The incoming Dutch government has finally released its agenda – and it includes a range of measures aiming to push back the influence that “certain activist investors”, defined as being “mainly focused on short term gain instead of long term value”, have in publicly traded companies.

In the Netherlands, it’s traditional that shortly before a new government gets inaugurated, a coalition agreement, the “Regeerakkoord”, gets presented to the general public. This document describes the outcome of the negotiating process between the four governing parties and the agreed policy changes that the new government will attempt to meet. This time around, it took politicians a record-breaking 208 days of talks after the general election in March before an agreement was achieved. “Good things come to those who wait”, was the essence of Mark Rutte’s speech on the presentation of this agreement on October 10, who will lead a Dutch cabinet for the third time.

One aspect that’s very good for investors is the intention to abolish dividend tax. The tax (now at 15%) has been under pressure from lobbyists for some time, who argue that it damages competitiveness and hurts the country’s chances to attract and retain international companies. By contrast, just across the channel in the UK, no taxes are collected on the appropriation of profits. Multiple Dutch companies are also incorporated in the UK, and this, along with recent developments such as Brexit, has apparently inspired the new government to increase its efforts to entice organisations that are shopping around.

According to commentary from Stef van Weeghel, professor of tax law and partner at PwC, politicians have been startled by recent takeover bids of well-known multinationals such as Unilever and AkzoNobel. Without a dividend tax, these multinationals would be able to raise foreign capital more quickly and would arguably be less of an easy target.

The abolishment of dividend tax is not the only evidence that the new government is looking to protect Dutch companies. The coalition agreement explicitly states its intention of combating short-term, activist investors, and includes several other related provisions.

  • When a publicly traded company receives shareholder proposals on its AGM that call for a significant alteration of the company’s strategy, the company can invoke a 250-day “thinking time”. During this period, stakeholders must be consulted and the company must explain its taken course to all existing shareholders. This ploy for time cannot be taken in combination with anti-takeover defenses that the company has already put in place, such as the issuing of priority or preference shares.
  • In addition, the agreement may lead to a wider pool of shareholders being subject to disclosure and registration requirements. Whereas currently investors must own 3% before registering, going forward companies with revenues over 750 million euros will “receive the possibility” to ask shareholders that own more than just 1% of the issued capital to register as a major shareholder with the Dutch watchdog of the financial markets, the AFM.

All in all, Rutte III’s start sends a mixed message to international investors. It will be a surprise to no one that the abolishment of dividend tax will be welcomed. The additional anti-takeover procedures however, will be received with a healthy dose of scepticism. A move towards protectionism is perhaps understandable in light of recent takeovers and the prevailing popular sentiment, and the agreement certainly introduces additional hoops for activists to jump through, potentially impeding their progress. However none of the proposed changes address what’s attracting activist investors in the first place: subpar company performance.

Seve is an analyst covering the Dutch market.