Earlier this year, the Amsterdam District Court granted in summary proceedings a claim for expulsion on the grounds that the 50% shareholder did not sufficiently consider the interests of the company, a childcare centre. A drastic measure, which sometimes proves necessary. Corporate lawyer Hasnaa Beni Driss explains.
Due to illness, one of the two directors (Director X) of a childcare centre resigns her management duties in March 2020. Director X is a 50% shareholder in the company. The other 50% of the
The portion of registered capital of a private or public limited company
» Meer over share shares are held by the other director (Director Y). In September 2020, both parties as shareholders decide that Director X would temporarily step down as statutory director. After a year, Director X wants to resume her duties. But Director Y and the Supervisory Board do not want her back in charge of the company. According to them, the company has been doing better recently. This is also stated by the managers of the various locations.
Relations between all parties reach an impasse and nerves become frayed. Director X writes to the members of the Supervisory Board, the location managers and the auditor that they are liable because the continuity of the company is endangered. She also believes that Director Y is alleged to have committed fraud. Director Y then starts these summary proceedings proceedings, demanding the expulsion of Director X as a shareholder.
Summary proceedings procedures allow a person to quickly obtain a preliminary judgement from the court. To initiate summary proceedings, the plaintiff must have an urgent interest in his or her claim. In these proceedings, the preliminary relief judge ruled that Director Y had a sufficiently urgent interest in her claim because the conflict prevented important decisions from being taken and thus created an untenable situation.
If a person’s behaviour as a shareholder puts the survival of the company at risk, a court can force him or her to transfer the shares to the other shareholder(s). This is a far-reaching decision. The preliminary relief judge ruled in these proceedings that Director X as shareholder had harmed the interests of the company and its future viability. She tried to return as a director, while not paying sufficient attention to the necessary calm and continuity in the company. Director X behaved inappropriately and disproportionately in the conflict, according to the court. Director Y kept the company running smoothly during Director X’s absence.
Director X further argued that expulsion is a final measure, which is not appropriate in summary proceedings. The preliminary relief judge ruled that the expulsion seems final, but that this decision can be challenged in normal, comprehensive judicial proceedings on the merits. If that is successful, she can still get her shares back and at least in the meantime there has been peace in the company.
A deadlock between 50/50 shareholders can be broken if the interests of the company, and by extension the interests of the other shareholder, demand it. This may be an issue if one of the shareholders is guilty of misconduct.