Can Ahold Delhaize deprive its shareholders of their rights to express an opinion on protective structures?
In the Netherlands, protective structures for companies as a takeover defence are topical and the subject of debate. Protective structures played a significant role in the proposed takeover at Fugro, Unilever and, for example, Mylan. It was recently revealed that Ahold Delhaize deprived its shareholders of their rights to express an opinion on the protective structures. Dutch Corporate Law Lawyer Martijn Kesler explains.
Expiry of Ahold’s protective structure
In 2003, Ahold set up a Continuity Foundation. This Foundation was granted specific shareholders’ rights for a period of 15 years, to be activated to protect Ahold in the event of a takeover battle. If these rights are not renewed, their validity will expire, and the Foundation will lose its protective structure.
Possibilities of a protective structure
Although I have referred to the options of protective structures in previous blogs, I will explain Ahold’s protective structure through this Foundation again.
Specific rights granted through a protective structure
In general, the purpose of a protective structure is to invoke shares with particular rights (preference and/or priority shares) that have been granted to the Foundation via (for example) a so-called call option. This option has a specified duration (in the case of Ahold 15 years) and can be invoked by the Foundation’s board in circumstances in which the company ‘is in danger.’ The board of a foundation that invokes these shares is often closely connected with the target company – in this case, Ahold.
Protective structure fair? Permissible!
Normally speaking, a protective structure in the Netherlands is only permissible if the required procedure has been followed and the setting up of such a structure is not contrary to the principles of reasonableness and fairness. If they wish, shareholders may try to counter such structures by invoking the principles of reasonableness and fairness.
Ahold sidelined its shareholders
Ahold took the position that shareholders should not express an opinion on the ‘renewal’ of the rights granted to the Foundation. Boer, the Dutch chairman of the board, explained that maintaining the protective structure is purely a matter for the board of directors and the supervisory board, in consultation with the Foundation. According to Boer, this means that Ahold’s shareholders are not required to decide on this.
Strategy: preserve Ahold’s board
The Dutch Association of Stockholders, which represents the interests of shareholders, stated that it was disappointed and regretted that Ahold had not engaged in a dialogue with its shareholders. In principle, Ahold’s board is not required to do so. In (among other things) the ABN Amro judgement, it had been that the strategy of the company and its affiliated companies is the preserve of the board.
Going to the Enterprise Court in the Netherlands
Nevertheless, it remains impossible for Ahold’s shareholders to do anything about this. The Netherlands Enterprise Court may assess the conduct of Ahold’s board. Even though it is unlikely that the Enterprise Court will decide in favour of the shareholders, the shareholders’ proceedings against Akzo Nobel, in any case, did show that going to the Enterprise Court in the Netherlands may create new dynamics and opportunities.