Conflict of interests and related parties
We consider that Gilead became a related party of Galapagos in 2019 because of Gilead’s then 25.84% shareholding (25.49% on 31 December 2021) in Galapagos and the fact that Gilead is entitled to propose two candidates to be appointed to our supervisory board under the share subscription agreement.
On 6 September 2021, we entered into a related party transaction with Gilead within the meaning of article 7:116 of the Belgian Companies Code, by agreeing to transfer the sponsorship of and the operational and financial responsibility for the DIVERSITY clinical study, evaluating filgotinib in Crohn’s Disease, and its long-term extension study, from Gilead to us. Daniel O’Day and Linda Higgins only participated in the discussion among the supervisory board prior to the deliberation and resolutions in relation to the DIVERSITY Letter Agreement, and then recused themselves from the supervisory board meeting held on 4 September 2021 regarding this related party transaction, since they are representatives of Gilead. The remaining supervisory board members considered that the related-party transaction’s approval mechanism didn’t need to be applied, since the value of the DIVERSITY Letter Agreement is less than 1% of the Company’s consolidated net equity (based on the consolidated interim financial statements of Galapagos for the six months ended 30 June 2021) and since Galapagos is therefore able to rely on the materiality exemption set out in article 7:116, § 1, 2° of the Belgian Companies Code. A more detailed explanation of our transactions with Gilead in 2021 can be found in the section titled Agreements with major Galapagos NV shareholders. We further refer to note 31.
In the event of a transaction where a supervisory board member’s interest conflicts with the interest of Galapagos NV, the board member shall notify the supervisory board in advance of the conflict and will act in accordance with the relevant rules of the Belgian Companies Code (i.e. article 7:115 of the Belgian Companies Code for supervisory board members). In the event of a transaction where a management board member’s interest conflicts with the interest of Galapagos NV, the management board shall refer the decision regarding such transaction to the supervisory board.
In addition, Galapagos’ Corporate Governance Charter and Galapagos’ Related Person Transaction Policy contain procedures for transactions between Galapagos and its supervisory board members, management board members, major shareholders or any of their immediate family members and affiliates. Without prejudice to the procedure defined in articles 7:115 and 7:117 of the Belgian Companies Code, these policies provide that all transactions between Galapagos and its supervisory board members, management board members or its representatives need the approval of the audit committee and the supervisory board, which approval can only be provided for transactions at normal market conditions. Moreover, conflicts of interest, even in the event they are not a conflict of interest within the meaning of articles 7:115 and 7:117 of the Belgian Companies Code, are enacted in the meeting minutes, and the relevant board member cannot participate in the voting.
In 2021, the following conflict of interests between Galapagos NV and a director within the meaning of article 7:115 of the Belgian Companies Code was noted:
- in a meeting of the supervisory board held on 4 September 2021, the following was reported in accordance with article 7:115 of the Belgian Companies Code in connection with the proposed DIVERSITY Letter Agreement: the chairman declared that Daniel O’Day and Linda Higgins had informed him that, since they are representatives of Gilead, they might have a conflict of interest in relation to the resolutions to be passed by the supervisory board in relation to the DIVERSITY Letter Agreement. Accordingly, Daniel O’Day and Linda Higgins only participated in the discussion among the supervisory board prior to the deliberation and resolutions in relation to the DIVERSITY Letter Agreement, and then recused themselves for the meeting.