Conflict of interest among shareholders
It was recently revealed that the brokerage association NVM did not at this stage want to lose its majority interest in Funda. This was not very well received by a group of depositary receipt holders.
This group of minority shareholders – united in Stichting FundaBelang – had already started proceedings at the Enterprise Chamber with the aim of persuading NVM to enter into talks with interested investors. The proceedings were suspended to give NVM the opportunity to decide internally on the future of Funda.
The recently published strategy study now shows that NVM would prefer to sell a small stake by the minority shareholders. The FundaBelang Foundation sees an IPO as the most interesting option and is denouncing the inadequate actions of NVM. Several private equity parties have already shown an interest in Funda.
The obstinate attitude of NVM is a thorn in the flesh of the FundaBelang Foundation. They are therefore threatening to resume the previously pending procedure at the Enterprise Chamber. Corporate Lawyer Martijn Kesler explains such a procedure.
Investigation proceedings before the Enterprise Chamber
Proceedings before the Enterprise Chamber of the Amsterdam Court of Appeal are also referred to as inquiry proceedings. The shareholders, a trade union involved or the company itself can apply to the Enterprise Chamber by means of a petition to order an investigation into the policy and course of affairs of the company.
Right of inquiry for shareholders
Shareholders can request an inquiry if they jointly represent at least 10% of the issued capital, or are entitled to an absolute share or certificate value of at least EUR 225,000.
In the case of listed companies, the shares or depositary receipts must represent a value of at least EUR 20 million, according to the closing price on the last trading day before the application is submitted. The articles of association or an agreement can stipulate that others are authorised to submit an application for an inquiry (Article 2:346(1) of the Dutch Civil Code).
Assessment criterion of the Enterprise Chamber
The Enterprise Chamber will only grant the request for an inquiry if there are well-founded reasons for doubting the correctness of the policy. The facts and circumstances are of crucial importance in this assessment criterion.
If the Enterprise Chamber orders an inquiry, it should indicate the period and the specific elements of the policy on which the inquiry should focus.
Taking immediate measures before the investigation
The Enterprise Chamber may – if the situation of the legal entity or the interests of the investigation so require – take immediate measures even before the inquiry starts (Article 2:349a of the Dutch Civil Code).
Immediate measures are temporary procedural measures. Examples are the suspension of a director, the appointment of a temporary director or supervisory director, the postponement of a shareholders’ meeting or the suspension of a resolution.
The adoption of an immediate injunction may provide a solution in the following situations:
- if the interests of a minority shareholder are being trampled on by a majority shareholder or the board;
- to prevent the board from taking a path that certain shareholders do not want;
- to let an impasse between directors or shareholders be broken; or
- to bring mismanagement to an end.
The investigation, one step at a time
If there are reasonable grounds for doubting the correctness of the policy, the Enterprise Chamber will order an investigation. It then appoints an investigator, the costs of which are borne by the company.
The investigator has broad powers. For example, the investigator is given access to the entire books and records and all persons involved in the company are obliged to cooperate in the investigation. The investigator records his findings in the investigation report. This report is filed with the Registrar’s Office of the Enterprise Chamber.
If the applicants or other parties with the right of inquiry are of the opinion that the report shows that there is or has been mismanagement, they can ask the Enterprise Chamber to confirm, within two months after the report is filed, that the report does indeed disclose mismanagement.
In that case, the Enterprise Chamber has the power to take measures, including annulment of a resolution, temporary transfer of the shares, dismissal of a director or even dissolution of the company. The outcome of the investigation can also be used in liability proceedings against the director(s).