Trend Report: New Developments On Dutch Loyalty Share Schemes

Published date27 March 2023
Subject MatterCorporate/Commercial Law, M&A/Private Equity, Corporate and Company Law, Corporate Governance, Shareholders
Law FirmLoyens & Loeff
AuthorMr Bastiaan Kemp, Michel Van Agt, Menno Baks, Philippe Hezer and Eline Viersen

Over the past years, several listed Dutch companies implemented share loyalty schemes, incentivising long-term shareholdership by granting additional dividend or voting rights to long-term shareholders. In our September 2020 trend report, we covered an unprecedented judgment in which the implementation of a loyalty share scheme - as part of a merger - was successfully challenged. Recently, an expert group on the modernisation of Dutch company law published its advice (in Dutch) on the use of loyalty shares by Dutch companies.

In this trend report, we share our views as to how the expert group's advice may impact the use and development of loyalty share schemes under Dutch law.

Loyalty share schemes under Dutch law

Loyalty share schemes are intended to incentivise long-term shareholdership. Provided that the corresponding ordinary shares are held by the same shareholder during a set qualification period (in most cases three or five years), that shareholder may be granted certain additional 'loyalty' benefits; typically, additional voting or in some cases additional dividend rights. Dutch company law allows loyalty share schemes to be structured in such a way that eligible shareholders can participate in the loyalty scheme without having to make any additional payments (on their loyalty shares) and the loyalty shares are transferred back to the company for no consideration once the entitlement to the loyalty benefits expire. Loyalty share schemes may be similar to, but should be distinguished from, dual class share structures in which different classes of shares have different rights attached to them (e.g., high/low voting shares).

In our September 2020 trend report, we shared our thoughts on the Mediaset judgment, marking the first time that a Dutch loyalty share scheme was successfully challenged in court. According to the Amsterdam Court of Appeal, it did not become sufficiently clear that the loyalty share scheme was, under the circumstances of the case, a suitable and proportionate instrument to incentivise and promote long-term shareholdership.

In that trend report, we also indicated that we did not expect the Mediaset judgment to have a significant impact on the use and permissibility of loyalty share schemes in the Netherlands, but that it would likely expose the rationale of such schemes to enhanced levels of scrutiny.

Statutory basis for loyalty shares?

At the request of the Dutch Minister for Legal Protection, the expert group on the...

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