Resolve shareholder disputes without harming your company

Resolve shareholder disputes without harming your company

a shareholder dispute requires speed and strategy. After all, the conflict affects not only the shareholders; it primarily affects the company.

Decisions regarding strategy, dividends, financing, remuneration of the director-major shareholder, or the entry of a new party can stall. Customers, staff, and financiers often notice the tension sooner than shareholders realize. As a result, a legal dispute quickly turns into an operational problem.

Good legal assistance therefore does not begin with litigation. First, it must become clear what the conflict is truly about. Is it about control, money, information, trust, or a necessary exit? That analysis determines the route: negotiation, mediation, a contractual exit, the statutory dispute resolution procedure, or an inquiry procedure before the Enterprise Chamber.

Resolving a shareholder dispute starts with the documents

The first step is always a review of the articles of association and the shareholders' agreement. These documents often determine how much leeway the parties still have.

We examine, among other things, deadlock clauses, offer obligations, leaver provisions, blocking arrangements, and valuation agreements. Sometimes the shareholders' agreement contains an escalation ladder. Examples include consultation between directors, mediation, or binding advice. In other cases, it includes a buy-sell provision, such as a Russian roulette or Texas shoot-out clause.

However, the documents do not always resolve the conflict. Many articles of association contain only basic rules. Furthermore, an older shareholders' agreement often no longer aligns with the current dispute. In such cases, the solution must be sought outside the documents. It is precisely then that a sharp strategy is needed.

First choose the correct route

Not every shareholder conflict requires the same approach. Sometimes a formal notice of default or a strict negotiation process suffices. Sometimes one shareholder must leave. In other cases, the primary need is for the board to function again.

The right route depends on three questions. Who is blocking the company? Which agreements have been violated? And what result is commercially desirable?

Legal proceedings can exert pressure. However, they can also further damage the company. Therefore, we first assess whether a settlement is feasible. Examples include the sale of shares, a phased buyout, an adjusted governance structure, or temporary agreements regarding management and information.

The statutory dispute resolution procedure: expulsion or withdrawal

If consultation yields no results, the statutory dispute resolution mechanism under Book 2 of the Dutch Civil Code may offer a solution.

In the case of expulsion, one or more shareholders request the Enterprise Chamber to have another shareholder leave. To do so, they must in principle collectively represent at least one-third of the issued capital. The core principle is that the shareholder harms the interests of the company to such an extent that their shareholding can no longer be tolerated.

Upon withdrawal, a shareholder specifically requests permission to leave voluntarily. This is possible when the conduct of fellow shareholders or the company harms his position to such an extent that he can no longer reasonably be expected to remain a shareholder.

The Enterprise Chamber subsequently determines whether the shares must be transferred or acquired. This is followed by the valuation. The Enterprise Chamber often appoints an expert for this purpose. The reference date, valuation method, and any necessary corrections can still lead to intense debate.

Therefore, you should not view the dispute resolution procedure as a standard solution. It is a powerful tool, but only if the facts and evidence are sufficiently strong.

Inquiry procedure at the Enterprise Chamber

Sometimes the dispute does not primarily revolve around an exit. In such cases, it is mainly the policy or decision-making that is at issue. In that instance, an inquiry procedure before the Enterprise Chamber may be the appropriate route.

The Enterprise Chamber may order an investigation if there are well-founded reasons to doubt the correctness of policy or the proper course of business. In the case of a BV or NV with issued capital of up to €22.5 million, shareholders or certificate holders may, inter alia, have access if they represent at least ten percent of the issued capital or hold a nominal interest of €225,000.

The inquiry procedure can quickly exert pressure. The Enterprise Chamber can also take immediate measures. Examples include the suspension of a director, the appointment of an interim director, or the transfer of shares by way of management.

However, the inquiry procedure is not an ordinary dispute procedure. A shareholder conflict is not sufficient in itself. Something must be wrong with the policy, governance, or the state of affairs within the company.

Settling is often the best business solution

Resolving a shareholder dispute through a settlement often yields the most value. The parties retain more control over the outcome. Furthermore, the damage to the company usually remains limited.

A settlement can encompass much more than a court decision. Consider a payment arrangement, securities, confidentiality, non-competition clauses, transfer of clients, dismissal as a director, a consultancy role, or agreements regarding communication with staff and business relations.

It is precisely these tailored agreements that make a settlement attractive. The company can continue. The departing shareholder gains clarity. And the remaining shareholders prevent the conflict from hanging over the market for years.

Need help with a shareholder dispute?

Do you want to resolve a shareholder dispute before the company suffers damage? Or do you foresee an impasse between shareholders?

The corporate lawyers at MKB Juristen assess your position quickly and practically. We analyze the articles of association, shareholders' agreement, decision-making process, and evidentiary position. We then determine the best course of action together with you: negotiation, mediation, an exit arrangement, the dispute resolution procedure, or proceedings before the Enterprise Chamber.

The sooner you intervene, the greater the chance of a business solution.