23 Dec Preliminary Bill for Amendment of the Dispute Resolution Rules and Clarification of Admissibility Requirements in Enquiry Proceedings
The Minister of Justice & Security published the preliminary Bill for Amendment of the Dispute Resolution Rules and Clarification of Admissibility Requirements in Enquiry Proceedings (the “Bill“) on 22 August 2019. The law in practice is in dire need of a more efficient and reasonable method for resolving shareholder disputes. The present dispute resolution is a long and winding road. In practice, the courts only seem to intervene if there has been misconduct. The Bill is designed to make the dispute procedure more practical. We will explain the most important changes in this article.
Dispute resolution rules
The Bill is a response from the legislator to the problems that arise in practice if there are disagreements among shareholders. In a conflict situation, a shareholder can either (i) force the sale of the shares held by a co-shareholder who is misbehaving (‘expulsion‘) or (ii) offer his own shares to the co-shareholder(s), who is/are then obliged to buy these shares (‘retirement‘).
Right to an enquiry as an alternative
An impasse among shareholders can be resolved by submitting an application to the Enterprise Chamber of the Amsterdam Court of Appeal, to hold an enquiry and order an immediate provision. With the Enterprise Chamber – or an independent party it appoints – exerting some pressure, a transfer of the shares can then form part of a comprehensive settlement. This route is generally preferred to the dispute resolution procedure , but it should be noted that the enquiry procedure itself offers no solution for ending the collaboration with the co-shareholder. That is what the dispute resolution rules are for.
The most important amendment in the Bill as regards the dispute resolution procedure deals with the ambit of the procedure. The Bill clarifies that not only the person’s conduct as a shareholder will be examined. Conduct in other capacities may also be relevant for awarding the claim for expulsion. For instance, the fact that a shareholder is a (direct) competitor of the company, so that the company is suffering a significant loss. That sort of activity would be covered by the broaden ambit of the rules in terms of the Bill. In short, a significant expansion of the expulsion possibility.
The Bill’s most important amendment relating to enquiry proceedings is that a dispute resolution action will be able to be raised before the Enterprise Chamber. Currently, even if there is an apparent misconduct, the Enterprise Court cannot order a definitive transfer of shares. That will still have to be dealt with under the dispute resolution procedure. The Bill proposes a simplified dispute resolution procedure before the Enterprise Chamber if apparent misconduct has been determined. That procedure may result in a final order for transfer of the shares. In such case, the Enterprise Chamber will already have examined the details of the dispute and will be in the position to reach an opinion quickly. This does not alter that fact that the overall process is time-consuming, as the workload of the court is not reduced but simply shifted: an “allocation of resources”.
The Bill holds the promise of an efficient dispute resolution procdure. It remains to be seen whether the Bill will actually be enacted and whether it will result in an improvement.
The consultation period was recently closed and the next stage entails an evaluation of responses. We will keep you posted on further developments.
This article was published in the Newsletter Vestius of January 2020