Substitute authorization for shareholders’ meeting
In the Netherlands, a shareholder can exert influence on the board in different ways. A shareholder now has the (relatively new) option to convene a shareholders’ meeting through the provisional relief court. In a recent case, the Dutch Court gave an opinion on this right to put an item on the agenda. Corporate lawyer Martijn Kesler explains.
Disagreement between shareholders and director
In this case, the shareholders disagreed with the director and co-shareholder. This conflict went so far that the director and co-shareholder avoided every contact with the other shareholders and the company lost clients because they no longer wanted to do business with the company.
Directors refused to convene shareholders’ meeting
The general meeting of shareholders is usually the body that can appoint and dismiss directors. It means that the board must first convene the general meeting of shareholders. And this is where things often go wrong: directors refuse and make it impossible to convene the general meeting.
Article 2:220 DCC: input possible by shares in capital
Under Article 2:220 DCC, anyone holding a minimum of 1 percent of the shares in the capital can put a written request to the board to convene a general meeting, specifying the reasons. In this case, the agenda included the dismissal of the director.
‘Deliberately thwarting the board’
The board should then ensure that this general meeting is held within four weeks following the request unless such meeting is barred by a substantial interest of the company. Legislative history sometimes cites ‘deliberately thwarting the board’ as an example. In other words, a shareholder must have a legitimate reason to convene a meeting.
Dutch interim relief court authorises shareholder
If the board refuses to convene the meeting, the interim relief court may grant the shareholder authorization by virtue of Article 2:221 DCC. This also happened in this case, where the interim relief judge eventually authorised the shareholder to convene a general meeting at the shareholder’s request.
Relationship between board and shareholders damaged
The interim relief judge would soon give authorisation if there are legitimate interests. In this case, the interim relief judge went even further and considered that the relationship between the board and the shareholders had been severely damaged. Such consideration is usually only assessed after the request. Moreover, this also applies to the resolutions on the agenda: they should not be assessed in the request either, but only in retrospect.
AMS Advocaten specialist in shareholders’ disputes
It turns out that Article 2:220 DCC can be used as a tool to provoke a situation within the company. Such a measure often equates to a motion of no confidence against the board. AMS Advocaten N.V. are specialists in both national and international shareholders’ disputes. If you have any questions about this, you can always contact us.