Do you, as a shareholder, director or board member of a company, disagree with the policy being pursued? Or has the tone hardened during discussions and do you no longer feel comfortable with the state of affairs within the company? Then proceedings before the Enterprise Chamber of the Amsterdam Court of Appeals may offer a solution. This court is authorized to take measures aimed at restoring the balance within the company. In this way deadlock situations within a BV, an NV, a cooperative, an association or a mutual insurance company can be effectively broken.
Freedom of contract
In The Netherlands, freedom of contract is paramount. This means that, in principle, everyone is free to break off negotiations at any time and for any reason. One cannot be forced to do business with someone. However, this does not mean that this freedom is unlimited. Under circumstances, one may be obliged to continue negotiating and even to compensate the other party for damages suffered as a result of the aborted negotiations.
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The first negotiation phase
When companies enter into negotiations with each other, a certain relationship arises between them almost immediately, long before the final contract comes into view. This so-called pre-contractual relationship is governed by the requirements of reasonableness and fairness. This means that the parties must take each other’s interests into account as early as the negotiation stage. As the intended agreement takes on more concrete forms and the justified expectation arises that this agreement will actually come about, the chances increase that parties will not be free to simply walk away from the negotiating table.
Breaking off negotiations at an advanced stage
If a party breaks off negotiations at an advanced stage, the aggrieved negotiating partner can under Dutch law, under certain circumstances, successfully claim compensation. This may involve compensation for the costs of advisers, but also, for example, for investments that the aggrieved party has made in the meantime in the legitimate expectation that the deal would ultimately be struck. There is also a chance that the party who breaks off negotiations must compensate the disappointed party for lost profit. This is the profit that the disappointed negotiating party would have generated if the deal had simply been concluded (and fulfilled).
If you want to keep your hands free to break off negotiations at any time, you can achieve this by making clear agreements with your negotiating partner beforehand. This might include making reservations, such as a financing reservation, the reservation of approval by the shareholders meeting or the reservation that only a signed agreement in which all the specified parts of the transaction have been addressed is binding on the parties.
If you and your company prefer to forego a project to which you have already committed yourself via an LOI or Term Sheet, or if you are confronted with a business partner who is threatening to pull the plug on an advanced negotiation process (or has already pulled the plug), please contact the specialists at VIOTTA Advocaten. Assisting entrepreneurs and companies who find themselves in such situations is almost a daily task for us. We assist clients in preventing or conducting proceedings on broken negotiations. We litigate in the ordinary courts (in preliminary relief proceedings and proceedings on the merits), but also before arbitrators in numerous different arbitration proceedings. Please contact Arnoud Fioole or Martijn Kesler for questions or advice without any obligation. They will be happy to help you.
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VIOTTA is a law firm based in Amsterdam, specialising in providing advice in the areas of corporate law, mergers and acquisitions, contract law and corporate & commercial dispute resolution. We advise in transactional matters and litigate in commercial disputes. VIOTTA provides legal advice to its clients on Dutch corporate law matters, such as corporate governance, board structures, directors’ duties and liabilities, joint ventures and other collaborations. VIOTTA advises purchasers, sellers, management and other stakeholders in domestic and cross-border mergers and acquisitions (M&A).