Dutch diversity act on gender balance in business leadership: a recap

On 1 January 2022, the Dutch Act on Gender Balance in Business Leadership (Wet evenwichtiger man-vrouw verhouding in de top van het bedrijfsleven) (the “Diversity Act”) entered into force. By virtue of the Diversity Act, three new provisions have been introduced to Book 2 of the Dutch Civil Code (Burgerlijk Wetboek) (“DCC”). The purpose of the Diversity Act is to balance the number of men and women at the top and sub-top of listed and large companies, since the aim is for everyone to have equal opportunities.

Applicability
The new provisions following from the Diversity Act apply to three categories of Dutch companies: listed companies on Euronext Amsterdam (beursgenoteerde vennootschappen) (article 2:142b DCC) (the “Listed Companies”);

  • large (listed) public limited companies (grote (beursgenoteerde) naamloze vennootschappen) (article 2:166 DCC) (the “Large NVs”);
  • large (listed) private limited companies (grote (beursgenoteerde) besloten vennootschappen) (article 2:276 DCC) (the “Large BVs”).


Listed Companies
Requirements
The diversity quota requires that at least one-third of the supervisory board members must be women, and at least one-third must be men. As long as this is not the case, an appointment of a new member of the supervisory board that does not make the composition more balanced shall be null and void (‘nietig’). The vacancy will thus remain unfulfilled.

Exceptions
In case of reappointment (‘herbenoeming’) within eight years after the first appointment, the requirement of the diversity quota does not apply.
In addition, exceptional circumstances (‘uitzonderlijke omstandigheden’) may prevent the diversity quota from being obligatory for a maximum period of two years. This is limited to circumstances in which deviation from the diversity quota is necessary in order to serve the long-term interests and sustainability of the Listed Company as a whole or to guarantee its viability.

Timing
Every appointment as of 1 January 2022, with exception of the abovementioned cases of reappointment and exceptional circumstances, will need to be in accordance with the Diversity Act.

Large NVs and BVs
Requirements
Large NVs and Large BVs need to fulfill two requirements in order to improve the gender balance in the board of directors (‘bestuur’), the supervisory board, and the sub-top. The sub-top includes categories of workers in managerial positions.

In pursuance of complying with the Diversity Act, the Large NVs and BVs must:
(i) set appropriate and ambitious target numbers to promote gender diversity in the (supervisory) board and sub-top, as well as draw up a plan of action to achieve the set objectives;

  • appropriate means that the target numbers depend on the size of the (supervisory) board and sub-top as well as on the current gender diversity in these corporate bodies;
  • ambitious means that the Large NVs and BVs should aim at a more equal gender diversity at these levels than the existing situation;


(ii) report annually, within ten months after the end of the financial year, to the Dutch Social Economic Council (Sociaal-Economische Raad (SER)) (the “SEC”) the number of men and women at the end of the financial year who are members of the (supervisory) board and sub-top, the target numbers and the action plan. In case the target numbers have not been met, the reason(s) thereof should also be reported. The SEC will publish these reports annually. The information reported to the SEC must also be included in the directors’ report (‘bestuursverslag’).

Timing
The obligations under the Diversity Act will apply as of January 1st, 2022. Once the first of the aforementioned requirements is met, the targets and the plan of action do not need to be adjusted every year or at a certain fixed moment. However, targets should remain appropriate and ambitious.
Regarding the second requirement, both reporting obligations (to the SEC and in the Directors’ report) apply to financial years commencing on or after 1 January 2022.

Sanctions
Except for the nullification of the appointment for the supervisory board of the Listed Companies, there are no legal sanctions for failure to comply with the obligations under the Diversity Act (other than potentially naming and shaming), but the shareholders can question the corporate bodies in case of non-compliance. If they are not satisfied with the answers, they can – as an ultimum remedium – refuse to adopt the annual accounts. Additionally, not complying may have a detrimental impact on the reputation of the company.

Over de auteur(s)

Tessa Bender, Senior Associate | Eversheds Sutherland
Carola de Bruijn, Associate | Eversheds Sutherland