Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/5.6:5.6 Amicable settlement

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/5.6

5.6 Amicable settlement

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As the report of Cools and Kroeze shows, disputes in companies are often settled amicably at the start or during the inquiry proceedings.1 Still, the report of Cools and Kroeze does not show the contents of the amicable settlements. As will be seen below, case law includes quite a few examples of disputes in companies that are amicably solved by way of a buy-out of one of the shareholders. If one of the disputing parties exits the company, the dispute will most probably end. Assuming that the inquiry proceedings are quite successful means pressing parties to conclude an amicable settlement of their dispute in a relatively short period, the inquiry proceedings present an attractive alternative to statutory exit proceedings.2 In this paragraph, it is investigated how the OK assists parties to reach an amicable settlement.

To start with, an interesting example of a case in which parties shifted from the statutory exit proceedings to the inquiry proceedings is the case of Dodo Beheer BV.

In Dodo Beheer BV, the minority shareholder initially started proceedings for the settlement of disputes, more specifically exit proceedings.3 In the first instance, the Rechtbank Arnhem awarded the minority shareholder an exit, appointed experts and, subsequently, determined the price of the shares on the basis of the expert report. In accordance with statute (at that time), the judgment was not declared provisionally enforceable. Afterwards, the coshareholders gave notice of appeal at the OK. In the meantime, in interlocutory proceedings, the minority shareholder requested to declare the judgment of the Rechtbank Arnhem provisionally enforceable, but this request was denied. Then, the minority shareholder started inquiry proceedings. In the first session at the OK, the attorneys of parties explained their views, followed by a short suspension of the session by the OK. After the suspension, parties submitted that an amicable settlement had been reached. The amicable settlement was included in the decision of the OK.4

In short, in the agreement on amicable settlement, the parties agreed on the buy-out of the minority shareholder by the co-shareholders for a price to be determined by an expert. The parties agreed on a valuation date. They agreed that if the determination of the value of the shares requires specific knowledge, the expert has the authority to involve third parties. Moreover, the parties agreed that each party is entitled to submit matters that must be taken into consideration when valuing shares. In addition, it was agreed that if parties have different views on matters relevant for the valuation, the expert is entitled to provide a binding decision. The parties also agreed on what conditions the agreement could be executed, on the costs of the expert, on who would be the expert and on several other aspects. The parties agreed to end the proceedings for the settlement of disputes. The decision of the OK with respect to the inquiry was reserved to the moment that one of the parties requests the OK to start an inquiry.

Unfortunately, the amicable settlement did not end the conflict and parties did not comply with it. According to the expert, the value of the company (and, consequently, of the shares) largely depended on the valuation of three parcels of land. These parcels had to be valued by a real estate expert. However, in the meantime, the parcels were sold by the company (controlled by the majority shareholders) to a third party without the knowledge of the minority shareholder. In the articles of association, it was stipulated that the sale of parcels required the prior approval of the general meeting, but this prior approval had not been obtained. At the request of the minority shareholder, the OK ordered an inquiry and appointed an investigator and a temporary managing director with far-reaching powers. As appears from the last decision of the OK, somewhat later, the parties settled their dispute amicably. In this last decision, the OK did not mention the contents of the amicable settlement.5

The case of Dodo Beheer BV illustrates that the threat of an inquiry into the policy of the company and the threat of application of immediate remedies can induce parties to amicably settle their dispute.6 The OK may facilitate parties by pointing at the possibility of an amicable settlement and by suspending the court session in order to enable parties to negotiate. If an amicable settlement has been concluded, each party is entitled to request the OK to record the amicable settlement in the minutes (proces-verbaal) of the court session, pursuant to Art. 87 paragraph 3 Rv. These minutes have enforceable power (executoriale kracht), which means that these minutes entitle any party to enforce its obligations.

The aforementioned strategy has been used in numerous cases. by the OK and by the parties involved @@7 In these cases, the OK records that parties agree on the transfer of the shares of one of the shareholders in the minutes of the court session. Moreover, in the amicable settlement, the parties request the OK to appoint an independent expert, who is entitled to provide a binding valuation of the shares. Parties agree that, when valuing the shares, the expert takes into account the influence that disputes may have on the value of the shares. Taking the depreciating effect of the disputes into regard in the valuation of the shares was not possible under the former exit proceedings, but has become pos sible under the new exit proceedings.8 Sometimes, parties agree that the amicable settlement is subject to the condition that sufficient funds can be obtained to finance the buy-out. As appears from these judgments, the decision of the OK with respect to the inquiry (and immediate remedies) is reserved to the moment that one of the parties requests the OK to start an inquiry. After some months or, occasionally, after some years, the inquiry proceedings end upon request of the parties, because an amicable settlement has been realized. Sometimes, disputes between holders of depositary receipts for shares are amicably settled in a similar way.9

In the case of ITIS Informatisering BV, both parties agreed that each of parties is entitled to appoint an expert. Moreover, they agreed that a third expert would be appointed by the OK.10 After a year, the parties request the OK to end the inquiry proceedings, because an amicable settlement has been realized. The OK grants the request.11 A comparable approach involving the appointment of three experts has been utilized in some other cases.12

Sometimes at the first OK session, parties also agree on the price of the shares. In the case of Hagoort & Associates, one of the shareholders started inquiry proceedings. In the first session, the OK suggested an amicable settlement. The parties agreed on the transfer of the shares and even on the price of the shares. The OK recorded the amicable settlement in the minutes of the session.13 As appears from the last decision of the OK in this case, after a while, the parties performed their duties onder the amicable settlement and the shares were transferred.14

In several cases, an amicable settlement is reached in a later stage of the inquiry proceedings. Sometimes, parties agree on an amicable settlement after publication of the inquiry report.

In the case of Blanksma Makkum Beheer BV, the OK appoints a supervisory director by way of a immediate remedy. The OK puts forward that the supervisory director may consider that one of his tasks is to pursue an amicable settlement between the parties involved. Moreover, the OK recommends the appointment of an independent expert for the valuation of the shares. The decision of the OK with respect to the inquiry is delayed until such time as one of the parties requests the OK to start an inquiry.15#$

After some years, the OK ends the inquiry proceedings upon request of the parties, because an amicable settlement has been realized.16

Examples of amicable settlements reached after the publication of the report of the investigators are the cases of Kraepelien & Holm and De Leeuw.17

Acting managing directors, acting supervisory directors and investigators performing the inquiry often play an important role in the settlement of disputes. Frequently, the OK submits that the acting managing director,18 temporary supervisory director,19 or investigator20 may regard pursuing an amicable settlement between the parties involved as one of his tasks. In addition, the OK regularly puts forward that the amicable settlement can consist of the transfer of the shares of one of the parties or recommends the appointment of an independent expert in order to value the shares.

As has been elaborated above, the OK may be very helpful in assisting parties to amicably settle their disputes. Nonetheless, it should be noted that the OK cannot force parties to enter into an amicable settlement. An amicable settlement, like any other agreement, depends on the cooperation of all parties involved. Under the inquiry proceedings, the OK is not entitled to order the transfer of the shares of one of the parties.

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