Annual Report 2019

Corporate Governance

Beter Bed Holding N.V. is a public limited liability company incorporated under Dutch law and listed on Euronext Amsterdam in the Netherlands. The Company has a two-tier board structure, consisting of a Management Board and a Supervisory Board, accountable to the Annual General Meeting for the performance of their duties.

The corporate governance structure is based on the articles of association, the Dutch Civil Code requirements, the revised 2016 Dutch Corporate Governance Code (the Code), applicable securities laws, and the rules and regulations of Euronext Amsterdam.

The Company monitors and assesses the corporate governance structure to ensure compliance with the Code, applicable laws and regulations, and relevant developments. If a substantial change to the corporate governance structure occurs that affects compliance with the Code, shareholders will be informed at a General Meeting.

Management Board

The Management Board represents the Company. The authorisation to represent is also granted to each member of the Management Board individually. Member biographies can be found in the Executive Board section

Role and responsibilities

The Management Board is responsible for the day-to-day management of Beter Bed Holding N.V.’s operations as well as the continuity of the Company and the Company’s goals, objectives, long-term value creation strategy, policy and results. In fulfilling its duties, the Management Board is guided by the Company’s interests and considers the interests of the stakeholders as a whole. The Management Board is accountable for its actions to the Supervisory Board and the General Meeting. The Management Board consults with the Supervisory Board on important matters and submits important decisions to the Supervisory Board for its preapproval, as further described in the Company’s articles of association, which are available on the Company’s corporate website.

Composition and appointment

The articles of association provide that the Management Board must consist of one or more members. Each member of the Management Board is appointed for a maximum period of four years, with the possibility of reappointment for consecutive four-year terms in accordance with the Code. The General Meeting appoints the members of the Management Board, subject to the right of the Supervisory Board to make a binding nomination. The General Meeting may at all times, by a resolution passed with an absolute majority of the votes cast, representing more than one third of the issued share capital, resolve that the nomination submitted by the Supervisory Board is not binding. In such a case, the appointment of a member of the Management Board in contravention of the Supervisory Board’s nomination requires a resolution of the General Meeting adopted with an absolute majority of the votes cast, representing more than one third of the issued share capital. A resolution of the General Meeting to suspend or dismiss members of the Management Board, other than on a proposal of the Supervisory Board, requires an absolute majority of the votes cast, representing more than one third of the issued share capital. The Supervisory Board can suspend a member of the Management Board.

Management Board Remuneration

The Supervisory Board determines each Management Board member’s remuneration, upon a proposal by the Remuneration Committee, and based on Beter Bed Holding N.V.’s remuneration policy for the Management Board as established by the Annual General Meeting in 2006 and 2016. The remuneration policy is subject to a binding vote of the General Meeting once every four years. The application of the remuneration policy is described in the remuneration report, as part of the annual report over the present year, and is subject to an advisory vote of the General Meeting, the first time in 2020. This results from the implementation of the Shareholder Rights Directive (SRD II) into the Dutch Civil Code on 1 December 2019 (‘Wet inzake implementatie van de herziene EU Aandeelhoudersrichtlijn’). Further information about the (application of the) remuneration policy can be found in the remuneration report.

Conflicts of interest

Members of the Management Board must report any (potential) conflict of interest to the Chair of the Supervisory Board. The Supervisory Board shall decide whether a conflict of interest exists. The member of the Management Board who has a (potential) conflict of interest shall not participate in discussions and decision-making on a subject or transaction in relation to which the member has a conflict of interest with the Company. Decisions to enter into transactions under which members of the Management Board have conflicts of interest that are of material significance to the Company and/or to the relevant member(s) of the Management Board, require the approval of the Supervisory Board. In 2019 no conflicts of interest were reported.

