The Year to Come and Year in Review summarise a selection of major developments you should be aware of from 2021, and a selection of key developments expected in 2022.
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key updates for 2021 and 2022
Classification of Special Purpose Acquisition Companies (SPACs) shares (IAS 32):
Following increased regulatory scrutiny of SPACs, ESMA has identified different views on applying the requirements of IAS 32 in relation to the classification of shares issued by SPACs as liabilities or as equity instruments when a particular fact pattern is present. Accordingly, ESMA has suggested that the IFRS Interpretation Committee (IFRS IC) considers clarifying the relevant accounting requirements.
Rules for turbo-liquidations: Measures to remedy the detriment of creditors caused by the misuse of the turbo-liquidation procedure are being considered. The procedure was introduced to allow for a cost-efficient and fast way to liquidate companies without assets. Measures being considered include the mandatory preparation and deposit of final accounts and the requirement for boards to announce the turbo-liquidation and explain the absence of assets. Additionally, all missing annual accounts from previous years must be deposited before the company can be deregistered. Separately, directors can be disqualified from acting as managing directors in the event of non-compliance with their obligations in relation to turbo-liquidations. The consultation period on the draft bill ended on 27 July 2021 and further action is expected in 2022.
Digital incorporation of private limited companies (BVs): The Netherlands missed the August 2021 deadline to implement EU Directive 2019/1151which facilitates the incorporation and registration of a Dutch BV by digital means without any physical presence of the shareholders and board members. The draft legislation consultation closed on 12 July 2021, but no legislative proposal has been submitted to date.
Ultimate Beneficial Owner (UBO) registers for legal entities: Based on the fourth EU Anti-Money Laundering Directive (AMLD IV), a public UBO register for legal entities was introduced on 27 September 2020. In this register, held by the Dutch Trade Register, specific details of UBOs must be published and supporting documents must be submitted. No new legal entities can be registered without doing this and existing entities will be required to make the UBO disclosures by 27 March 2022 at the latest. A separate public register for UBOs of trusts will be introduced. A legislative proposal to that effect was approved in 2021 and is expected to come into force on 1 January 2022.
Dispute resolution and inquiry proceedings: In 2019, a consultation was launched on a legislative proposal aimed at: (i) improving access to Dutch courts by expanding the grounds to force buy-outs by or sell-outs to co-shareholders in shareholder dispute resolution proceedings; and (ii) reducing the required stock exchange value for shareholders to request inquiry proceedings before the Dutch Enterprise Chamber to EUR 20m for all listed companies. No legislative proposal has been tabled so far, however, further action is expected in 2022.
Implementation of the EU Collective Redress Directive: The directive must be transposed by 25 December 2022 and come into force on 25 June 2023. The draft legislation consultation closed on 31 May 2021. The Government believes that the Act on collective damages claims, that came into force on 1 January 2020, covers most of the directive's requirements and minor changes are required. A draft bill is expected early 2022.
Implementation of EU Directive on transparent and predictable working conditions:
The Directive was adopted in June 2019. Member States are required to implement this into domestic legislation by 1 August 2022. The Directive provides employees with minimum rights including, a probationary period, ancillary activities and cost-free mandatory training. On 11 November 2021 a legislative proposal has been published to implement this into Dutch law. This legislative proposal is currently pending before the House of Representatives.
EU sustainability disclosure regime:
The Regulatory Technical Standards (RTS) are yet to be finalised by the EC. The RTS specify the content, methodologies and presentation of the sustainability-related disclosures required under the Sustainable Finance Disclosures Regulation (SFDR) at both entity and product level which were drafted by the European Supervisory Authorities (ESAs) in February 2021. The RTS will apply from July 2022. In addition, the proposed Corporate Sustainability Reporting Directive envisages the adoption of sustainability reporting standards. The draft standards would be developed by the European Financial Reporting Advisory Group and tailored to EU policies, while building on and contributing to international standardisation initiatives. The first set of standards would be adopted by October 2022.
MiFID Quick Fix: The EU Quick Fix amendments to MiFID II will apply from 28 February 2022, and the proposals following the EU MiFID II/MiFIR review will go through the legislative process. Consequently, ESMA are expected to amend the relevant technical standards. On 5 October 2021, the Dutch Minister of Finance launched consultations to seek views on the draft Implementation Act on the Investment Firms Recovery Package which implements the MiFID Quick Fix into Dutch law. The consultations closed on 16 November 2021.
