Companies will be able to revise and claw back directors' bonuses if they are excessive or wrongly awarded. Companies will also have to deduct from executive remuneration any profit made from share price increases during significant events such as a public offer. This is set out in new legislation that will take effect on 1 January 2014 and also apply to existing pay packages.

In this legal alert we will outline the main elements of the new law. We will show step-by-step the process of calculating increases in value in the case of a public offer. We also include Q&As illustrating its practical impact.

Revising and clawing back bonuses

The new law introduces the power to

  • revise an as yet unpaid bonus to an appropriate amount if payment were unacceptable according to standards of reasonableness and fairness
  • claw back a bonus insofar as it has been paid based on incorrect information concerning the realisation of underlying targets or circumstances that the bonus was dependent on.

These powers to revise and claw back a director's bonus have been given to

  • public companies (NVs)
  • cooperatives and private limited liability companies (BVs) qualifying as a bank
  • mutual insurance companies qualifying as an insurance company
  • financial institutions, regardless of their legal form.

At financial institutions, bonuses awarded to day-to-day policymakers can also be revised or clawed back. For financial institutions with corporate seat in the Netherlands, further legislation about remuneration policy is being prepared ( see our In context newsletter).


"Bonus" means the variable portion of the remuneration that is partly or entirely conditional on realising certain targets or on the occurrence of certain events. A number of examples were mentioned while this legislation was passing through parliament. These include:

  • cash payments
  • payments in the form of options or shares or other remuneration components based on shares
  • signing bonuses and severance payments.


The body that determines the remuneration of individual directors has the power to revise an as yet unpaid bonus to an appropriate amount. But only if payment of the bonus is unacceptable according to standards of reasonableness and fairness. A number of factors may be relevant in determining this, including the company's size, the sector in which it operates, and the remuneration environment within the company. If a company is internationally active, the remuneration environment at foreign divisions may also be taken into account. If the director disputes the revision, the courts will ultimately have to interpret what is reasonable and fair.


The power to claw back has been given to the company, that is, the management board on the company's behalf. But it may also be exercised by the supervisory board, the non-executive directors of a one-tier board, or a special representative designated by the general meeting. To assess if information concerning underlying targets was incorrect, the explanatory notes to the annual accounts may be relevant.

Connection with Corporate Governance Code and Banking Code

During the legislation's passage through parliament, the need to lay down these revisory and claw-back powers in company law was often called in question. It was argued that it would not create new powers. The Corporate Governance Code and the Banking Code allow for revision and claw-back of bonuses under certain circumstances. But the government felt that self-regulation was not sufficiently effective. In addition, existing contracts cannot be amended without the parties' consent under the provisions of the two codes. The claw-back legislation is mainly aimed at clarifying the circumstances in which bonuses can be clawed back. The government's expectation is that the supervisory board will have a more solid basis for exercising its powers and thus more options to claw back bonuses.

Duty to deduct increase in value of shares from a director's remuneration

The new law also introduces a duty to deduct from a director's remuneration any increase in the value of shares or options that were part of his pay. Shares in this alert include depositary receipts for shares.

This duty exists when:

  • a public offer is announced
  • the general meeting approves a resolution about a significant change in the identity or character of the company or its business, as referred to in section 2:107a (1) (a), (b) or (c) of the Dutch Civil Code (a "section 2:107a resolution")
  • a merger or demerger decision is taken.

This duty applies only to (the management boards of) listed companies the shares of which have been admitted to trading on a regulated European market. Companies listed on another trading platform (e.g. Alternext) or an exchange outside Europe do not have a duty to deduct increases in value. Only shares and options received by way of remuneration are subject to deduction. Shares that the director has purchased or inherited are not.

The company has a duty to deduct an increase in value from the moment that the director sells the shares or options, or his appointment ends, after:

  • the public offer has been announced
  • notice has been given of a general meeting where the approval of a 2:107a resolution is an agenda item, or
  • the company has announced the proposal to merge or demerge, but before the merger or demerger takes effect.

This duty will not exist if the announcement or notice takes place before 1 January 2014.

Reference dates for determining increases in value

If one of the corporate events takes place, the company will first have to establish if the shares or options held by each director in the company were received as remuneration, and then determine their value on the following three reference dates:

  1. four weeks before the announcement of the public offer or proposed merger/demerger is made or notice is given of the general meeting where a section 2:107a resolution is to be discussed
  2. four weeks after

    1. the public offer ends
    2. the section 2:107a resolution is approved
    3. the merger/demerger decision is taken or, if this is earlier, the day before the merger or demerger takes effect
  3. the day that the director sells his shares or options, or the day that his appointment ends.

The value is determined on the basis of the day's closing price. If the value on reference date (3) is higher than on reference date (1), the company will deduct the difference from the director's pay, but subject to a maximum of the increase in value between reference dates (1) and (2). We have illustrated this calculation process in a step-by-step outline.

