6.12 Reform of exit proceedings required?

As mentioned in § 6.2.5 the Company Law Committee advised to keep exit proceedings separate from the inquiry proceedings. I concur with this advice for several reasons and also do not recommend including a buy-out order in the inquiry proceedings.1

Firstly, the inquiry proceedings is not at the disposal of a minority shareholder that provides less than 10% of the issued capital of the BV, provided that he is not entitled to a number of shares with a total nominal value of at least €225,000.2 The exit proceedings aim to offer protection to all oppressed shareholders, regardless of the number of shares they hold. In my view, including the exit proceedings in the inquiry proceedings would not be für to these small minority shareholders.

Secondly, the exit proceedings are hard to fit in with the objectives of the inquiry proceedings as exposed by the Supreme Court in the Ogem case.3 Of these objectives perhaps the restoration of sound relationships and the threat of application of an exit order may fit in. However, similar to a winding-up, an exit will not restore relationships within the company. In contrast to inquiry proceedings which aim to serve the interests of the company, the exit proceedings aim to safeguard the interests of particular shareholders.

Thirdly, if an exit order is to be included in the inquiry proceedings, I assume that the exit order will not be available as an immediate remedy, but only as a final remedy. For the reason that an exit order is not provisional but final in nature, it is not appropriate to make the exit order available as an immediate remedy. I doubt whether the exit order as a final remedy will create a relatively quick and efficient exit. The inquiry may provide information with respect to the question of whether an exit is justified, but the current exit proceedings show that the court can assess this issue without assistance of an investigator. In my view, it is preferable to have a court hear both parties involved.

Fourthly, full inquiry proceedings may be a burden to small and medium-sized companies, which closed companies usually are. A minority shareholder who wishes to exit the company is not necessarily interested in an inquiry into the policy of the company, but is interested in a relatively quick and efficient exit.

Fifthly, the Cools and Kroeze report shows that the number of amicable settlements in the second stage of the inquiry proceedings is almost negligible compared with the total amount of amicable settlements.4 Consequently, I hesitate whether an exit order in the second stage of the proceedings meets a certain need, although I admit that the fact that (almost) no amicable settlements are concluded in the second stage does not necessarily mean that a minority shareholder involved does not wish to exit.

Sixthly, if by way of a final remedy an exit order is directed, the shares have to be valued and the price of the shares must be determined by the court. This would extend the inquiry proceedings with a third stage. Whereas the inquiry report relates to the policy of the company itself, the valuation of the shares cannot be based on this report. This is another reason to assume that a final remedy in the inquiry proceedings is not necessarily a more efficient way.

Seventhly, it is questionable whether the inquiry proceedings meet the requirements of Art. 6 ECHR.5If the exit proceedings are maintained as proceedings started by summons, in my view, sufficient procedural safeguards are present. In this respect, integration of the exit proceedings in the inquiry proceedings may signify a step back.

Eighthly, the inquiry proceedings do not seem fit to be combined with proceedings for related claims. The first is started by application and has only one instance. Proceedings for related claims, for instance proceedings for damages, usually have two instances and are initiated by summons.

As appears from § 5.3 and § 5.6, the main reason why disputing shareholders use the inquiry proceedings instead of (at least) the (former) exit proceedings is that within a short period the OK can direct immediate remedies and can put pressure on parties to settle their dispute amicably. The main reason why the former exit proceedings were unattractive is that there were too many possibilities to appeal and judgments could not be declared provisionally enforceable.

In the current exit proceedings, the judgment can be declared provisionally enforceable and only once appeal can be brought.6 After one instance, the shares can already be transferred. Moreover, parties can put pressure on the case by requesting for immediate remedies in interlocutory proceedings.7 In addition, parties may request for provisional remedies on the basis of Art. 223 Rv.8 Of course, immediate remedies can also be obtained in inquiry proceedings.9 Although the exit proceedings still have to prove to be efficient proceedings, the aforementioned possibilities make the current exit proceedings user-friendly.10

As mentioned in § 6.2.5, the Company Law Committee suggested limiting the number of instances of exit proceedings to one instance instead of two. In § 6.6.1, I explained to be in favour of this suggestion.

