Enterprise Chamber breaks deadlock in 50/50 joint venture through appointment of an independent director

Deadlocks between shareholders with equal voting rights are among the most common disputes brought before the Enterprise Chamber. We often see this in disputes between estranged siblings, but it also occurs in international joint ventures with a Dutch holding company. A recent decision demonstrates that the Enterprise Chamber is willing to break such deadlocks in those circumstances as well. Corporate law attorney Onno Hennis discusses the ruling.

Background

The case concerns Emberock, a Dutch holding company owned 50% by the Czech investment company Seven and 50% by HY, a subsidiary of the Chinese state-owned enterprise CHG. Emberock indirectly holds a 50% interest in the English company OzGen, while the remaining 50% is also held by CHG (through USDL). OzGen owns all shares in the Australian company Genuity, which operates a power plant in Queensland.

Shareholders’ agreement

The parties entered into a shareholders’ agreement (SHA), but notably only at the level of OzGen. Genuity and Emberock are not parties to the SHA and are therefore not formally bound by it. The SHA does require OzGen to align the articles of association of group entities, including Genuity, with the SHA, but this was never implemented.

Defective governance

This omission becomes problematic when the parties disagree on the strategic direction of the group and Seven demands compliance with the SHA. Genuity has (i) entered into a collective labour agreement resulting in labour costs increasing by more than 30%, and (ii) initiated a refinancing process. Both decisions fall within the reserved matters under the SHA, requiring prior shareholder approval from OzGen. HY argues, however, that these approval rights do not apply because they were never incorporated into Genuity’s articles of association, and Genuity’s board has openly stated that it does not consider itself bound by them.

Deadlock

The problem cannot be remedied at a higher level either. Emberock no longer has statutory directors, and the supervisory directors (half nominated by Seven and half by HY), who act in their place, are unable to reach agreement. At the shareholders’ meeting in August 2025, where Seven had proposed implementing the SHA rights at the Genuity level, HY voted against the proposal. As votes are tied within all corporate bodies, the situation remains unchanged.

Inquiry proceedings

Seven subsequently initiates inquiry proceedings. It argues that there are well-founded reasons to doubt proper governance: Emberock is unable to exercise its governance rights while Genuity continues to make significant decisions without shareholder approval. HY counters that the request is in reality a strategy aimed at enforcing a de facto veto right at the Genuity level.

Judgment of the Enterprise Chamber

The Enterprise Chamber agrees with Seven. It emphasises that Emberock’s interest as a company existing solely to manage its indirect interest in Genuity requires it to exercise its governance rights and intervene where subsidiaries fail to implement agreed governance arrangements. Since a deadlock has arisen, decision-making has effectively ceased. This constitutes well-founded reasons to doubt proper policy and governance.

As immediate measures, the Enterprise Chamber appoints a temporary director with a casting vote and independent power of representation. In addition, it suspends the supervisory board’s approval rights concerning the exercise of voting rights attached to shares in subsidiaries.

Lessons for practice

This ruling contains several important lessons. First, it once again demonstrates that where a collaboration has become deadlocked, the Enterprise Chamber is willing and able to intervene through a Dutch holding company, even if it is merely one link in an otherwise entirely foreign corporate structure. Second, parties should ensure not only that their agreements are carefully documented at the outset of the cooperation, but also that all relevant entities within the group structure are legally bound by those agreements. Third, a 50/50 joint venture requires a clear deadlock mechanism. Where there is a fundamental disagreement, an equal governance structure can completely paralyse the company, leaving inquiry proceedings as the only way out.