Supervisory Board

The Supervisory Board consists of four members. All members are independent within the meaning of best practice provision 2.1.7 to 2.1.9 inclusive of the Code. Member biographies can be found in the Supervisory Board section

Role and responsibilities

The Supervisory Board supervises the Management Board and Beter Bed Holding N.V.’s general affairs, and supports the Management Board by providing advice. The Supervisory Board thinks along with the Management Board and regularly discusses the strategy, the implementation of the strategy and the principal associated risks. In performing its duties, the Supervisory Board acts in the interest of the Company and its stakeholders: employees, shareholders, customers and society, including the environment.

The articles of association require that certain decisions of the Management Board be subject to the approval of the Supervisory Board. For further information on the Supervisory Board’s activities in the area of corporate governance, reference is made to the Report of the Supervisory Board.

Composition and appointment

The articles of association provide that the Supervisory Board shall consist of a minimum of three members. Members of the Supervisory Board may be appointed for a maximum period of 12 years in accordance with the Code. The Supervisory Board appoints a Chair and a Vice-Chair from amongst its members. The Supervisory Board members retire periodically in accordance with a rotation plan, which can be downloaded from the Company’s corporate website. The General Meeting appoints the Supervisory Board members, subject to the right of the Supervisory Board to make a binding nomination. The Supervisory Board will give the Works Council of Beter Bed B.V. the opportunity, in good time, to advice the Supervisory Board regarding the draft list of candidates drawn up by the Supervisory Board, and will not adopt said list of candidates until the Works Council has issued such advice, has given notification that it will not be issuing advice or has not issued advice within a reasonable period given it to do so. The full procedure of appointment and dismissal of members is explained in article 25-27 of the Company’s articles of association. In 2019, at the Annual General Meeting, the Supervisory Board’s Chair, Mr Dirk Goeminne, resigned after nine years of service. Mr Bart Karis is his successor as Chair of the Supervisory Board.

The General Meeting may at all times, by a resolution passed with an absolute majority of the votes cast, representing more than one third of the issued share capital, resolve that the nomination submitted by the Supervisory Board is not binding. In such a case, the appointment of a member of the Supervisory Board in contravention of the Supervisory Board’s nomination requires a resolution of the General Meeting adopted with an absolute majority of the votes cast, representing more than one third of the issued share capital. A resolution of the General Meeting to suspend or dismiss members of the Supervisory Board requires an absolute majority of the votes cast, representing more than one third of the issued share capital.

Supervisory Board Committees

The Supervisory Board has established two committees: an Audit Committee and a Remuneration Committee. Each of these committees is staffed by members of the Supervisory Board. Their task is to assist and advise the Supervisory Board in fulfilling its responsibilities. For an overview of all activities performed by the committees, reference is made to the Report of the Supervisory Board. The tasks and procedures of each committee are outlined in their charters and can be found on the Company's corporate website.

Supervisory Board remuneration

The remuneration of the members of the Supervisory Board and the additional remuneration of the Chair and the members of its committees are determined by the General Meeting, lastly approved by the Annual General meeting on 19 May 2016. The remuneration policy for the Supervisory Board must be submitted to the General Meeting every four years, the first time in 2020, in light of the implementation of the SRD II into the Dutch Civil Code on 1 December 2019 (‘Wet inzake implementatie van de herziene EU Aandeelhoudersrichtlijn’). The remuneration of individual members of the Supervisory Board can be found in the Report of the Supervisory Board. The remuneration policy can be found on the corporate website, once approved by the General Meeting.

Conflicts of interest

Members of the Supervisory Board (excluding the Chair) must report any (potential) conflict of interest to the Chair of the Supervisory Board. If the (potential) conflict of interest involves the Chair of the Supervisory Board, it must be reported to the Vice-Chair of the Supervisory Board. The Supervisory Board shall decide whether a conflict of interest exists. The member of the Supervisory Board who has a (potential) conflict of interest shall not participate in discussions and decision-making on a subject or transaction in relation to which the member has a conflict of interest with the Company. Decisions to enter into transactions under which members of the Supervisory Board have conflicts of interest that are of material significance to the Company and/or to the relevant member(s) of the Supervisory Board, require the approval of the Supervisory Board. In 2019 no conflicts of interest were reported.

