Shareholders’ quarrels, what can the Netherlands Enterprise Court do?
Two brothers applied to the Netherlands Enterprise Court for their father’s suspension as a director. In the Netherlands, the proceedings to force a breakthrough between shareholders are called inquiry proceedings. Is there any reason for the Dutch Enterprise Court to intervene? Moreover, will the father be suspended? Corporate Law Lawyer Martijn Kesler explains.
Father: majority shareholder and sole director
Two brothers and their father were the indirect shareholders of Setay B.V., a Dutch company in the field of foam cutting and processing for the manufacture of mattresses. The father held 51% of the shares, the brothers each owned 24.5%. Besides being the majority shareholder, the father was also the sole director of Setay B.V.
Company rendered inaccessible to majority shareholder
In the spring of 2017, the parties got into a quarrel as a result of which one of the sons reported an assault. The sons then changed all the access codes to the company building, making it immediately inaccessible.
Application Enterprise Court: Suspend father as director
Subsequently, the father attempted to reverse the share transfer that had made the brothers shareholders in Setay B.V. On 3 October 2017, the brothers submitted an application to the Netherlands Enterprise Court requesting an investigation into the policy and affairs within Setay, suspension of the father as director, appointment of the brothers as jointly authorised directors, and deprivation of the father’s voting rights attached to the shares.
Father: ‘Are brothers shareholders?’
However, the father argued that the brothers ‘in all probability’ had not become shareholders and, therefore, should never have been allowed to submit a request to the Netherlands Enterprise Court. Only persons or entities with specific interests in a company, provided that all the conditions have been met, may submit such a request in the Netherlands. These are interests such as shares or depositary receipts.
Netherlands Enterprise Court examined grounds inquiry proceedings
In any case, the Netherlands Enterprise Court concluded that the brothers on the one hand and their father on the other had such a furious quarrel that they, as shareholders, had become deadlocked. Given that this quarrel was damaging the company, the Netherlands Enterprise Court ruled that there were good reasons to doubt proper policy or affairs. This doubt formed the threshold for ordering an investigation. As this threshold had been reached, the Court ordered an investigation into the policy and affairs within Setay.
Dutch Enterprise Court appoint director with casting vote
The Netherlands Enterprise Court also took measures to break the deadlock. The Enterprise Court appointed a director with a casting vote as an immediate remedy. One of this director’s tasks was to try to settle between the parties.
Dutch lawyer in shareholders’ disputes
The above case demonstrates the effectiveness of proceedings before the Netherlands Enterprise Court. Was the company being jeopardised because of a shareholders’ argument? If so, the Enterprise Court is the body that can force a breakthrough. The lawyers of AMS can assist you in such proceedings.