The view that exit proceedings started by summons (dagvaarding) must be maintained instead of changing the exit proceedings into proceedings started by application (verzoekschrift) is put forward by the Company Law Commitee.11A first argument in favour of this view is that, in general, proceedings started by summons are contentious in nature and that exit proceedings fit in with this characteristic. An additional argument in favour of this view is that proceedings started by summons contain more safeguards than proceedings started by application. The third argument is that exit proceedings started by summons can be combined easily with proceedings for related claims, for instance claims for damages, because usually these proceedings must be started by summons as well.

On the other side, a number of legal authors have stated that they prefer proceedings started by application, even after 2002, as they are of the opinion that proceedings started by application are quicker, cheaper and more flexible.12 These authors put forward that the main advantage of proceedings started by application is that these proceedings may quickly lead to an oral hearing. Furthermore, it is submitted that in proceedings started by application the court has a more proactive approach, which could more often lead to an amicable settlement between disputing shareholders.

In broad outlines, the differences in procedural rules are as follows. After an application is filed, the court determines the date and time or the first hearing without delay (Art. 279 Rv). The counter plea (verweerschrift) can be submitted to the court before or even at the oral hearing (Art. 282 Rv). At this oral hearing, the court can assist parties in reaching an amicable settlement. The inquiry proceedings show that this is an efficient way forward.13 Nonetheless, it should be mentioned that proceedings started by application may suffer delay if the counter plea includes an independent (but related) request (Art. 282 paragraph 4 Rv). In addition, it is relevant to note that regular proceedings started by application do not have to be as quick as the inquiry proceedings. As appears from the website of the OK, urgent cases that are submitted to the OK before Monday at noon can be dealt with in an oral hearing on the subsequent Thursday.14 In this respect, the inquiry proceedings are comparable to interlocutory proceedings.15

Proceedings started by summons in principle also include an oral hearing (Art. 131 Rv). In these proceedings, after the summons has been launched, the defendant first has the right to submit an incidental motion and the right to submit a writ of defence within a certain period (Art. 128 paragraph 2 Rv). The writ of defence can be combined with a counter claim. The incidental motion or the counter claim will essentially start a separate set of proceedings within the main proceedings. After the writ of defence has been submitted, the court may provide an interim judgment. This interim judgment may include a date and time of an oral hearing (Art. 131 Rv). The court may also allow parties to serve a writ of reply (repliek) and a writ of rejoinder (dupliek), without having an oral hearing. Alternatively, after an oral hearing, the court may also a writ of reply and a writ of rejoinder, if this is necessary to create a für hearing (Art. 132 paragraph Rv). If not, the court may provide a final judgment.

A first argument to support indifference with respect to a change is that since 2002 both kinds of proceedings have become more similar and are comparable to a considerable extent.16 For instance, the terras on which writs and pleas have to be submitted and the terras on which appeal or cassation must be brought are equal (three months for both). In principle the same evidence rules apply, unless these rules are not compatible with the nature of the case.17

There is a second argument to support indifference. The division in types of proceedings based on the fact that the matter dealt with is contentious seems to be outdated. At present several proceedings started by application are in fact contentious.18 Additionally, some contentious matters in the field of company law are dealt with in proceedings started by application,19 but other corporate matters are dealt with in proceedings started by summons.20

Thirdly, the speed of proceedings started by summons perhaps looks better on paper than in practice. As appears from practice, an oral hearing in proceedings started by summons may take a considerable amount of time.21 This may particularly be the case in courts at which the workload is high. In addition, the view that the court is less proactive in proceedings started by summons may be outdated.22As appears from practice, the eagerness of courts to pressure parties to conclude an amicable settlement is quite comparable in both kinds of proceedings.23

Fourthly, in 2006 an important final report on a fundamental review of the Dutch procedural rules has been published.24 One of the proposals in this report is that the distinction between proceedings started by application and proceedings started by summons must be abolished and be replaced by one basis type of proceedings. The Minister of Justice has submitted this report to the Parliament.25 Although it is certainly not sure whether this proposal will be implemented, it is possible that in the future only one basis type of proceedings will be available.

Although it makes sense to favour proceedings that are quicker, cheaper and more flexible, I am not convinced that the reform of the exit proceedings into proceedings started by application is urgently needed. I suggested above that I favour to limit the exit proceedings to one instance. Due to this limitation, there is more need for safeguards. Granting an exit claim is a far-reaching measure and can have a significant impact on the defendants. In my opinion, proceedings started by summons allow each party involved sufficient time and opportunity to contest the view of its counter party. I tend to concur with the Company Law Committee that proceedings started by summons must be maintained, as these proceedings offer more safeguards.