Implementation of the Credit Services and Credit Purchasers Directive: The Directive was approved by the EU Council on 9 November 2021 and will come into force 20 days after publication in the Office Journal of the European Union. The Government will need to implement it into national law within two years. It applies to non-performing loans (NPLs) issued by credit institutions established in the EU. Credit servicing of such NPLs will become a regulated activity and require a licence (this also implies passporting rights). Although the directive is likely to take effect at the end of 2023 or early 2024, it could begin to affect market participants well in advance as they must prepare to comply with the reporting, disclosure, authorisation and other obligations laid out in it.
Financial Markets Amendment Act 2022: On 25 October 2021, the legislative proposal for the Financial Markets Amendment Act 2022 was submitted to the House of Representatives. This proposal aims to change the Dutch Financial Supervision Act in order to make it possible for payment and electronic money institutions to use a segregated bank account for client money. This will be a significant change as the relevant institutions will no longer need a separate legal entity to separate client money from their own funds. The act is expected to come into force in 2022.
European Market Infrastructure Regulation (EMIR): Changes to clearing obligations (and the related derivatives trading obligation) in view of interest rate reform are expected to take effect from early 2022. Pursuant to EMIR REFIT, the delegated regulation specifying the conditions under which commercial terms offered for clearing services are required to be fair, reasonable, non-discriminatory and transparent (FRANDT) will apply from 9 March 2022. The phase-in of initial margin for uncleared derivatives will be completed with phase 6 counterparties coming into scope from 1 September 2022. It is anticipated that draft technical standards in respect of initial margin model validation and reporting will move through the legislative process.
EU Central Securities Depositories Regulation (CSDR): The EU CSDR settlement discipline regime is due to apply from 1 February 2022. However, a delay to the mandatory buy-in requirement could be announced in the coming weeks following support from ESMA and market participants.
Legislative proposals for AIFMD II: The EC is expected to publish legislative proposals for amendments to AIFMD by the end of 2021, for consideration by the Parliament and Council in 2022. Also, ESMA’s guidelines on marketing communications come into force on 2 February 2022.
Review of EU Solvency II: The EC has proposed a series of targeted amendments to the Solvency II regime, alongside a new framework for the recovery and resolution of insurers. The EU’s legislative bodies will now negotiate final texts based on the EC’s proposals.
Pension reform:
The Minister of Social Affairs and Employment is expected to submit proposals on pension reform to the House of Representatives in early 2022. The reforms are expected to come into force by 1 January 2023, one year later than originally planned, with a transition period from 2023 to 2027.
Pre-pack concerning essential service providers in financial distress:
New legislation is being prepared to introduce a statutory pre-pack regime for financially distressed companies which provide essential services to society (e.g., hospitals and educational institutions). The new regime would enable such providers to seek the appointment of a silent administrator to assist the company in negotiating a pre-pack and, more generally, an orderly settlement of the estate (to be implemented in subsequent bankruptcy proceedings). The scope of the proposed regime is confined to essential service providers. The upcoming ECJ decision in FNV/Heiploeg concerning the application of TUPE rules may trigger the Dutch legislator to extend the statutory pre-pack regime to other types of companies.
CIT rates and deductible EBITDA rate under the earnings stripping rules: The Dutch CIT rate in 2022 will be 15% for amounts of taxable profit up to EUR 395,000 (15% up to EUR 245,000 in 2021), and 25.8% thereafter (25% in 2021). The percentage of deductible interest under the earnings stripping rules will be reduced to 20% of fiscal EBITDA (30% in 2021).
Rules on tax losses for Dutch purposes: As of 1 January 2022, tax losses originating in book years starting on or after 1 January 2013 may be carried forward indefinitely and back one year. Such losses can as from 2022 only be fully offset against the first EUR 1m of taxable profit of a year. Insofar as the losses exceed EUR 1m these may only be set off up to an amount of 50% of the taxable profit of a year after a deduction of EUR 1m.
Implementation of reverse hybrid mismatch rule (ATAD 2): Transparent entities entered into under Dutch law or situated in the Netherlands that have one or more qualifying participants in jurisdictions which consider the entity to be opaque and that hold at least 50% of the voting rights, capital interest or profit rights, will become subject to Dutch CIT for book years starting on or after 1 January 2022.
Bank Recovery and Resolution Directive (BRRD): Regulatory Technical Standards setting out the mandatory content of the contractual recognition of stay language required by Article 71a(1) of the BRRD apply from 5 September 2021.
EU SFTR: The phase-in of the reporting obligation under EU SFTR was completed, with NFCs coming into scope from 11 January 2021.
