Dutch Act on balanced gender diversity at the top of large companies

The Act creates a new statutory framework, to be included in Book 2 of the Dutch Civil Code (DCC)[2], which aims to improve the gender balance in Dutch listed companies and large companies. It replaces gender balance rules based on a comply-or-explain principle that applied from 1 January 2013 to 1 January 2020. These led to slightly more gender diversity, particularly on supervisory boards, but progress was very limited and very slow. The Act, which is based in part on the advisory report 'Diversity at the Top: Time for Acceleration' of 20 September 2019 of the Dutch Social and Economic Council (Sociaal Economische Raad, or SER, an advisory body in which employers, employees and independent experts work together and that advises the Dutch government and Parliament on social and economic policy), is much more compelling in nature. It is expected to take effect on 1 January 2022.

Gender diversity quota for listed companies

For Dutch companies whose shares or depositary receipts for shares are listed on Euronext Amsterdam (i.e. a Dutch regulated market) - there are approximately 100 of these – a gender diversity quota will apply. This means that, as long as the gender diversity of the supervisory board is not balanced, i.e. at least one third consists of men and at least one third of women, a person whose appointment would not make the ratio between the men and women in the supervisory board more balanced, cannot be appointed as a supervisory board member. The same applies regarding the appointment of non-executive directors at companies that have a one-tier board structure.

The gender diversity quota will apply to new appointments. A supervisory board member or a non-executive board member who is eligible for reappointment may be reappointed, even if his reappointment would not make the male/female ratio more balanced, provided however that it regards a reappointment within eight years of the year of initial appointment or exceptional circumstances in the meaning of section 2:135a DCC apply. These are limited to circumstances in which deviation from the quota is necessary in order to serve the long-term interests and sustainability of the company as a whole or to guarantee its viability. Examples are the situation in which a significant number of the supervisory board members resign unexpectedly or the situation in which a company in dire straits urgently needs to appoint a new supervisory board member but does not have the time or the resources to conduct an extensive search for a suitable candidate. An appointment in such exceptional circumstances can only be made for a maximum period of two years.

If the number of members of the supervisory board is not divisible by three, the next higher number that is divisible by three will be taken into account in determining the number of members necessary to achieve a balanced gender ratio. In the case of a supervisory board consisting of one person, no quota is possible.

An appointment of a person that does not contribute to a more balanced gender ratio on the supervisory board is null and void. In order to avoid legal uncertainty, the nullity of an appointment does not affect the validity of resolutions.

Gender diversity targets for large companies

NVs and BVs which qualify as 'large companies' for accounting purposes[3] are required to set target numbers to improve the gender balance on the management and supervisory boards and at senior management levels to be determined by the company. Where the management board and supervisory board consist of one person, a target number may be set for both boards collectively. If a large company is listed on Euronext Amsterdam, the growth quota applies to the supervisory board and the gender diversity targets regulation applies to the management board and senior management.

The gender diversity targets should be appropriate and ambitious. 'Appropriate' means that the target number depends on the size of the management board, supervisory board and senior management and on the existing male/female ratio. 'Ambitious' means that the target should aim to achieve a more balanced gender diversity than the existing situation. If there is no female member on the management board or supervisory board, the aim should be to appoint at least one woman. Depending on the size of the management board and supervisory board, this may also be as far as the goal reaches (for example, in the case of a two-member management board or a three-member supervisory board). If a set target is reached and there is room to further balance gender diversity (e.g. a management board consisting of four persons or a supervisory board consisting of five persons), the company will have to reconsider an appropriate and ambitious target.

Large companies - there are some 5,000 of them - are also required to draw up a plan for achieving the gender diversity targets set. Such a plan may include, for example, drawing up a composition profile, setting up a transparent recruitment and selection process and an explanation of any affirmative action policy.

Within ten months of the end of each financial year, a large company must also report to the SER on the number of men and women making up the management board, the supervisory board and senior management, its gender diversity target numbers, the plan for achieving these targets and, if one or more targets have not been achieved, the reasons for this. On the basis of the Decree on the content of management reports (Besluit inhoud bestuursverslag), this information must also be included in the management report that is part of the company's financial statements. The report to the SER must be made on the basis of a format to be developed by the SER and via the digital "SER diversity portal". The SER will annually make the gender diversity target numbers and results of companies public via a generally accessible part of the SER diversity portal. Later this year large companies will be informed by the SER about the Act and the SER diversity portal.

Entry into force

The gender diversity quota and gender diversity targets regulations are expected to take effect on 1 January 2022 and have a sunset clause under which they will expire (subject to renewal) eight years after entry into force.

[1] Wet tot wijziging van Boek 2 van het Burgerlijk Wetboek in verband met het evenwichtiger maken van de verhouding tussen het aantal mannen en vrouwen in het bestuur en de raad van commissarissen van grote naamloze en besloten vennootschap (35628)

[2] The gender diversity quota for listed companies is enacted in section 2:142b DCC. The gender diversity targets regulation for large listed companies is enacted in sections 2:166 and 2:276 DCC.

[3] This is the case if a company meets at least two of the following criteria on two consecutive balance sheet dates:

• the value of the assets exceeds € 20 million;
• the net turnover is more than € 40 million;
• the average number of employees is 250 or more.