In addition, in accordance with provision 2.7.5 of the Code, Beter Bed Holding N.V. reports that no transactions occurred in 2019 between the Company and legal or natural persons who hold at least 10% of the shares in the Company.

Diversity and inclusion

Beter Bed Holding N.V. strongly believes in diversity and works towards an extension of its diversity and inclusion strategy to all areas of its organisation. Following the advice of the Social Economic Council (SER) which was subsequently adopted by Dutch parliament in December 2019 and by Dutch government in February 2020, Beter Bed Holding N.V.’s diversity strategy is focused on an inclusive organisation, equality and an integral approach throughout the organisation. Gender diversity is one of the elements of this strategy.

Diversity in the Management Board and Supervisory Board

The Management Board’s composition is based on diversity of experience, background, skills, knowledge and insights. After the approval by the 2020 Annual General Meeting of the appointment of Mrs Gabrielle Reijnen as Statutory Director of the Company, Beter Bed Holding N.V. has 50% female representatives in the Management Board. And as such, it does qualify as gender balanced within the meaning of article 2:166 of the Dutch Civil Code, as applicable during 2019.

The Supervisory Board has determined a profile regarding its size and composition, taking into account the nature of Beter Bed Holding N.V.’s business, its activities and the desired experience and expertise. In addition to the profile, our goals for diversity and inclusion aim to have a minimum of 30% female in the Supervisory Board. And as such, it does currently not qualify as gender balanced within the meaning of article 2:166 of the Dutch Civil Code, as applicable during 2019. The Company recognises the benefits and importance of diversity, and is committed to improving gender balance at Beter Bed Holding N.V. The Supervisory Board has expressed its objective to have a balanced gender diversity at both Management Board and Supervisory Board level. To comply with previous (Wet Bestuur en Toezicht) and future legislation (following the 30% quota requirement for Supervisory Boards of listed companies, as laid down in the SER advice), the Supervisory Board strives to have a minimum of 30% male and female in both the Management Board and the Supervisory Board. After the appointment of Gabrielle Reijnen as CFO in December 2019, the Management Board is in line with the requirements. Succession discussions are on the way for the Supervisory Board vacancy.

Risk management and internal control framework

Beter Bed Holding N.V.'s operations are based on the Company’s strategic objectives which are related to opportunities and risks. In this respect a risk management system to monitor and control the Company’s most important risks has been implemented. The organisation applies a matrix that describes the risks, their (financial) impact, the probability of their occurrence, the control measures and the actions to be taken. This matrix is updated and discussed in the Audit Committee twice a year and the key points are reported to the Supervisory Board. The risks are classified in the categories Financial, Operational, Board and Management, Legal, Social, Information and Tax. The Audit Committee assists the Supervisory Board in its responsibility to oversee the system of internal control and risk management, including the effectiveness of the internal auditors. For more information reference is made to the Audit Committee activities included in the Report of the Supervisory Board.

External auditor

Before being presented to the Annual General Meeting for adoption, annual financial statements as prepared by the Management Board must be examined by an external auditor. The General Meeting has the authority to appoint the external auditor. Each year, the Supervisory Board nominates the external auditor for (re)appointment by the Annual General Meeting, taking into account the advice of the Audit Committee. The external auditor’s assignment and remuneration are resolved by the Supervisory Board, on the recommendation of the Audit Committee. Prior to publication, the half-year results and reports and the annual financial statements are discussed with the Audit Committee in the presence of the external auditor and subsequently with the Supervisory Board.

The external auditor attends all Audit Committee meetings and the meetings of the Supervisory Board in which the annual financial statements are to be approved and the year-end audit of the external auditor is discussed. The Audit Committee monitors the performance of the external auditor and the effectiveness of the external audit process, as well as its independence. The rotation of the external auditor’s lead partner is also evaluated. The Audit Committee annually reports to the Supervisory Board on the functioning of the external auditor and the relationship with the external auditor, whilst giving due considerations to the Management Board’s observations.

