News Update Corporate M&A

21 May 2021

On 1 May, a new law entered into force allowing the management or one-tier board of a listed Dutch company to invoke a statutory 250-day cooling-off period when it is faced with an unsolicited takeover bid or shareholder activism related to director changes that is fundamentally contrary to the company's interest and its business. This cooling-off period is meant to give the board sufficient time to evaluate the situation and carefully weigh the business and its stakeholders' interests.

For a more elaborate analysis and background information, please refer to our 29 May 2020 News Update which discusses the initial draft bill for the cooling-off period. The bill has since been subject to amendments that were introduced during the parliamentary debate. This News Update provides a brief overview of the notable amendments.

Start of the cooling-off period

Under Dutch law, shareholders meeting certain thresholds can request items to be placed on the general meeting of shareholders agenda or judicial authorisation to convene a general meeting if the board refuses to do so at their request. The start of the cooling-off period depends on whether shareholders have merely requested an item to be placed on the agenda or have been granted judicial authorisation to convene a general meeting themselves. The new law now specifies this distinction.

Depending on the situation at hand, the cooling-off period starts:

• on the day following the latest day on which the request to put an item on the agenda must be received by the company in order to be tabled for the next general meeting (which is typically 60 days before the general meeting);
• immediately after shareholders are granted judicial authorisation to convene a general meeting; or
• no later than on the day following the day on which an unsolicited takeover bid for the company's shares is made.

Authority to terminate cooling-off period

The initial draft bill granted the right to one or more shareholders together representing at least 3% of the company's issued share capital to request termination of the cooling-off period with the Enterprise Chamber of the Amsterdam Court of Appeals. This right has now been granted to one or more shareholders holding the right to request items to be added to the general meeting agenda (within the meaning of Article 2:114a of the Dutch Civil Code). By default, such right is granted to one or more shareholders representing at least 3% of the issued capital, but the articles of association of the company may specify a lower (but not a higher) threshold. Several Dutch companies have a provision in their articles of association where this threshold is set at 1%. Accordingly, for those companies, the authority to request termination of the cooling-off period is granted to shareholders representing that lower percentage.

No cumulation of the cooling-off period and other protective measures

At the time of publication of our previous News Update it was unclear if, and to what extent, the cooling-off period could be combined with the use of other protective measures. Under the law as it has now entered into force, the Enterprise Chamber can, among other things, terminate the cooling-off period if the nature, aim and purport of these protective measures correspond with the cooling-off period. Shareholders can request to terminate the cooling-off period with the Enterprise Chamber if at the time it was invoked, the shareholders (alone or together) held the right to request items to be added to the agenda of the general meeting (see the paragraph above). The Enterprise Chamber will not honour a termination request unless such protective measures have not been terminated or suspended within a reasonable period following the shareholders' request.

In this respect, it was initially unclear whether the cooling-off period could be combined with the similar response time of 180 days provided for in the Dutch Corporate Governance Code. The amendment's explanatory memorandum introducing the anti-cumulation provision clearly mentions invoking this response time as an example of protective measures that allows the Enterprise Chamber to terminate the cooling-off period.

Evaluation of the new law

The introduction of the cooling-off period has been disputed given the broad scope of existing antitakeover measures that are available to Dutch publicly traded companies, and the perceived uncertainty and interference with common corporate decision-making the cooling-off period could bring about. To address these objections, an evaluation provision has been included in the new law. The Dutch government must report to parliament on the new law's effectiveness and consequences in practice no later than 1 May 2026.