Selling Dutch shares that are subject to attachment? It is not all that simple!
Although shares subject to attachment seem safe, realising the attached shares is often a challenging and lengthy process. Corporate Law Lawyer Martijn Kesler clarifies this in the light of a recent ruling of the Dutch Court of Appeal in The Hague.
Result of the ruling: an executory attachment of shares
In the ruling, the shares in the capital of the Dutch company Nostro Futuro, which were held by the company under Russian law Trest, were attached before judgement against Trest. Trest was subsequently ordered to pay a sum of money. Following service of the ruling, the prejudgement attachment of the shares was converted into an executory attachment.
Executing shares subject to attachment? First requirement: petition!
In the case of an executory attachment of shares, the court should first be requested by law whether the shares subject to executory attachment may be sold and transferred and the timeframe within which this should take place.
The sale of shares subject to an attachment proves difficult
The problem is that provisions in the articles of association relating to the offering and selling of shares must be followed. Therefore, the court must also observe these requirements, including, for example, transfer restrictions. Moreover, it is not easy to determine a price for shares that are subject to executory attachment. Indeed, the relevant financial data will often be missing.
On appeal, attempts were made to prevent the sale
In the above ruling, the court was also asked for permission to sell the shares. After the court granted the request, an appeal was lodged with a request to reverse the court’s decision and to refuse permission to sell the shares.
Winning on appeal? Only in exceptional circumstances
However, it appears from Dutch legislative history that refusal is only possible on valid grounds. This may be the case, for example, if the executor has misused his powers. An example of this is a legal or factual error in the ruling. This does not appear to have been the case because on appeal it was merely cited that recourse will be impossible in Russia and that the situation is irreversible. The Court of Appeal did not concur with this as the applicants themselves entered into a transaction with a Russian company and, by doing so, they apparently took the alleged problems of recourse for granted.
Problems after winning on appeal in the Netherlands
Therefore, although the Court of Appeal had upheld the court’s decision, the issue had not yet been resolved. The price of the shares and the way in which they will have to be sold can still cause problems. Therefore, it is essential to get well informed in advance in case such a process is started. AMS’ lawyers have extensive experience in corporate law and can assist you.