Shareholder disputes are not uncommon among shareholders. Entrepreneurs often work with other entrepreneurs. Various forms are possible. When an organizational form is chosen in which shares are distributed (N.V. or B.V.), it is important to think about the future. Because collaboration sometimes also leads to disagreements. A shareholder dispute can pose a significant threat to the continuity of the company. In that case, it is important to enlist the help of a lawyer for a dispute settlement.
Disputes between shareholders
Conflicts between shareholders can quickly derail into outright rows between these entrepreneurs. The value and continuity of the company can be jeopardized by such a shareholder dispute. Shareholders may see their company, often their life’s work, disappear in one fell swoop. Especially if the other party threatens to use the scorched earth policy. TIP: It is very important at an early stage of a shareholder dispute, when most options are still open, to seek advice from an experienced specialist in business law. This makes it possible to provide insight into the legal options and to weigh them up against other solutions for a shareholder conflict.
Inquiry proceedings in the event of a shareholder dispute
Inquiry proceedings are proceedings before the Netherlands Enterprise Court at the Amsterdam Court of Appeal, where shareholders (or depositary receipt holders), the company itself, supervisory directors or employees’ organizations can request an investigation into the company’s policy. This is therefore possible in the event of a shareholder dispute. To that end, the applicant must put forward facts and circumstances that give valid reasons to doubt the correctness of the policy. Not every shareholder or depositary receipt holder can start inquiry proceedings. To this end, the law provides for an arrangement whereby shareholders or depositary receipt holders must represent a certain value of the subscribed capital before they are allowed to submit such a request. Want to know more about your options for starting a survey? Then feel free to contact Fruytier Lawyers in Business. If the request is upheld, the Netherlands Enterprise Court may order an investigation into the company’s policy, for which purpose one or more investigators will be appointed. Following the outcome of that report, the original applicant can submit a request to the Netherlands Enterprise Court within two months to determine whether there has been mismanagement and, in this case, a dispute. In that case, the Netherlands Enterprise Court can take the following measures:
- suspension or annulment of a resolution of the directors, the supervisory directors, the general meeting or any other body of the legal entity;
- suspension or dismissal of one or more directors or supervisory directors;
- temporary appointment of one or more directors or supervisory directors;
- temporary deviation from the provisions of the articles of association indicated by the Netherlands Enterprise Court;
- temporary transfer of shares by way of administration;
- dissolution of the legal entity.
If an immediate measure is required in connection with the legal entity’s situation or in the interest of the investigation, the above measures may also be taken as an interim measure. Interim measures can also be imposed before and during the investigation.
The law also provides for another solution for shareholder disputes, the so-called dispute settlement. These proceedings, like the inquiry proceedings, can be used in the event of unworkable relationships between shareholders. This arrangement is primarily intended for companies whose shares are not freely tradeable, for example, due to transfer restrictions. There are two potential proceedings: the squeeze-out arrangement and the exit arrangement. Squeeze-out arrangement In brief, the squeeze-out arrangement means that if a shareholder harms the company’s interests through his actions to such an extent that the continuation of his shareholding cannot reasonably be tolerated, the other shareholder can demand that this shareholder transfer his shares to the other shareholder(s). The shareholder who demands this (squeeze-out) must own one-third of the shares. An expert will be appointed by the court to determine the value of the shares. If the articles of association or shareholders’ agreement include a clear formula for the valuation of shares, it will certainly be of help and it may prevent a lot of discussions. Exit arrangement The exit arrangement is the opposite. In this case, a shareholder demands his shares are bought from him. The requirement of holding at least one-third of the shares does not apply. With regard to the determination of the purchase price of the shares, another special aspect applies. In determining the price of the shares, the court may apply an equitable increase on the claimant’s demand. The law also includes a separate arrangement for shareholders with an interest of 95% or more; the buy-out arrangement. Buy-out arrangement Here too, a shareholder buy-out is involved, but in this case it involves a large shareholder who is burdened with small shareholders who own less than 5% of the subscribed share capital. The valuation takes place by appointing one to three experts who determine the value.
If the shareholders do agree that it would be better for them to separate, and the business activities lend themselves to this, it would be wise to consider a demerger. The assets of the company to be demerged are then transferred by universal title to the acquiring legal entities, with the advantage that no exhaustive asset transaction is needed.
Resolving the shareholder dispute?
The lawyers of Fruytier Lawyers in Business in Amsterdam are experienced lawyers who can resolve your shareholder dispute professionally and with the least possible damage to the company. Call +31(0) 205 210 130 or fill in the form below to find out what we can do for you.