PricewaterhouseCoopers Accountants N.V. was appointed as external auditor by the 2015 Annual General Meeting. PricewaterhouseCoopers Accountants N.V. has been reappointed by the Annual General Meeting every year since. The lead partner will change in 2020 due to the rotation requirements.

Beter Bed Holding N.V. has an Internal Audit Function which is established by the Board of Management and reports functionally to the Chair of the Audit Committee. The role of the internal audit function is to assess the design and the operation of the internal risk management and control systems. The scope of work of the internal audit function is regulated in an Internal Audit Charter. In line with the Code, both the appointment and dismissal of the internal auditor shall be submitted to the Chair of the Audit Committee for approval, with a recommendation issued by the Management Board. In line with the Code, the Management Board, senior management and the Audit Committee are involved in the preparation and approval of the annual internal audit plan. The annual internal audit plan is submitted to the Management Board and Audit Committee for approval.

General Meeting

The Annual General Meeting is held at least once a year and takes place in Uden, Utrecht, ‘s-Hertogenbosch or Amsterdam, the Netherlands. The General Meeting is convened by public notice via our website. Recurring agenda items are the compilation of our annual report, the adoption of the annual accounts, the release from liability of Management Board and Supervisory Board members and the advisory vote on the execution of the remuneration policy during the present year. When deemed necessary in the interests of the Company, an Extraordinary General Meeting may be convened by resolution of the Management Board or the Supervisory Board. The minutes and the resolutions of the General Meeting are recorded in writing. The minutes are available to the shareholders on the Company’s website no later than three months after the meeting. During 2019, two General Meetings were held: the Annual General Meeting on 25 April 2019, and an Extraordinary General Meeting on 26 November 2019, to obtain shareholders’ approval for the divestment of Matratzen Concord and the issuance of 2.15 million newly issued shares to Magical Honour Limited. Further details can be found on the Company’s website.

Voting rights

Each of our ordinary shares is entitled to one vote. The voting rights attached to the shares in the Company are not restricted, and neither are the terms in which voting rights may be exercised. The voting rights attached to any shares held by the Company are suspended as long as they are held in treasury. Resolutions of the General Meeting are adopted by an absolute majority of the votes cast, except where Dutch law or the Company’s articles of association provide for a special majority.

Special controlling rights

No special controlling rights are attached to the shares in the Company.

Agreements on limitations on the transfer of shares

Subject to certain exceptions, Beter Bed Holding N.V. has entered into a lock-up agreement under which Magical Honour Limited has agreed not to sell or otherwise transfer their shares for a period of 18 months from the completion date of 2 December 2019 (which is 2 June 2021). Beter Bed Holding N.V. is not aware of any agreements with a shareholder that could give rise to any restriction on voting rights.

Significant agreements and changes in the control of the Company

Beter Bed Holding N.V. is not a party to any major agreements that are concluded, amended or dissolved subject to the condition of a change of control over the Company after a public bid within the meaning of Article 5:70 of the Financial Supervision Act has been made.

Amendment of the articles of association

The General Meeting may resolve to amend the articles of association, if it acts on a proposal by the Management Board that has also been approved by the Supervisory Board. Before making a proposal to amend the articles of association, the Company will consult with Euronext Amsterdam N.V. regarding the content of the proposed amendment. The full procedure of amendment of the articles of association is explained in article 46 of the Company’s articles of association. A resolution of the General Meeting to amend the articles of association requires an absolute majority of the votes cast, irrespective of the share capital represented at the General Meeting.

Capital structure

The authorised share capital of Beter Bed Holding N.V. amounts to € 2,000,000 and is divided into 100,000,000 ordinary shares with a nominal value of € 0.02 each. On 31 December 2019, a total of 24,105,562 ordinary shares were issued and are outstanding.

