How do I resolve a shareholder dispute?
A shareholder dispute is rarely welcome. You once started a private limited company together with a clear plan, a clear division of roles and the confidence that you complement each other. But when shareholders start working at cross-purposes, decisions are blocked or management comes under pressure, the focus shifts from growth to firefighting. This is not only noticeable in the boardroom: uncertainty seeps through to employees, customers and financiers. Results lag behind and, in the worst case, even the continuity of the company is jeopardised. That is precisely why, in the event of a conflict between shareholders, it is important to quickly choose a route that breaks the deadlock and restores manageability. Below are four commonly used ways to bring “peace to the tent”, ranging from informal to robust legal intervention.
What is the first step?
The first and often most practical step is mediation in shareholder conflicts. Mediation works particularly well if you and your co-shareholder(s) are still able to talk to each other, even if it is with difficulty. Under the guidance of an independent mediator, you examine what interests are at stake, where trust has been damaged and what agreements are necessary to move forward. Mediation is attractive to entrepreneurs because it is usually faster and cheaper than litigation, and because you yourself have a say in the outcome. In many cases, just a few meetings are enough to unravel the sticking points, clear up misunderstandings, and make new agreements. The ideal outcome is to get things working again, like through clearer governance agreements, a new way of sharing tasks, better info sharing, or a clear decision-making process. But mediation can also show that it’s better to just split up the business. In that case, mediation can still be valuable, because you can make agreements about the exit in a relatively calm setting: think of a sale of shares to the other party, a sale to a third party, a legal split of activities or – if there is no future – an orderly termination through dissolution and liquidation or, in appropriate situations, turbo liquidation. An important precondition remains that all parties involved are willing to seriously seek solutions.
What is the second route?
If it is not possible to reach an agreement, or if the relationship is so disrupted that a voluntary process has no chance of success, then legal instruments quickly come into play. The second route is the statutory dispute resolution procedure for shareholders, which comes into play when the articles of association or the shareholders’ agreement do not contain a (workable) dispute resolution procedure, or when a contractual arrangement does not offer a satisfactory solution. The law provides for two core procedures. In the event of expulsion, co-shareholders can ask the court to oblige a shareholder to transfer his shares, for example if his behaviour harms the interests of the company or holds the company hostage.
In the case of withdrawal, it is the shareholder who is stuck in a deadlock who calls on the court to oblige the other shareholder(s) to take over his shares when it can no longer reasonably be expected of him or her to continue as a shareholder. In both variants, the valuation of the shares almost always plays a major role: what price is reasonable, how is it determined and at what point in time is it valued? A corporate law solicitor can assist you in this, for example by organising evidence, determining the litigation strategy and properly addressing expert issues (such as valuation and financial information).
What is the third way?
The third way to reach a solution more quickly and decisively is linked to an important change in the law: on 1 January 2025, the Act amending the dispute resolution procedure and clarifying the admissibility requirements for inquiry proceedings (Wagevoe) came into force. This Act is intended to make the handling of shareholder disputes in unlisted private limited companies and public limited companies more efficient. The impact on entrepreneurs is considerable. Whereas in the past, proceedings concerning expulsion and withdrawal were perceived as complex and time-consuming, there are now three practical improvements that can make a difference. Firstly, withdrawal and expulsion procedures will now be handled by the Enterprise Chamber of the Amsterdam Court of Appeal, a specialised court with extensive experience in corporate law disputes, governance issues and valuation matters. Secondly, the procedure has been set up as a single court of fact, which means that, in principle, there is no longer any possibility of appeal; this can shorten the processing time and increase the pressure to reach a final solution (appeal to the Supreme Court remains possible). Thirdly, it has become easier to include related claims arising from the conflict, even if they do not normally belong before the Enterprise Chamber. In practice, this may mean that more “loose ends” can be included in a single process, such as a claim for damages, issues relating to directors’ liability, a request for the dismissal of a director or an investigation (related to the conflict).
What is the fourth route?
The fourth route is to initiate an inquiry procedure before the Enterprise Chamber. This procedure is particularly suitable when there are serious doubts about the policy and conduct of affairs within the company, for example in the event of a structural information deficit, a conflict of interest, disrupted decision-making, a stalemate in the general meeting or a conflict between shareholders and management. The core objective is restoration: the company must become manageable again and confidence in its governance must be restored. An important advantage is that, in addition to an investigation, you can also request immediate measures. These are temporary measures that the Enterprise Chamber can use to get the company “back on track” while the investigation is ongoing. These include suspending a director, appointing an (interim) director or supervisory director, temporarily suspending voting rights on shares or suspending certain decisions. If the Enterprise Chamber orders an investigation, it appoints an investigator who is given access to relevant company information and records the facts in a report.
On the basis of that report, a request for definitive measures may be made in a subsequent phase. These measures may be far-reaching, such as the dismissal of directors, the annulment or amendment of decisions, the transfer of shares or, as a last resort, the dissolution of the company.
Which route is most appropriate?
The most appropriate route depends on the nature of the shareholder dispute, the urgency (can the company still operate?), the position of the board, the agreements in the articles of association and the shareholders’ agreement, and the willingness to negotiate. In practice, time is often the biggest enemy: the longer an impasse lasts, the greater the damage to the company, its staff and its market position. Early legal analysis and a well-considered strategy – whether it focuses on mediation, an exit arrangement, the statutory dispute resolution procedure or the Enterprise Chamber – increase the chances of a solution that is both legally tenable and commercially viable. If, as an entrepreneur, you want to quickly refocus on your business and prevent the conflict from escalating, have the steps that are appropriate for your situation and the instruments within company law that are most effective assessed in good time.
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