EU Benchmarks Regulation (BMR): The EU BMR has been amended to grant powers to the EC to designate statutory replacement benchmarks in place of certain critical benchmarks. Designations have already been made in respect of CHF LIBOR and EONIA and are effective in January 2022.
EU CSDR: Only part of the EU CSDR settlement discipline regime will apply from 1 February 2022, following the announcement that implementation of the mandatory buy-in regime will be delayed pending expected reforms to the rules.
Guidance on EU SPAC prospectuses: Prompted by the recent increase in SPAC activity, ESMA issued guidance seeking to promote uniform prospectus disclosure and protect investors in SPACs. Among other things, ESMA expects firms subject to the product governance requirements under MiFID II to carefully assess whether retail clients should be excluded from the target market for SPAC shares and warrants, or even included in the negative target market. This guidance applies to SPAC prospectuses whose securities are to be traded on an EU regulated market.
Modernisation law for public companies: On 30 March 2021, an expert group advised the Minister of Justice, in light of various EU initiatives that are being undertaken, not to prepare additional Dutch legislation regarding corporate social responsibility. The group recommended that sustainable corporate governance should not be added to the legal duties of management boards. Rather, it should be considered how companies can be required to report in their annual accounts on their sustainable strategies. The group supported more technical changes to modernise laws for public companies as well as additional rules for fully digital general meetings and multiple voting arrangements.
Statutory response time: The Act introducing a statutory response time for Dutch listed companies came into force on 1 May 2021. Pursuant to the Act, management boards of Dutch NVs and BVs (private limited companies) listed on a stock exchange in the Netherlands or abroad can invoke a statutory response time of a maximum of 250 days to obtain all information needed for careful policy making in the event of a hostile takeover or certain other actions by activist shareholders in manifest breach of the interests of the company and its stakeholders.
Harmonisation rules for management and supervisory boards: On 1 July 2021, the Act on Management and Supervision of Legal Persons came into force. The Act provides and harmonises rules for management boards and supervisory boards of legal persons (including foundations and cooperatives) with those of NVs and BVs. These rules include the exercise of voting rights, conflicts of interest, absence of managing or supervisory directors or inability to perform duties, one-tier boards, supervisory duties and duty of care.
Gender diversity targets for listed and/or ‘large’ Dutch companies: On 28 September 2021, the Dutch Senate passed a legislative proposal aimed at balancing the gender diversity at large companies. The proposal introduces a one-third diversity quota for supervisory boards of NVs and BVs listed on Euronext Amsterdam and the requirement for “large” (listed and non-listed) NVs and BVs to set appropriate and ambitious gender balance targets for the management board, supervisory board and senior management levels. The Act will come into force on 1 January 2022.
Covid-19 Emergency Regulation:
In response to Covid-19, an Emergency Regulation came into force to, among other things, (i) facilitate fully virtual shareholders meetings in the current social-distancing environment and create legal certainty on the validity of decisions adopted at AGMs or EGMs, and (ii) give boards of non-listed companies the authority to extend the term for adoption of annual accounts. This Regulation has been extended until 1 February 2022, but further extensions are expected.
Royal Dutch Shell ordered to reduce carbon emissions: On 26 May 2021, the Hague District Court ordered Royal Dutch Shell to reduce its global carbon emissions by 45% by 2030 compared with 2019 levels. This not only includes the emissions of the Shell group but also its suppliers and customers. The case was brought by the Dutch arm of Friends of the Earth (Milieudefensie) and over 17,000 citizens, among other claimants. The court concluded that Shell’s climate plan is not “concrete” enough and that meeting the goals of the Paris Agreement is not only up to governments.
Oil multinational liable for oil spill damage: The Hague Court of Appeal held Shell Nigeria (SN) liable for damage caused by oil spills near Goi and Oruma (Nigeria) under Nigerian law and ordered SN to pay compensation to the Nigerian claimants (amount to be determined at a later stage). SN had not proven beyond reasonable doubt that third party sabotage had caused the leakage. Hence, the Court found SN liable for the damage on the basis that it had breached its duty of care in its response to the leakages under Nigerian common law. In the Oruma case, the Court found also that SN continuously breached its duty of care by not installing a leak detection system. It ordered SN to install such a system. This order was also imposed on Royal Dutch Shell (RDS). As Nigerian common law does not have precedent cases on parent company liability, English precedents have persuasive authority, according to the Court. The Court concluded from Vedanta v Lungowe [2019] UKSC 20, that a parent company breaches its duty of care towards third parties if its subsidiary committed a tort against these third parties, the parent company knew or should have known this and intervened in the subsidiary’s relevant business operations. RDS knew that SN breached its duty of care by not installing a leak detection system, because from at least 2010 it intervened in internal discussions about this system. However, RDS did not use its authority to force SN to install this system, even though it knew or should have known that its absence could cause severe adverse effects in the case of another leak. This judgment follows the trend that, increasingly, parent companies are being sued in European courts for alleged torts of their overseas subsidiaries.
