New statutory gender diversity rules for Dutch companies

8 October 2021

On 28 September, the Dutch Senate has adopted a new law which introduces a mandatory gender diversity quota for Dutch listed companies' supervisory boards.

In addition, other 'large' companies will have to set gender diversity targets for the composition of their management board, supervisory board and senior management. The new law is expected to enter into force on 1 January 2022. This News Update sets out the most important changes the new law brings about. For background information on the new law, please refer to our 14 February 2020 News Update.

Mandatory gender diversity quota for listed companies

The new law introduces a gradual entry quota for listed companies which requires their supervisory boards to consist of at least one-third of men and at least one-third of women. As long as the supervisory board does not meet this requirement, any appointment to the supervisory board that does not contribute to achieving the quota will be void.

However, such appointment can be valid for a maximum period of two years in the case of exceptional circumstances. These exceptional circumstances may only be invoked by the company if the appointment is necessary to serve the long-term interests and sustainability of the company as a whole or to assure its viability. According to the explanatory notes to the new law, this situation occurs, for example, if a significant number of the supervisory board members unexpectedly resigns or if a company in distress urgently needs to appoint a new supervisory board member and does not have the time or resources to search extensively for a suitable candidate.

The quota only applies to new appointments. It does not apply to reappointments of supervisory board members, provided that their reappointment takes place within eight years after the year in which they were first appointed. The quota also only applies to Dutch listed companies. These include all NVs and BVs whose shares, or depositary receipts for shares, have been admitted to trading on Euronext Amsterdam. The quota equally applies to the appointment of non-executive directors in listed companies with a one-tier board structure.

Under the new law, the nullity of an appointment does not affect the validity of supervisory board resolutions, even if this new member has participated in the decision-making process. This way, legal certainty is secured and the interests of third parties are protected.

'Large' companies obligated to set own gender diversity targets

All Dutch 'large' companies must set 'appropriate' and 'ambitious' targets for gender diversity in their management and supervisory boards (excluding the supervisory boards of listed companies) and senior management. A 'large' company is an NV or BV which meets at least two of the three following criteria: (i) a balance sheet total more than EUR 20 million, (ii) a net turnover of more than EUR 40 million and (iii) an average number of 250 or more employees during the financial year. 'Large' group companies are exempted, provided that their parent company complies with its self-imposed gender diversity targets, also on their behalf.

In this context, ‘appropriate’ means that the target depends on the size of the management board, the supervisory board and senior management, and on the existing ratio between the men and women. In this context ‘ambitious’ means that the target should aim to make the male-female ratio more balanced than the existing composition. Dutch 'large' companies must also develop a plan on how to reach their gender diversity targets.

There are no legal consequences for failure to meet the self-imposed gender diversity targets. However, 'large' companies must report on the progress they make annually to the Social and Economic Council ("SER") within ten months after the end of the financial year. A format and infrastructure for reporting to the SER will be developed and the data gathered by the SER will be made publicly available in full.

Evaluation and limited validity period

The introduction of the new law has not been undisputed. To address these objections, an evaluation provision and a 'sunset provision' have been included in the new law. The Dutch government must evaluate the new law five years after its entry into force. In addition, the new law will expire eight years after its entry into force, provided that the evaluation results of the new law do not require an extension of its validity period.