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25 March 2014
Since January 2013 the Enterprise Chamber – a specialised section of the Court of Appeal – has been authorised to investigate the behaviour of individual shareholders of Dutch legal entities. One of the shareholders of Strauss Coffee made a request for such an investigation. In December 2013 the Enterprise Chamber rejected the requested investigation.
Strauss Coffee has two shareholders. Strauss Group holds 74.9% of the shares. Robusta, a subsidiary of TPG, holds the remaining shares. TPG filed a request with the Enterprise Chamber for an investigation into the behaviour of its co-shareholder, Strauss Group.
Strauss Group delivered certain services to Strauss Coffee for a fee. In 2011 the chief executive officer of Strauss Coffee noticed that Strauss Group did not perform all of the agreed services. He reported that Strauss Coffee paid too much for those services. In compliance with the shareholders' agreement, TPG requested that Strauss Coffee prepare an initial public offering (IPO) of the shares in Strauss Coffee in 2013.
However, preparation of the IPO took time – too much time, according to TPG. TPG requested the Enterprise Chamber to launch an investigation. TPG stated that the fee charged by Strauss Group was too high, and was in fact a disguised dividend. Furthermore, TPG stated that Strauss Group had frustrated TPG's right to an exit (by way of an IPO). According to TPG, Strauss Group and the directors appointed by Strauss Group had acted contrary to the principles of the shareholders' agreement. TPG also argued that the directors appointed by Strauss Group had an unacceptable conflict of interests and failed to comply with their duty of care towards TPG as a minority shareholder.
The Enterprise Chamber may order an inquiry when there appear to be well-founded reasons to doubt the correctness of the policy or the correctness of the course of affairs of a company (Section 2:350 lid 1 of the Civil Code), but it is not obliged to do so. As of January 1 2013, the phrase "the correctness of the course of affairs" has been added to Section 2:350 in order to clarify that an inquiry can also take place with regard to the behaviour of an individual shareholder. If the individual shareholder's behaviour sufficiently affects and negatively influences the actual course of events within the company, the Enterprise Chamber may order an inquiry.
Only the behaviour of an individual shareholder that affects the day-to-day affairs or reputation of the company may give cause for doubts as to the correctness of the course of affairs. The fact that a shareholder does not agree with the policies of the board of directors is not sufficient. Only the behaviour of the individual shareholder is decisive – not its possible motives and intentions. An example of a valid reason to doubt a correct course of affairs of a company is if one or more shareholders inform the media incorrectly about the company.
If the Enterprise Chamber orders an investigation, it may also impose provisional measures on request. Such provisional measures may include:
In this case, the Enterprise Chamber rejected TPG's request. The Enterprise Chamber stated that as the shareholders had chosen their own governance structure, differences of opinion between them or other disagreements on company policy, should first be resolved by adhering to those governance principles. Furthermore, the Enterprise Chamber ruled that the acts and omissions of Strauss Group did not constitute valid reasons to doubt the correctness of the policy or the course of affairs of the company. The Enterprise Chamber disregarded the alleged intentions of Strauss Group because it assesses only the behaviour of the shareholder, not its motives. With respect to TPG's envisaged exit by IPO, the Enterprise Chamber ruled that this was a matter of interpretation of the shareholders' agreement, and that it should be decided in ordinary civil proceedings. Disputes of property law are not settled in inquiry proceedings before the Enterprise Chamber. This is in line with previous case law.
The wording of Section 2:350 expands the remit of the Enterprise Chamber. This is a positive development, because now all persons that negatively affect the policies of a company may become subject to an inquiry.
Individual shareholders of Dutch entities should be aware that they may be confronted with requests from other shareholders (or from the company itself) to the Dutch Enterprise Chamber to investigate their behaviour as shareholders of the Dutch company. A request may lead to provisional measures, such as a prohibition against exercising voting rights for a certain period. However, if a shareholder believes that the behaviour of a fellow shareholder is damaging or harming the company, it may be entitled to file an application for an inquiry with the Enterprise Chamber.
For further information on this topic please contact Eelkje van de Kuilen at AKD by telephone (+31 88 253 50 00), fax (+31 88 253 54 00) or email (email@example.com). The AKD website can be accessed at www.akd.nl.
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