Temporary emergency bridging measures for employers: The emergency subsidies to provide employers with financial support for employee wages were extended with a third leg (NOW 3.1, 3.2, 3.3), a fourth leg (NOW 4.0) and a fifth leg (NOW 5.0). An employer which experienced a loss of turnover of at least 20% could be eligible for partial compensation of its wage costs. Restrictions applied regarding the payment of dividends, payments of bonuses to the board/management, and a company repurchasing its own shares.
Implementation of the EU Whistleblowing Directive: The EU Whistleblowing Directive was adopted on 23 October 2019. EU Member States were required to implement the directive by 17 December 2021. A legislative proposal was submitted to amend the current Whistleblowers Act. Amongst other requirements, internal whistleblowing policies will have to meet higher standards and the range of protected individuals will be expanded to include volunteers, interns, independent contractors and applicants.
ESG: Commitment to sustainability is one of three focus areas in DNB’s Supervisory Strategy 2021 – 2024. Climate-related risks are now part of the fit and proper assessments of banks, insurers and pension funds. In September 2021, DNB published the Good Practice Integration of climate-related and environmental assessments in the risk management of investment firms, UCITS and AIFMs for public consultation. In addition, contributing to sustainable financial well-being is part of the AFM’s mission, as reflected in its Strategy 2020 – 2022. In this context, the AFM supervises the reporting of sustainable developments, climate-related issues and oversees that sustainability principles are being adhered to in an honest and transparent manner. From 10 March 2021, as stipulated in the EU Sustainable Finance Disclosure Regulation (SFDR), financial service providers must be transparent about their investment decisions and advice which has a negative impact on sustainability factors. Requirements for periodic reporting to investors will apply from January 2022. Primarily, SFDR is a set of EU rules which aim to make the sustainability profile of funds more comparable and better understood by end-investors. This will focus on pre-defined metrics for assessing the environmental, social and governance (ESG) outcomes of the investment process. Among the SFDR’s key parts is its focus on preventing “greenwashing”. In September 2021, the AFM published a report on the implementation of the SFDR requirements by Dutch fund managers of Dutch collective investment schemes.
EU Green Bond Standard (EUGBS): On 6 July 2021, the EC proposed a Regulation on a voluntary EUGBS. The proposed regulation will create a voluntary standard available to all issuers to help financing sustainable investments. The EUGBS will set a ‘gold standard’ for how companies and public authorities can use green bonds to raise funds on capital markets to finance investments, while meeting sustainability requirements and protecting investors from greenwashing. Also on 6 July 2021, the Delegated Act supplementing Article 8 of the Taxonomy Regulation was adopted by the EC. The delegated act further specifies the content, methodology and presentation of information to be disclosed by financial and non-financial undertakings concerning the proportion of environmentally sustainable economic activities in their activities.
MiFIR/MIFID II: On 25 November, the European Commission published its long-awaited legislative proposals following the detailed review of EU MiFID II/MiFIR.
EMIR: Amendments to the margin rules for uncleared derivatives came into force in February 2021 and phase 5 counterparties came into scope for initial margin on uncleared derivatives from 1 September 2021. Equivalence decisions covering certain aspects of the margin rules in respect of Australia, Brazil, Canada, Hong Kong, Singapore and the US prudential regulators came into force on 26 July 2021. Pursuant to EMIR REFIT, ESMA consulted on technical standards on reporting and the EBA published draft regulatory technical standards for consultation on initial margin model validation. On 18 November 2021, ESMA published its final report and draft changes to clearing obligation (and the related derivatives trading obligation) as a result of interest rate reform.