The new law does not provide how an increase in value should be calculated if several corporate events coincide, e.g., a public offer followed by a competing offer. The provisions introducing this duty to deduct increases in value are of a temporary nature and will expire on 1 July 2017, unless extended. The provisions will be evaluated before 1 July 2016.

Financial accounting

The new law also requires companies to:

  • report any revised or clawed-back bonus amounts, and any amounts deducted from a director's remuneration, in the explanatory notes to the annual accounts
  • account for the remuneration policy at the general meeting, in a separate agenda item prior to the item concerning adoption of the annual accounts; this applies to open NVs

Tax aspects

The new claw-back legislation contains no specific tax provisions. The tax consequences for companies and their directors will depend on the individual situation, e.g., the tax treatment of the disputed bonus at the time when it was first paid.


Revision and claw-back of bonuses

1. If the company has a one-tier board, who is responsible for revising and clawing back bonuses awarded to executive directors?

If the articles of association provide that the remuneration of executive directors is determined by the board, the non-executive directors have the power to determine remuneration and also to revise a bonus. If there is no provision in the articles of association, the general meeting has this power. The board, on behalf of the company, has the power to claw back bonuses. But the non-executive directors and a special representative designated by the general meeting also have this power.

2. Does the new law allow revision and claw-back of bonuses awarded to non-executive directors in a one-tier board?

Yes, the new rules apply to all directors, executive and non-executive.

3. Can a bonus be revised upwards?

Bonuses can be revised both downwards and upwards.

4. Can bonuses be clawed back if they have been paid before 1 January 2014?

No, the power to claw back only applies to bonuses paid after 1 January 2014. Duty to deduct increase in value of shares from executive pay in the case of certain corporate events

5. Who has to prove that a director has or has not received shares or options as part of his remuneration?

In principle, the director has to prove this. To avoid discussion, it may be preferable to agree in writing with the company after 1 January 2014 which shares held by the director on that date have been awarded as part of his remuneration. In addition, the director could consider having two securities accounts, one of which would only contain shares awarded as remuneration.

6. Must the company deduct an increase in the value of shares that the director has purchased with the proceeds of a prior sale of shares awarded to him as part of his remuneration?

No, this duty only extends to shares and options awarded to the director as part of his remuneration. This may be different if the company and the director have agreed that the director will use part of the cash remuneration to acquire shares and the director does so.

7. Does the duty to deduct increases in value extend to instruments awarded as remuneration if the price of the instruments is fully or partly determined by the price of the shares?

No, the duty to deduct only applies to shares and options. It does not extend to payment of instruments such as stock appreciation rights (SARs), phantom shares, and cash-settled options. But if a company wants to convert existing share or option schemes into schemes that are not subject to deduction under the new law, that conversion will have to be consistent with the remuneration policy adopted by the general meeting. If this is not the case, the general meeting will have to adopt a new remuneration policy.

8. Does the duty to deduct also apply to shares and options that a director receives as part of his remuneration before 1 January 2014?


9. Do the provisions on deducting increases in value extend to shares and options that a non-executive director in a one-tier board has received as part of his remuneration?

Yes, the provisions apply to all directors, both executive and non-executive.

10. If a director is re-appointed, does this mean that his original appointment ends?

No, re-appointment does not cause the original appointment to end, but should be regarded as a renewal of the original term of appointment.

11. When is there an "announcement of a public offer"?

To determine this, one should refer to article 5 of the Dutch Decree on Public Offers, which distinguishes between a friendly offer, a hostile offer, and a mandatory offer. A hostile offer is announced if a potential bidder has made concrete information about the content of the offer public, but no agreement has been reached with the target company. There is concrete information if a potential bidder has made the name of the target company public, in combination with (i) a proposed price or exchange ratio, or (ii) a clearly specified timeline for the proposed public offer. The offer is not regarded as "announced" if the bidder and the target company jointly announce that parties are in discussion without agreement having been reached yet, or if the target company announces that the bidder and the target company are in discussion immediately after concrete information has been made public.

12. Do the provisions on deducting increases in value also apply if an announced public offer is not launched or a public offer that has been launched is withdrawn or does not become unconditional?

Yes, the provisions apply to any form of ending a public offer that has been announced.

13. Do the provisions apply if a resolution to merge or demerge or a section 2:107a resolution is passed but the merger, demerger or transaction in question does not take place?


14. Do all resolutions about a significant change in the identity or character of the company or business fall under the provisions?

No, only resolutions as listed in subparagraphs a, b of c of section 2:107a (1) of the Dutch Civil Code.

15. Do the provisions apply to a merger with a subsidiary or a demerger within the group as part of an internal restructuring?

Yes, any increase in value that may result from a completely different event but happens to coincide with a merger or demerger in an internal restructuring must be deducted from the director's remuneration. This applies only if the director sells shares or options that he received as part of his remuneration or his appointment ends before the merger or demerger takes effect.

16. What happens if the increase in value cannot be deducted from the future remuneration payments?

If an increase in value cannot or may only partially be deducted because there is, for example, no future or sufficient remuneration, the company will have a claim based on undue payment for the remainder.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.