As of 1 January 2025, a new law to facilitate efficient shareholder dispute resolution will enter into force in the Netherlands.
Shareholder disputes negatively impact business operations, so resolving conflicts quickly and efficiently with the right expertise is essential. If there are no proper leaver and exit arrangements in place, shareholders can fall into deadlock.
In the Netherlands, one of the key legal mechanisms available to ensure the practical and efficient resolution of (i) shareholder and joint-venture disputes in relation to Dutch legal entities, and (ii) international corporate disputes involving Dutch (holding) companies is the enquêteprocedure, or ‘inquiry proceedings’, which are a form of procedure that take place before a specialist national court, the Enterprise Chamber (Ondernemingskamer).
Where a shareholder dispute cannot be resolved, the Dispute Resolution Act (geschillenregeling) allows certain parties to seek an order from the district court requiring a shareholder to be bought out or to buy out another shareholder. However, this regime is inefficient and claims can drag on for years.
As of 1 January 2025, this has been resolved with the introduction of a one-stop shop for shareholder disputes under the new dispute resolution law: the Law on Adaptation of Dispute Resolution and Clarification of Admissibility Requirements for Inquiry Proceedings ('Wagevoe').
Under Wagevoe, the admissibility requirements for the Dispute Resolution Act have been broadened and it is expected that the Enterprise Chamber will be able to resolve disputes within companies better and faster, with an efficient dissolution of shareholder relations.
In this article, we elaborate on this option of inquiry proceedings before the Dutch Enterprise Chamber, the current Dutch Dispute Resolution Act, the new mechanism under Wagevoe and our conclusion.
Unique specialised court for injunctions in relation to mismanagement and deadlocks
Inquiry proceedings can be requested by the following parties (among others):
- shareholders and holders of depositary receipts 1 of a company with an issued capital not exceeding EUR 22.5 million, holding (combined) at least 10% of the shares/certificates;
- shareholders and holders of depositary receipts of a company with issued capital exceeding EUR 22.5 million, holding (combined) at least 1% of the shares/certificates;
- shareholders and holders of depositary receipts of a listed company that represent a value of at least EUR 20 million (if that is less than the requirement of 1% of the issued capital);
- the legal entity itself (acting through its management/executives or its supervisory/non-executive board); and
- a trustee in bankruptcy.
During inquiry proceedings, the Enterprise Chamber conducts an investigation into the affairs and policies of a company when there are “well-founded reasons to doubt a correct policy”.
The key feature of the inquiry proceedings is that the Enterprise Chamber has the power to order far-reaching provisional measures in order to resolve possible mismanagement and/or a deadlock between the shareholders, such as suspending managing/supervising directors and appointing independent temporary directors.
Proceedings before the Enterprise Chamber often lead to a settlement between the shareholders achieved through the use of court-appointed directors who take on a role akin to that of a mediator and can apply pressure to reach a settlement: indeed, the Enterprise Chamber has an excellent track record in facilitating the settlement of high-value international disputes.
On the other hand, if a settlement cannot be reached and if the investigation ultimately reveals mismanagement (wanbeleid) within the company, then the Enterprise Chamber has extensive powers to take (limitative) final measures in relation to the company, such as setting aside resolution, dismissing a director, or even dissolving the company.
However, under the current inquiry proceedings system, the Enterprise Chamber does not have the power to order a measure for the (definite) transfer of shares. Instead, Dutch law currently requires that a party wishing to procure the divestment of a shareholder after an inquiry, proceedings must make a separate application to the civil court pursuant to the Dispute Resolution Act.
Mechanism for buy-out and squeeze out of shareholders
If repairing relations between shareholders is not possible, shareholders may need to part ways for optimal long-term value creation and to address ongoing disruptions in mutual relations.
The Dispute Resolution Act offers two key possibilities for dispute resolution:
- One or more shareholders who (solely or jointly) hold at least one-third of the shares, may seek an order that another shareholder who, through his conduct, harms or has harmed the interests of the company in such a way that a continuation of his share ownership can no longer be reasonably tolerated, be required to transfer his shares ('buy-out') (uitstoting).
- A shareholder whose rights or interests are harmed, as a result of the conduct of one or more of his co-shareholders, in such a way that a continuation of his shareholdership can no longer reasonably be expected of him, may seek an order that his co-shareholders are required to buy up his shares ('buy-up') (uittreding).
Claims under the Dispute Resolution Act are made at the district court in first instance (and to the Enterprise Chamber on appeal). However, in practice, such claims prove to be problematic as the Dutch district courts are busy and, being non-specialist, more than often lack the necessary expertise in this area. This leads to long turnaround times in the proceedings and can prevent efficient dispute resolution. There has, therefore, been a long-standing call for improvement and, as a result, on 1 January 2025, Wagevoe will finally enter into force.
Wagevoe: a new dispute resolution one-stop shop
The purpose of Wagevoe is to achieve a more integrated, low-threshold, expert, and specialised resolution for all shareholder disputes with one specialist court, the Enterprise Chamber, able to combine shareholder disputes and split up shareholders.
As of 1 January 2025, the Enterprise Chamber will act as the only dispute resolution body where parties can initiate combined proceedings.
This is a positive development in the context of a more efficient one-stop shop handling of shareholder disputes. The Enterprise Chamber’s specialisation in this area will lead to more efficient application of the Dispute Resolution Act, making it easier and faster for shareholders to part ways.
In short, the changes under Wagevoe on dispute resolution include the following:
- dispute resolution will be concentrated in the Enterprise Chamber (with the possibility of appeal to the Supreme Court);
- dispute resolution will apply to Dutch limited liability companies, with the exception of listed companies;
- the scope of the dispute resolution scheme will be widened to include depositary receipt holders; and
- the grounds on which a buy-out can be ordered will be broadened: in particular, the court can take into account the conduct of a shareholder in other capacities (e.g. as a director or as a private individual) when weighing interests.
Conclusion
As of 1 January 2025, the international business community can benefit from the improvements offered by the new Wagevoe in relation to the governance of Dutch companies and their holdings.
The expectation is that shareholder disputes will rise in these turbulent times when tensions are on the rise between shareholders over short-term profits and sustainable long-term value creation. On top of that, the number of bankruptcies throughout Europe is rising significantly, which will also impact shareholder cooperation.
It is advisable to agree upon effective exit- and leaver-arrangements in the beginning of a business relationship. However, if no good arrangements are in place and/or they fail to work in the specific circumstances, then the new Wagevoe in the Netherlands can facilitate a resolution by offering relief.
Under the new law, the Netherlands will offer a one-stop shop before the Dutch Enterprise Chamber with an excellent track record in international shareholder disputes. Here, all parts of a shareholder dispute can be resolved in a cost-efficient manner by a specialised court that has a comprehensive set of powers (including the power to force transfers). Wagevoe, therefore, promises to be a useful tool in international disputes and risk management.
