In a recent ruling, the Gelderland District Court considered that a provision in a shareholders’ agreement must be interpreted on the basis of the intention of the parties. The court concluded that a shareholder can no longer invoke the right to appoint. Corporate law attorney Dirk de Waard explains.
Shareholders’ agreement contains an appointment provision
This is what happened in this case.
Three shareholders (X, Y and Z) each held a third of the shares in Energie Consult Holding B.V., which in turn held all the shares in Energie Consult Holland B.V.
The management of the holding company (and the operating company) was (indirectly) formed by Y and Z.
A shareholders’ agreement had been concluded between the shareholders. This included an appointment provision.
Under this provision, X had the right to be appointed as director of both Energie Consult Holding B.V. and Energie Consult Holland B.V., as long as he had a claim against the holding company and/or operating company.
A payment schedule was also attached to the shareholders’ agreement, according to which a shareholder loan provided by X was repaid. Deviation from the repayment schedule required approval from X.
A payment schedule was also attached to the shareholders’ agreement, according to which a shareholder loan provided by X was repaid. Deviation from the repayment schedule required approval from X.
Shareholder tries to enforce his right to appoint in court
In December 2019, the shareholder loan was repaid early without X’s approval. This repayment was therefore in conflict with the repayment schedule.
In May 2020, X demanded to be appointed as a director of the holding company, but Y and Z declined this appointment. Hence, X went to court and demanded fulfilment of the obligation under the shareholders’ agreement so that X would be appointed as director.
X argued that he had a claim against the holding company consisting of (interest) loss because the loan had been repaid early.
Implicit voting obligation only applies if the conditions of the right of appointment are met
The appointment provision provided that decisive voting rights were granted to the shares of X, if X had claims against the holding company and/or operating company. This appointment provision therefore included no explicit voting obligation for Y and Z.
The question before us was whether there was an implicit voting obligation in the appointment provision. The court considered that this question only needed to be answered if it was established that X had claims against the holding and/or operating company.
Appointment provision is explained on the basis of intent of parties
With reference to the Haviltex standard and Lundiform/Mexx, the court considered that it must be assumed that the parties intended to create the right to appoint X in the event that repayment of X’s loan was endangered.
The appointment provision was included on the advice of a civil law notary, in view of the large financial interests that X held in the company.
For that reason, the repayment schedule included the minimum repayment obligations. In view of the drastic nature, according to the court, it could not be assumed that X had to be appointed as director for every possible claim.
Shareholder could not invoke the right to appoint
The court concluded that the loan had been repaid in full. Hence, X could no longer rely on this provision.
There was no interest in appointing X as director after repayment of his loan. Moreover, the relations between the parties were so disturbed that the appointment of X would inevitably lead to conflicts.
That is why the court also indicated that the appointment of X as director was not in the interest of the company.
Contact
Are you, as a shareholder, getting to a point where things are getting tough? Do you prefer to put certain things on paper rather than discus them verbally? These are often times when a lawyer can provide you with advice to prevent legal proceedings or help you strengthen your position. VIOTTA’s procedural lawyers rely on many years of international experience. VIOTTA is happy to help. Please contact Dirk de Waard: dirk.dewaard@viottalaw.com.
