A Dutch BV or NV is in principle free to choose whether it has a supervisory board (raad van commissarissen). It becomes mandatory when the company falls under the large company regime (structuurregime), and in regulated sectors such as banking and insurance.
The supervisory board supervises the policy of the management board and the general course of affairs, and advises the board (Articles 2:140 and 2:250 of the Dutch Civil Code, BW). Below we explain when you need one, what its members may and must do, how they are appointed and when they can be held liable.
Table of contents
What is a supervisory board?
It is a separate corporate body of a BV or NV, alongside the management board (bestuur) and the general meeting (algemene vergadering). The Netherlands traditionally has a two-tier system: the management board runs the company, and the supervisory board supervises and advises.
Supervisory directors (commissarissen) must act in the interest of the company and its business, not in the interest of the shareholder who appointed them (Article 2:250(2) BW for the BV, Article 2:140(2) BW for the NV). Only natural persons can be supervisory directors. See also the definition of a supervisory board in our legal glossary.
When is a supervisory board mandatory?
For an ordinary BV or NV it is optional; the articles of association can provide for one. It is mandatory in three situations.
- Large company regime: the company meets three criteria for three consecutive years. Issued capital plus reserves of at least €16 million, a works council required by law, and at least 100 employees in the Netherlands, together with its dependent companies.
- Regulated sectors: banks, insurers and certain investment firms must have a supervisory body under the Financial Supervision Act (Wft); housing corporations and many healthcare institutions have similar rules.
- Articles of association: if the articles provide for a supervisory board, the company must have one.
A company that meets the three large company criteria must file a statement with the trade register within two months after adopting its annual accounts. After three consecutive years the regime applies by law.
What are the tasks and powers of the supervisory board?
The core task is supervision and advice. In addition, the law and the articles give the supervisory board specific powers.
- Supervision: monitoring the strategy, risks, financial reporting and the functioning of the management board.
- Advice: acting as a sounding board for the management board, on request or on its own initiative.
- Approval rights: the articles often require supervisory board approval for important decisions, such as large investments, acquisitions or financing.
- Suspension: the supervisory board can suspend a director at any time, unless the articles provide otherwise (Articles 2:147 and 2:257 BW).
- Employer role: under the full large company regime the supervisory board appoints and dismisses the directors itself.
The management board must provide the supervisory board in good time with the information it needs to perform its task (Articles 2:141 and 2:251 BW). A supervisory director who receives insufficient information must ask for it; not knowing is rarely a defence.
How are supervisory directors appointed?
In an ordinary BV or NV the general meeting appoints and dismisses the supervisory directors. The articles can give certain shareholders a right to nominate.
Under the large company regime, the general meeting appoints the supervisory directors on the nomination of the supervisory board, and the works council has an enhanced right to recommend one third of the members. Under the mitigated regime, for example when an international group holds at least half of the shares, the general meeting keeps the power to appoint the directors.
Is a one-tier board an alternative?
Yes. Instead of a separate supervisory board, a BV or NV can have a one-tier board in which executive and non-executive directors sit together (Articles 2:129a and 2:239a BW). The non-executive directors then perform the supervisory task.
A one-tier board shortens the lines of communication, but non-executive directors are in principle jointly responsible for the board’s decisions. That increases their liability risk compared with supervisory directors in a two-tier system.
What rules apply to conflicts of interest and diversity?
A supervisory director with a direct or indirect personal interest that conflicts with the interest of the company does not take part in the deliberations and decision-making (Articles 2:140(5) and 2:250(5) BW).
Since 1 January 2022 the supervisory board of a listed NV must consist of at least one third women and at least one third men; an appointment in breach of that quota is void (Article 2:142b BW). Large NVs and BVs must set appropriate targets for the ratio of men and women and report on them annually.
When is a supervisory director liable?
A supervisory director is liable towards the company for improper performance of his duties if he can be seriously blamed (ernstig verwijt), the same standard as for directors (Article 2:9 BW, applicable through Articles 2:149 and 2:259 BW).
In bankruptcy, the trustee can hold supervisory directors jointly and severally liable for the deficit if they clearly performed their supervisory task improperly and that is an important cause of the bankruptcy (Articles 2:150 and 2:260 BW). If the annual accounts were filed late, improper performance is presumed. See also directors’ liability.
In practice, liability usually turns on what the supervisory director knew or should have known, and what he did with it. Minutes of meetings, written questions to the board and documented decisions are therefore the best protection.
What should you check as a company?
- Check every year whether the company meets the three large company criteria, and file the statement on time.
- Record in the articles which decisions require supervisory board approval.
- Draw up board regulations on information, meetings and conflicts of interest.
- Check the diversity rules and targets that apply to your company.
- Arrange directors’ and officers’ (D&O) insurance that also covers the supervisory directors.
What should you check as a supervisory director?
- Read the articles and regulations before accepting the appointment, including the approval rights.
- Ask for information actively and record your questions and the answers in writing.
- Declare any conflict of interest and stay out of the decision-making.
- Check that the annual accounts are adopted and filed on time.
- Check the scope and cover of the D&O insurance.
What can we do for you with a supervisory board?
- Assess whether the large company regime applies, or the mitigated regime.
- Draft or amend the articles of association and the supervisory board regulations.
- Advise on appointment, suspension and dismissal of directors and supervisory directors.
- Advise supervisory directors in a crisis, a conflict with the management board or a shareholder dispute. See also our article on the role of the supervisory board in a crisis.
- Defend supervisory directors against a liability claim by the company or a bankruptcy trustee. See also our page on corporate law.
Summary
- A supervisory board is optional for a BV or NV, but mandatory under the large company regime and in regulated sectors.
- It supervises the management board and the general course of affairs, and advises the board, in the interest of the company (Articles 2:140 and 2:250 BW).
- The large company regime applies after three years with capital and reserves of at least €16 million, a works council and at least 100 employees.
- A one-tier board with non-executive directors is an alternative.
- Supervisory directors are liable only if they can be seriously blamed, and in bankruptcy if they clearly performed their task improperly.
Frequently asked questions
Can a shareholder also be a supervisory director?
Yes. A shareholder can be appointed as a supervisory director, but in that role he must act in the interest of the company and not in his own interest as a shareholder.
Can a legal entity be a supervisory director?
No. Only natural persons can be supervisory directors. A legal entity can, however, be a director of a BV or NV.
How many supervisory directors must a supervisory board have?
The law sets no minimum for an ordinary BV or NV; the articles decide. Under the large company regime there must be at least three supervisory directors.
Can the supervisory board dismiss a director?
In an ordinary BV or NV the general meeting dismisses directors; the supervisory board can suspend them. Under the full large company regime the supervisory board appoints and dismisses the directors itself.
