Philips 2014 Annual Report Download - page 100

Corporate governance 11.4
100 Annual Report 2014
Preference shares and the Stichting Preferente
Aandelen Philips
As a means to protect the Company and its
stakeholders against an unsolicited attempt to obtain
(de facto) control of the Company, the General Meeting
of Shareholders in 1989 adopted amendments to the
Company’s Articles of Association that allow the Board
of Management and the Supervisory Board to issue
(rights to) preference shares to a third-party. As a result,
the Stichting Preferente Aandelen Philips (the
‘Foundation’) was created, which was granted the right
to acquire preference shares in the Company. The mere
notification that the Foundation wishes to exercise its
rights, should a third-party ever seem likely in the
judgment of the Foundation to obtain (de facto) control
of the Company, will result in the preference shares
being eectively issued. The Foundation may exercise
this right for as many preference shares as there are
ordinary shares in the Company outstanding at that
time. No preference shares have been issued as of
December 31, 2014. In addition, the Foundation has the
right to file a petition with the Enterprise Chamber of
the Amsterdam Court of Appeal to commence an
inquiry procedure within the meaning of section 2:344
Dutch Civil Code.
The object of the Foundation is to represent the
interests of the Company, the enterprises maintained
by the Company and its affiliated companies within the
Group, in such a way that the interests of Philips, those
enterprises and all parties involved with them are
safeguarded as eectively as possible, and that they
are aorded maximum protection against influences
which, in conflict with those interests, may undermine
the autonomy and identity of Philips and those
enterprises, and also to do anything related to the
above ends or conducive to them. In the event of (an
attempt at) a hostile takeover or other attempt to obtain
(de facto) control of the Company this arrangement will
allow the Company and its Board of Management and
Supervisory Board to determine its position in relation
to the third-party and its plans, seek alternatives and
defend Philips’ interests and those of its stakeholders
from a position of strength. The members of the self-
electing Board of the Foundation are Messrs P.A.F.W.
Elverding, M.W. den Boogert and F.J.G.M. Cremers. No
Philips board members or officers are represented on
the board of the Foundation.
The Company does not have any other anti-takeover
measures in the sense of other measures which
exclusively or almost exclusively have the purpose of
frustrating future public bids for the shares in the capital
of the Company in case no agreement is reached with
the Board of Management on such public bid.
Furthermore, the Company does not have measures
which specifically have the purpose of preventing a
bidder who has acquired 75% of the shares in the capital
of the Company from appointing or dismissing
members of the Board of Management and
subsequently amending the Articles of Association of
the Company. It should be noted that also in the event
of (an attempt at) a hostile takeover or other attempt to
obtain (de facto) control of the Company, the Board of
Management and the Supervisory Board are authorized
to exercise in the interests of Philips all powers vested
in them.
Audit of the nancial reporting and the
position of the external auditor
The annual financial statements are prepared by the
Board of Management and reviewed by the
Supervisory Board upon the advice of its Audit
Committee and taking into account the report of the
external auditor. Upon approval by the Supervisory
Board, the accounts are signed by all members of both
the Board of Management and the Supervisory Board
and are published together with the opinion of the
external auditor. The Board of Management is
responsible, under the supervision of the Supervisory
Board, for the quality and completeness of such
publicly disclosed financial reports. The annual
financial statements are presented for discussion and
adoption at the Annual General Meeting of
Shareholders, to be convened subsequently. The
Company, under US securities regulations, separately
files its Annual Report on Form 20-F, incorporating
major parts of the Annual Report as prepared under the
requirements of Dutch law.
Internal controls and disclosure policies
Comprehensive internal procedures, compliance with
which is supervised by the Supervisory Board, are in
place for the preparation and publication of the Annual
Report, the annual accounts, the quarterly figures and
ad hoc financial information. As from 2003, the internal
assurance process for business risk assessment has
been strengthened and the review frequency has been
upgraded to a quarterly review cycle, in line with best
practices in this area.
As part of these procedures, a Disclosure Committee
has been appointed by the Board of Management to
oversee the Company’s disclosure activities and to
assist the Executive Committee in fulfilling its
responsibilities in this respect. The Committee’s
purpose is to ensure that the Company implements and
maintains internal procedures for the timely collection,
evaluation and disclosure, as appropriate, of
information potentially subject to public disclosure
under the legal, regulatory and stock exchange
requirements to which the Company is subject. Such
procedures are designed to capture information that is
relevant to an assessment of the need to disclose
developments and risks that pertain to the Company’s
various businesses, and their eectiveness for this
purpose will be reviewed periodically.
Auditor information
In accordance with the procedures laid down in the
Philips Auditor Policy and as mandatorily required by
Dutch law, the external auditor of the Company is
appointed by the General Meeting of Shareholders on
the proposal of the Supervisory Board, after the latter