Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55Jesper specialises in corporate litigation and governance
jesper.nooij@russell.nl +31 20 301 55 55A dispute between shareholders can lead to problems within the company. In the case of a 50/50 shareholding, it may even make decision-making impossible and, in the worst case, threaten the survival of the company. How is such a dispute resolved?
Starting a business with a business partner has many advantages. A partnership leads to more knowledge, a larger network and a sharing of tasks and responsibilities. After all, two heads are better than one. But there are also risks and pitfalls that can lead to disputes. Since prevention is better than cure, you could also write things down in a shareholders’ agreement. However this will not prevent all conflicts. In this blog we will discuss a number of options to solve this kind of disputes within the company.
While legal action is always an option, the preferred way to resolve disputes is through mutual agreement. Such a resolution often results in an outcome that is acceptable to both parties and may preserve the partnership and mutual trust. Possible solutions include settlement agreements or the mutual purchase or sale of shares, with the price determined by an independent party, such as a third-party accountant.
If a mutual agreement to resolve the dispute proves not to be an option, court action may be an effective means of resolving the shareholder dispute. This could include the inquiry procedure we have already described in previous blogs, the statutory dispute resolution procedure or summary proceedings.
If there is an urgent need for a quick solution, for example if decision-making in a company has come to a standstill, summary proceedings can be brought before a court. In these proceedings, a preliminary injunction can be requested. This can include forced cooperation in the execution of contractual agreements or the provision of information.
The disadvantage of summary proceedings is that only provisional or temporary measures are taken. A “normal” trial on the merits will have to be conducted after the summary proceeding in order to obtain a final judgment. Despite this temporary nature, a final settlement is often reached between the parties after summary proceedings.
Legal dispute resolution provides shareholders with an opportunity to settle arguments and disagreements and has two variants, exit and expulsion. Both variants require legal proceedings to be initiated.
In exit proceedings, one or more shareholders no longer wish to be shareholder(s) in the company. Under certain circumstances, this procedure can require the other shareholder(s) or the company itself to take over the shares of this exiting partner. There is a condition attached to this procedure. Namely, the exiting partner’s rights must be harmed to such an extent that he cannot reasonably be required to retain his shareholding. Think of family disputes within a family company or the situation where a shareholder starts a competing company.
The squeeze-out procedure applies when one shareholder wants to eject his fellow shareholder from the company. The aim of this procedure is to resolve the conflict through a share transfer. This is a rather drastic solution as the ejected shareholder loses ownership of his shares. Only shareholders who alone or jointly hold 1/3rd of the total share capital can file a claim for an expulsion.
For a shareholder to be expelled, there must be conduct that harms or has harmed the company’s interests to such an extent that the continuation of his shareholding cannot reasonably be tolerated. This could include a number of different situations, such as family disputes within a family business, the situation where a shareholder starts a competing business or the situation where the shareholder paralyses decision-making in the general meeting.
On 1 January 2025, the Dispute Settlement and Clarification of Admissibility Requirements Survey Procedure Act (Wagevoe) entered into force. The consequence of the Wagevoe coming into force is that the aforementioned proceedings must now be conducted before the Enterprise Chamber. In addition, the Wagevoe has made it possible to combine the aforementioned proceedings with a request for an inquiry.
Prevention is better than cure, which is why we can help you draft or review a shareholders’ agreement for you. Do you have a conflict within a company and want to know what options are available to you? Do you have questions about the right of inquiry or other forms of corporate litigation? Our specialists will be happy to assist you. Please contact us:
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