Conflict of interest shareholders
It was recently revealed that the brokerage association NVM provisionally does not 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 purpose 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 prefers to sell a small stake of the minority shareholders. Foundation FundaBelang sees an IPO as the most interesting option and denounces the inadequate actions of NVM. Several private equity parties have already shown interest in Funda.
The obstinate attitude of NVM is a thorn in the flesh of FundaBelang Foundation. They therefore threaten 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 request 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
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 € 225,000.
In the case of listed companies, the shares or depositary receipts must represent a value of at least € 20 million, according to the closing price on the last trading day before the request is submitted. The articles of association or an agreement can stipulate that others are authorized to submit a request for an inquiry (Art. 2:346, paragraph 1 of the Civil Code). (art. 2:346 lid 1 BW).
Measure of assessment
The Enterprise Chamber will only grant the request for an inquiry if there are well-founded reasons to doubt 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 parts 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 investigation commences (Section 2:349a of the Dutch Civil Code).
Immediate provisions are temporary order 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.
In the following situations, the adoption of an immediate injunction may provide a solution:
- if the interests of a minority shareholder are trampled on by a majority shareholder or the board;
- to prevent the board from taking a path that certain shareholders do not want;
- to enable an impasse to be broken between directors or shareholders; or
- to bring mismanagement to an end.
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 administration 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 (has been) mismanagement, they can request the Enterprise Chamber to establish, within two months after the report has been filed, that the report indeed shows mismanagement.
In that case the Enterprise Chamber is authorized 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).