 2018

Explore the tabs below to review the key developments you need to be aware of from 2018

Corporate
Employment
Data Protection
Financial Regulation
Restructuring and Insolvency
Banking
Dispute Resolution
Tax

Corporate

Corporate Governance Code compliance: In January, the Dutch Corporate Governance Monitoring Committee published its report on compliance by listed companies with the Dutch Corporate Governance Code over Fiscal Year 2016. The average compliance percentage was high (98.9%). Non-compliance primarily related to providing an overview of the most relevant aspects of the remuneration policy and publication of a policy for communication with shareholders. The code provision that was most deviated from, on the basis of the code’s comply-or-explain provision, was the maximum term for management board members.

New Dutch anti-money laundering rules/MLD4: On 25 July, new anti-money laundering rules were introduced based on the Fourth European Anti-Money Laundering Directive by amendment of the Dutch Act on the Prevention of Money Laundering and Terrorist Financing. Changes include an increased risk based approach to know-your-client (KYC) and a broader scope of ultimate beneficial owners (UBOs) and politically expressed persons (PEPs). The definitions of UBO and pseudo-UBO are now established for each category of Dutch legal entities and these legal entities are required to identify their UBO or pseudo-UBO on the basis of these new definitions. Further legislation on rules to make certain UBO and pseudo-UBO details available in a public register is expected to come into force in 2019.

Employment

Works council views on remuneration: In June, legislation was adopted that will require companies with more than 100 employees in the Netherlands to discuss with their Dutch works council pay ratios and differences in remuneration of the employees, including the directors. No effective date has been announced yet.

Data Protection

The general data protection regulation: This applied across the EU as of May 2018 marking the biggest shakeup of European privacy laws for 20 years with new obligations for businesses, new rights for individuals and new enforcement powers for regulators. On the same date, the Dutch GDPR Implementation Act (Uitvoeringswet Algemene verordening gegevensbescherming) came into force. This Act contains specific terms in relation to the application of the GDPR in the Netherlands.

Read more on Data Protected, our data protection resource.

Financial Regulation

MiFID II and MiFIR: The Dutch implementation of the revised Markets in Financial Instruments Directive (MiFID II) and the Markets in Financial Instruments Regulation (MiFIR) has applied since 3 January. Changes include a narrowing of the scope of exemptions, additional financial instruments and enhanced investor protection rules.

Dutch Overseas Person Exemption: A new exemption has been introduced in article 10a of the Exemption Regulation pursuant to the FSA (Vrijstellingsregeling Wft), which applies to non-EEA firms that only deal on own account in the Netherlands: (i) on a Dutch trading venue; or (ii) OTC with a Dutch counterparty having a licence or being able to rely on an exemption to provide investment services in the Netherlands or deal on own account in the Netherlands.

Benchmark Regulation: The Benchmark Regulation came into effect on 1 January and introduced a regime which aims to safeguard the accuracy and integrity of benchmarks. Coupled with the Benchmark Regulation, the discontinuation of LIBOR and potentially other benchmarks, resulted in many corporates and financial institutions evaluating the impact on finance documentation and looking to include appropriate fallback mechanisms.

PSD II: Although the revised payment services directive (PSD II) has not been transposed into Dutch law yet, implementing legislation is expected to come into force before the end of 2018. Changes include two additional payment services which enable non-banks to initiate payment transactions and to provide account information services.

PRIIPs Regulation: The Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation has applied since 1 January. It requires PRIIP manufacturers to draw up a key information document (KID) before making a PRIIP available to retail investors.

IDD: On 1 October, the Dutch transposition of the Insurance Distribution Directive came into force. Changes include rules on enhanced transparency in relation to, inter alia, the insurance intermediary, conflicts of interests and costs and related charges before the conclusion of an insurance contract.

