The right to place items on the agenda: a powerful weapon for shareholders
The right to place items on the agenda can be a powerful tool. In this way shareholders can apply pressure to the board, or, as the case may be, the company. Recently, a dispute about adding an item to the agenda of a meeting at Fugro by Boskalis was submitted to the court in preliminary relief proceedings. Corporate lawyer in The Netherlands Martijn Kesler explains.
Not interested in takeover
Fugro is described in the media as a listed company that has security like an ‘impregnable fortress’, because it has created several antitakeover structures. Major shareholder Boskalis, that recently substantially increased its share percentage in Fugro, claims not to be interested in takeover. Nevertheless, Boskalis attempted to challenge some of these antitakeover structures, by placing these constructions as an item on the agenda of the general meeting of shareholders. This tactic illustrates the possibilities of the right to place items on the agenda.
Applying pressure on the board
Influencing items on the agenda in a meeting of shareholders can be very interesting. In this way issues can be controlled and trends can be assessed. It can also be used to apply pressure to the board or other shareholders to move in a certain direction.
Have the conditions been complied with?
In a private company with limited liability, it is possible to do so based on article 2:224a of the Civil Code of The Netherlands. However, several conditions have to be complied with. If these conditions are complied with, the party drawing up the agenda for the shareholders’ meeting shall have to include the item requested on the agenda, unless this conflicts with compelling interests of the private limited company.
30 day term
These conditions are that the request has to be submitted in writing by a shareholder representing at least 1% or more of the issued capital, with a term of 30 days prior to the meeting. The articles of association, however, can decrease or increase this term. It is also possible to submit a request to place an item on the agenda by others than shareholders, who also have meeting rights. This could be, for example, holders of depository receipts who also have meeting rights under the articles of association.
Voting on antitakeover structures
In the matter between Boskalis and Fugro, Boskalis, after Fugro had denied the request in writing, requested the court in preliminary relief proceedings in The Hague, to add an item to the agenda where during the meeting there would be a resolution and a vote about one of the antitakeover structures. According to Boskalis, an antitakeover structure is contrary to one of the main features of corporate law, because it undermines the control of shareholders.
Contrary to the ‘administrative domain’
The court in preliminary relief proceedings ruled that Fugro NV was not held to add the item to the agenda, as parliamentary history shows that the board can disregard the request to add items to the agenda by public limited companies, if this is contrary to the ‘administrative domain’. According to the court in preliminary relief proceedings this applied here because the domain of the board is entered by trying to challenge the antitakeover structures. Nevertheless, the ‘item on the agenda’ shall be discussed at Fugro’s general meeting. A huge loss for Boskalis or still a small victory on Fugro? I think the latter.
It is important to note that this is different for a private limited company than for public limited companies. In a private company, an item on the agenda can only be refused if this is contrary to a compelling interest, for example a request to add items to the agenda solely to disturb the order. If an item on the agenda is refused, the board, in order not to be accused of mismanagement, shall have to give a (reasoned) explanation for this.
Putting items to the vote by a Dutch lawyer
The right to place items on the agenda can be used as a tool, if properly applied, to apply pressure to the board of a private limited company and to put items to the vote. If the board has not agreed, a last resort is to instrcut a Dutch corporate lawyer go to the court in preliminary relief proceedings and request an order to place this item on the agenda as yet.