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SER's inquiry right shift "damages shareholders"

NETHERLANDS - Proposals from the Social Economic Council (SER) to reform the right to instigate an inquiry will damage the position of minority shareholders, Eumedion, the platform for institutional investors, has claimed.

Proposed changes will have a negative impact on the investment climatein the Netherlands, as well as the quality of governance, Eumedion hassuggested in its response to SER advice to the Dutch cabinet oncorporate governance.

The SER recently concluded Dutch listed companies are more vulnerable than companies in, for example, the UK and the US, partly thanks to a low threshold to a right of inquiry on strategy, policy and organisation, even without proven illegal dealings of governors or supervisory board.

The right of inquiry is the right of shareholders to ask the'Ondernemingskamer' - a specialist court dealing with conflicts betweenstakeholders and companies - for an investigation into a company'spolicy and activity, in cases where there is suspicion of mismanagement.

But the present right of inquiry leads to unpredictability and uncertainty for both boards, it said, so reforms proposals have been presented.

To address this issue, the SER has proposed to bring the barrier for a right of inquiry to the same level as the one for agenda-setting by shareholders: a 1% stake of a nominal share capital of €22.5m. Since 1971, the respective figures have been 10% and €225,000.

"If the cabinet raises the threshold to 3%, as advised by the committee Frijns, the 1%-barrier for the inquiry right should also be raised," the SER added.

The committee Frijns is tasked with promoting corporate governance among listed companies, as well as monitoring their compliance with the rules.

In the SER's opinion, the inquiry procedure needs to be moved in line with the civic procedure, which allows for a suspension in case of an appeal. In addition, granting of immediate provisions should be limited.

"Minority shareholders should keep a considerable protection against possible mismanagement by the board of a listed company through the right to inquiry," Rients Abma, executive director of Eumedion argued.

According to Abma, the SER's proposals mean a double hit for shareholders as both an inquiry request and immediate provisions to be granted will become more difficult.

"It is wrongful that shareholders, who have recently tabled debatable board policy, will get the bill presented for this by the SER," Eumedion's director continued.

Eumedion represents 61 Dutch and foreign institutional investors with over €1tr of assets under management.

If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com

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