Issue of shares

The Management Board may issue shares or grant rights to subscribe for shares if so designated by the General Meeting or the articles of association. This Management Board resolution is subject to the prior approval of the Supervisory Board. No resolution of the General Meeting or the Management Board is required for the issuance of shares pursuant to the exercise of a previously granted right to issue shares or to subscribe for shares.

On 25 April 2019 the Annual General Meeting passed a resolution extending the Management Board’s authorisation to resolve to issue ordinary shares or grant rights to subscribe for such shares. The authorisation was granted for a period of 16 months from the date of the Annual General Meeting and will be in effect until 25 August 2020. This authority is limited to 10% of the number of issued ordinary shares for general purposes and authorises the restriction or exclusion of the pre-emption rights for existing shareholders for such issue or grant of rights.

Repurchase by the Company of its own shares

The 2019 Annual General Meeting resolved to authorise the Management Board to acquire shares in the capital of the company up to 10% of the issued share capital, subject to certain conditions. The authorisation was granted for a period of 16 months from the date of the General Meeting and will be in effect until 25 August 2020.

Cancellation by the Company of its own shares

The 2019 Annual General Meeting resolved to authorise the Management Board to cancel acquired shares in the capital of the Company up to 10% of the issued share capital, subject to certain conditions. The authorisation was granted for a period of 16 months from the date of the Annual General Meeting and will be in effect until 25 August 2020.

Substantial shareholdings and short positions

Shareholders owning 3% or more of the issued capital and/or voting rights of a listed Company (a substantial shareholding or short position) must report this to the Netherlands Authority for Financial Markets (AFM) as soon as this threshold is reached or exceeded. The thresholds for substantial shareholding notifications are: 3%, 5%, 10%, 20%, 30%, 40%, 50%, 60%, 75% and 95% of the Company’s issued share capital and/or voting rights. Shareholders (in)directly owning 3% or more of the Company’s issued capital and/or voting rights were registered with the AFM as of 31 December 2019 and are mentioned under Substantial holdings.

Compliance with the Code

Insofar as applicable, Beter Bed Holding N.V. complies with all the relevant provisions of the Code, with the exception of the provisions 3.1.2 (v) and 3.1.2 (vii). The nature of and reasons for this deviation is explained below. The provisions of the Code relating to 4.4 (‘Issuing depositary receipts for shares’) and 5 (‘One-tier governance structure’) are not applicable to the Company.

Provision 3.1.2 (v)

Best practice provision 3.1.2 (v) provides that the variable remuneration component is linked to measurable performance criteria determined in advance, which are predominantly long-term in character. Beter Bed Holding N.V. deviates from best practice provision 3.1.2 (v) to the extent that these measurable performance criteria were set, validated and agreed upon by the Supervisory Board at the beginning of 2019, however were amended in May/June 2019. The reason for this deviation is that the Company came in a precarious situation and new overriding priorities were indentified. The Supervisory Board formulated four key milestones that were considered crucial in assuring the viability of the Company, which were (i) the agreement of an additional loan; (ii) the sale and leaseback of real estate; (iii) the deleveraging of senior debt; and (iv) the divestment of Matratzen Concord within a period of six months.

Provision 3.1.2 (vii)

Best practice provision 3.1.2 (vii) provides that if share options are being awarded, the terms and conditions governing this and the terms and conditions subject to which the share options can be exercised. Share options cannot be exercised during the first three years after they are awarded. Beter Bed Holding N.V. deviates from best practice provision 3.1.2 (vii) to the extent that the 200,000 options (replacement) and 100,000 options (against cash payment) as adopted in the 2019 Annual General Meeting have a vesting period of two years after they have been awarded and can be exercised during a period of 12 months after the end of this vesting period, with a subsequent four year shareholding requirement. The reason for this deviation is that Mr Kruijssen received these options in 2019, as a replacement and under the same terms and conditions as the signing options previously awarded in April 2018, given the changed circumstances, and as such have been adopted in the Annual General Meeting of 25 April 2019.