Restructuring and Insolvency

Scope of CJEU ruling in Smallsteps: In the 2017 Estro case, the CJEU provided guidance on the application of transfer of undertaking (TUPE) rules to going concern sales implemented upon (or soon after) the commencement of bankruptcy proceedings. Although bankruptcy proceedings are designed by the legislator as winding-up proceedings and generally benefit from a statutory exception from the TUPE rules, the CJEU confirmed that a pre-packaged bankruptcy aimed at ensuring the continuation of the debtor’s business does not have the benefit of that exception. In 2018, the exact scope of the CJEU judgment has been tested in a number of lower court cases, e.g. where the liquidator had a limited formal role in the pre-commencement stage and/or where no (final) pre-pack deal has been agreed upon prior to the commencement of formal proceedings. These going concern sales out of bankruptcy were generally not deemed to be subject to TUPE rules.

Modernisation of insolvency proceedings: In 2018, a bill on the modernisation of insolvency proceedings has been adopted by the Dutch Parliament. The new act will come into force on 1 January 2019 and enhances options to use electronic communications at various stages of Dutch insolvency proceedings; abolishes the requirement of physical claims admission meetings; adds flexibility in the composition of the creditors’ committee; and provides for various other tools aimed at expediting the proceedings.

Banking

Financial collateral: In Aviabaltika v Ukio Bankas [2018] WLR (D) 472, the CJEU confirmed that financial collateral providers should not be forced to pay again amounts already paid as collateral where the collateral taker enters insolvency. Unless the arrangement provides otherwise, collateral takers must recover their claims first from the collateral and only then from the other assets of the collateral provider.

Dispute Resolution

Innovation of civil procedure: In 2017 the Dutch legislator adopted several changes to the Dutch Code of Civil Procedure with the aim of reducing the duration of the proceedings (e.g. introduction of tighter deadlines), simplifying the rules of civil procedure (e.g. more involvement of the courts) and digitising the legal system (e.g. online submissions). The first phase, which includes the digitisation of the filing of procedural documents, started in September 2017 for two local district courts only. In June 2018, it was decided that the rest of the district courts will not follow. The Council for the Judiciary will keep working on ways to digitise legal procedures.  The Dutch legislator adopted several changes to the Dutch Code of Civil Procedure with the aim of reducing the duration of the proceedings (e.g. introduction of tighter deadlines), simplifying the rules of civil procedure (e.g. more involvement of the courts) and digitising the legal system (e.g. online submissions). The first phase, which includes the digitisation of the filing of procedural documents, started in September 2017 for two local district courts only. In June 2018, it was decided that the rest of the district courts will not follow. The Council for the Judiciary will keep working on ways to digitise legal procedures.

Bilateral Investment Treaties: In March, in the case of Achmea, the CJEU handed down a much anticipated judgment on the compatibility of intra-EU BITs with EU Law.

Read our blog post on the Achmea judgment.

Prospectus liability: In September, in the case of Löber, the CJEU returned to the question of where jurisdiction, under the Brussels I Regulation, may sit for claims brought in tort/delict, against EU domiciled issuers, by secondary market purchasers of interests in securities.

Read our update on Prospectus liability before the CJEU - Kolassa refined, but how far?

Tax

Dutch dividend withholding tax: As of 1 January, distributions made on qualifying membership interest in Dutch holding co-operatives are in principle subject to Dutch dividend withholding tax. Dividend distributions made by a co-operative that does not qualify as a holding co-operative remain exempt from Dutch dividend withholding tax. In addition to the already existing domestic dividend withholding tax exemption in respect of qualifying EU/EEA shareholders, the domestic dividend withholding tax exemption is expanded for dividends distributed by a Dutch company to qualifying entities that are resident in third countries with which the Netherlands has concluded a tax treaty which includes a provision on dividends.The politically controversial plan to abolish the current Dutch dividend withholding tax has been withdrawn. This means that the current withholding tax remains unchanged. The integration of a new withholding tax on intercompany dividends to low tax jurisdictions and in abusive situations with the current withholding tax on dividends will be considered.

Key contacts for The Netherlands

For more information, please speak to one of the key contacts below

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