Protection of minority shareholders
Written by:
Marcel van den Ende
Minority shareholders' protection in the Netherlands
Every shareholder, including the minority shareholder, has the rights under the law and the articles of association and, if applicable, under the shareholders' agreement, in particular information rights, meeting rights and voting rights.
Information rights
The information right means that the minority shareholder is entitled to such information as he needs in order to be able to cast a balanced vote on the proposals during the shareholders' meeting. The management must provide him with this information. A minority shareholder would therefore first of all be wise to make use of his information rights, and always ask sufficient questions and critically assess the information provided. If important information is missing or information provided is too brief, he may request further information. If the management does not provide this information, the minority shareholder may ask the court to order the private company to provide this information.
Meeting rights
The right to attend meetings means that the shareholder, including the minority shareholder, has the right to be called to attend any meeting of shareholders and to speak there.
Most votes count
The reality is that the minority shareholder is often unable to block decision-making in the general meeting of shareholders. The majority shareholder can then unilaterally make important decisions, such as dismissing and appointing directors or issuing new shares.
In itself there is nothing wrong with that. This forms part of company law. It is inherent in the decision-making in a general meeting that the minority shareholder must in principle comply with the decision-making by the majority.
Reasonableness correction
That does not mean that the minority shareholder is completely powerless on the sidelines. The law requires shareholders to be guided in their mutual relationships by reasonableness and fairness. Article 2: 8 BW reads:
- A legal person and those involved in its organization under the law and the articles of association must, as such, behave towards one another according to what is demanded by reasonableness and fairness.
- A rule applicable between them under the law, custom, articles of association, regulations or decree does not apply insofar as this would be unacceptable in the circumstances according to standards of reasonableness and fairness.
Duty of care
This rule means that the majority shareholder must also take into account the reasonable interests of the minority shareholder when casting his vote. If the majority shareholder is also a director of the company, this duty of care becomes heavier.
If the majority shareholder fails to fulfill this duty of care, the way is open to an Inquiry procedure for the Enterprise Chamber, as shown in the following example. In the De Bruin / De Hasker decision, the Enterprise Chamber of the Amsterdam Court of Appeal considered that the management of De Hasker towards De Bruin Beheer as a non-director shareholder has a special duty of care, in the sense that:
- the board should exercise sufficient openness by providing information to which the third shareholder as such is not entitled; and that
- it should be prevented that De Hasker's interests are not mixed with those of its board or its majority shareholder (s) - whether or not at the expense of its minority shareholder;
- This special duty of care weighs even more in a case such as the present, in which two of the three shareholders are also directors of De Hasker.
Law simplifying and making BV law more flexible
The legal starting point of this law was the freedom of organization of the company. Only in those cases where there is a risk that the majority interest is misused or where essential shareholders' rights are at stake, specific legal rules protecting the minority shareholder were implemented. To this end, the bill contained a number of regulations, which have now been introduced into Netherlands company law.
Where an amendment to the articles of association can lead to changes in important shareholders' rights, such as voting rights and meeting rights, additional requirements are imposed on decision-making. Examples are the introduction of a statutory exclusion from the transferability of shares for a certain period (Article 2: 195 DCC) and a change in the voting rights distribution (Article 2: 228 DCC), for which unanimity is prescribed.
A statutory obligation of a contract law nature cannot imposed under the will of a shareholder (Article 2: 192 DCC).
The dispute settlement arrangement
The minority shareholder can also invoke the dispute settlement arrangement of Section 1 of Title 8 of Book 2 of the Dutch Civil Code. A minority shareholder who has been harmed in his rights or interests by the conduct of one or more co-shareholders in such a way that the continuation of his shareholding can no longer reasonably be expected of him, can file a notice of withdrawal against those co-shareholders.
Contact us today
Would you like to know more about what means are available to a minority shareholder? We think in solutions. Ask us today without obligation what we can do for you in your case. We are happy to help you. It is not without reason that our motto is: "Your problem, our concern."
More information?
Marcel van den Ende will gladly help you further.