Investment Firms Review: The Dutch Implementation Act on the Prudential Supervision of Investment Firms came into force on 19 October 2021 and the Implementation Decree on the Prudential Supervision of Investment Firms on 26 November 2021. These implement the Investment Firm Regulation (IFR) and Investment Firm Directive (IFD) which were to be implemented into Dutch law by 26 June 2021 but were delayed. Although the IFD and IFR comprise a new prudential regime for investment firms licensed and authorised under MiFID II, the new Dutch regime also has consequences for AIFMs with MiFID top-up permissions. The related (i) Regulation on Sound Remuneration Policies (RBB) of the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM) and the (ii) Implementation regulation directive prudential supervision of investment firms came into force together with the Implementation Act. The RBB implements the IFD remuneration rules, which applies to Class 2 investment firms under the IFD. On 16 July 2021, the DNB launched a consultation on the draft DNB Regulation which has specific provisions on IFR and IFD in which the DNB clarifies the capital requirements arising from the IFR for AIFMs and managers of UCITS that also provide MiFID investment services. The consultation on this draft regulation closed on 30 August 2021.
New pre-marketing regime under AIFMD: On 6 November 2021, the Dutch Implementation Act on Cross-Border Distribution of Investment Funds and UCITS Directive (Implementation Act) came into force, implementing the provisions of the Cross-Border Distribution of Funds Directive (CBDD) and the Cross-Border Distribution of Funds Regulation (CBDR). The CBDD and CBDR introduce the concept of pre-marketing — which is distinct from marketing of funds — and aim to harmonize this within the EU. They also stipulate specific pre-marketing requirements to be complied with by AIFMs, including on communications for funds.
Regulation on European Crowdfunding Service Providers: On 10 November 2021, the Regulation on European Crowdfunding Service Providers for Business (ECSP) came into force. The ECSP addresses crowdfunding services and the organisational and operational requirements of such providers in the EEA. The ECSP aims to enable crowdfunding platforms to offer their services across the EEA. The ECSP will cover both loans and equity-based crowdfunding and will apply to such services provided to non-consumer project owners amounts up to EUR 5m (calculated per 12 months per project owner).Consequently, crowdfunding services may, in principle, only be offered by legal entities that have obtained a license from the regulator.
Steinhoff: In relation to Steinhoff International Holdings N.V. a landmark restructuring composition plan was confirmed by the Amsterdam District Court in 2021. The composition plan will facilitate the global settlement of litigation claims, including various class actions, that Steinhoff has faced in the Netherlands, Germany and South Africa following the announcement of accounting irregularities in 2017. The plan, involving approx. 66,000 claimants worldwide and EUR 14bn in debt, is a crucial step towards restoring the company. The composition plan was innovative in many ways. It is the first ever settlement of mass litigation claims through a Dutch suspension of payments process; the appointment of a 15-member committee to vote on the composition plan instead of creditors (the only other time such a committee was appointed was in 1962); use of a “Bar Date” for the filing of litigation claims to achieve settlement finality; different treatment of creditor groups (e.g. financial creditors and litigation claimants); and conditional settlement on completion of a parallel Section 155 procedure in South Africa. Linklaters handled all of the shareholders litigation claims for Steinhoff in the Netherlands and Germany, the arrangements for the committee and drafted the composition plan. The committee voted unanimously in favour of the composition plan.
New pre-insolvency restructuring procedure for companies in financial distress: On 1 January 2021, the Act on Confirmation of Extrajudicial Restructuring Plans (WHOA) came into force. The WHOA established a new pre-insolvency procedure to restructure the debts of companies in financial distress. It incorporates elements from frequently applied foreign restructuring tools, such as US Chapter 11 proceedings and UK Schemes of Arrangement, into a single framework. The Dutch scheme offers an effective, flexible and widely accessible tool for distressed companies to implement a financial restructuring.
Ongoing developments to counter tax avoidance:
An advisory committee was created in February 2021 to explore the options available to combat the use of conduit companies in the Netherlands. The results are expected any time now. Another development is the recently announced legislative proposal to eliminate international transfer pricing mismatches that result in a (partial) non-taxation of profits of multinational enterprises. According to Dutch tax law, intercompany transactions should be in line with the arm’s length principle. As per the legislative proposal, which is envisaged to apply as of 1 January 2022, certain transfer pricing adjustments will no longer be taken into account if there is no corresponding adjustment in the other jurisdiction involved.
Digital reforms: The EU aims to finalise the Digital Markets Act in 2022, which will reshape how digital businesses operate in Europe and regulate online “gatekeepers” such as Amazon and Facebook.
New regulation for artificial intelligence: The EU will press ahead with its proposal to create a new regulatory superstructure for AI, including prohibiting some uses entirely and imposing significant and extensive compliance obligations on providers of “high risk” AI.
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