5.4 Procedure

The inquiry proceedings are proceedings that are started by application (verzoekschrift). A shareholder is qualified to apply for the inquiry proceedings if he, solely or jointly with other shareholders, represents at least 10% of the issued capital (geplaatst kapitaal) of the NV or BV. Moreover, a shareholder is qualified if he, solely or jointly with other shareholders, is entitled to a number of shares with a total nominal value of at least €225,000 or such lesser amount as is provided by the articles of association of the NV or BV.1 These requirements apply mutatis mutandis to holders of depositary receipts for shares.

The OK grants an application for inquiry proceedings if there are well-founded reasons to doubt the correctness of the company's policy.5 The standard of well-founded reasons is quite vague. In practice, the OK allowed cases on the basis of the following well-founded reasons:

The OK will dismiss the application if it becomes evident that, prior to application, the applicants have not send a written notice, expressing their objection(s) to the policy or conduct of business, to the board of directors and (if applicable) to the supervisory board.7 Furthermore, the company must be allowed to investigate the objections within a reasonable amount of time and must be granted the opportunity to take measures in this respect.8 Experience has shown that the OK almost never dismisses an application on these aforementioned grounds.9

An application to start inquiry proceedings involves a request to the OK to order an inquiry into the policy and the course of business of a legal entity executed by one or more investigators.10 The OK is entitled to appoint the investigator(s).

At any stage of the proceedings, the OK may interverve by way of immediate remedies at the request of an applicant.11 These immediate remedies are in force for the length of the proceedings at the very most. For instance, by way of an immediate remedy, the OK may suspend one or more of the BV's managing directors, may appoint a temporary managing director or a temporary supervisory director, sometimes with additional powers, may suspend management board resolutions or shareholders resolutions, or may order the temporary transfer of shares to a nominee There is no limited system of immediate remedies, which means that the discretion of the OK is essentially unfettered.12 Nonetheless, there are some boundaries, in particular if immediate remedies are requested before an inquiry has been ordered.

For the reason that the winding-up order is an ultimum remedium, the OK is not allowed to order a winding-up of the BV as an immediate remedy as the winding-up remedy concerns a final remedy.

After preparation of the report of inquiry by the investigators, the report is deposited with the registry (griffie) of the Court of Appeal of Amsterdam. This report may establish mismanagement (wanbeleid) of the company. At the request of anyone who is entitled to start the inquiry proceedings, the OK may determine that there has been mismanagement, may determine which person(s) are responsible for this mismanagement, and may order one or more final remedies.18 The final orders are comprehensively listed in Art. 2:356 DCC. One of the final remedies concerns the winding-up remedy.

If one of the parties requests for final remedies, the OK has the discretion to order the remedy it thinks fit. Nonetheless, the OK must be willing to order the least far-reaching measures in order to restore sound relationships within the company. Art. 2:355 paragraph 5 DCC reflects this rule as well. This article provides that a final remedy may be postponed by the OK, when the BV undertakes to take certain measures to stop the mismanagement or, as far as is achievable, to remedy or limit its consequences.

The OK is not competent to order final remedies, if such is not requested.19 If final remedies are requested, the OK in principle has the discretion to make such final order as it thinks fit. In my opinion, this follows from the legislative history of the inquiry proceedings. Nonetheless, as mentioned, some boundaries must be taken into regard. In view of the circumstances of the case, the OK should merely order such remedies as required for recovery of the company. The OK should withhold from taking radical measures if less far-reaching measures are available. Finally, action undertaken by the company itself is preferred over intervention by the OK.

In the Zwagerman case the Supreme Court ruled obiter dictum that the OK is competent to order other remedies than requested.21 The Supreme Court considered that an order by OK for a remedy that is not requested must be justified in the circumstances of the case and has to be motivated in the OK's judgment. Therefore, one may assume that even when parties have requested other final remedies than the order to wind up the company, the OK is allowed to order the winding-up, if this order would be justified in the circumstances of the case, less far-reaching measures cannot be taken, and the order for winding-up is sufficiently motivated by the OK.

The Zeelandia judgment points in the same direction. In this case, at first instance, one of the parties requested the OK to make several final orders, including the request to order such remedy as the OK thinks fit. Subsequently, after considering the circumstances of the case the OK ordered the winding-up of the company. In appeal for cassation, another party complained about the winding-up order, as the winding-up order was not explicitly requested. In his advisory opinion, the Advocate General of the Supreme Court pleaded for rejection of the complaint. He considered that the OK has a wide discretion in choosing the remedy that fits the circumstances of the case. In addition, he put that the OK did neither incomprehensively nor insufficiently motivate its judgment to wind up the company. The Supreme Court wiped out the complaint, applying Art. 81 RO, as according to the HR the complaint did not raise issues that needed to be addressed in the interest of legal unity and legal development.22

Case law shows that the OK has only ordered a winding-up at the request of one or more of the parties involved. This request was either done explicitly by (a) one or (b) both of the parties involved, or implicitly, by way of requesting the OK by (c) one or (d) both of the parties involved to intervene by way of a final order as the OK thinks fit.23 It is worth mentioning that parties in the inquiry proceedings often do not specify a certain order in their request for final remedies, but request the OK to make an order as it thinks fit and determined in fürness (in goede justitie te bepalen).

The inquiry proceedings are brought at one instance, at the OK. As the OK forms part of the Court of Appeal, appeal to the decision of the OK is not possible. An appeal in cassation is permitted.24 Appeal in cassation can be brought by parties to the proceedings that have appeared at the proceedings at the OK.25 Moreover, the legal entity involved in the inquiry proceedings, is allowed to bring appeal in cassation.26

The winding-up of a company pursuant to Art. 2:356 sub f DCC is one of the grounds for winding up legal entities by the court as referred to in Art. 2:19 paragraph 1 under f DCC.27 Therefore, the OK is obliged to apply the general provisions of Artt. 2:19-24 DCC goveming the dissolution of legal entities.28As far as is not contrary to Artt. 2:19-24 DCC and as far as is needed, the OK may make use of Art. 2:357 paragraph 2 DCC, which provision enables the OK to arrange the consequences of its order to wind up the company.29

Art. 2:358 paragraph 1 DCC determines that the orders listed under Art. 2:356 sub a up to and including e DCC can be declared provisionally enforceable (uitvoerbaar bij voorraad).30 As Art. 2:358 paragraph 1 DCC implicitly excludes this possibility for Art. 2:356 sub f DCC, it is assumed that the winding-up order cannot be declared provisionally enforceable.31 As appears from the legislative history, in the explanatory memorandum the legislator considered that temporary application of the winding-up order would not be conceivable.32 In 1994, the Supreme Court observed that the list of Art. 2:358 paragraph 1 DCC concerns a comprehensive list.33 Therefore, standing law is that the decision of the OK containing a winding-up order has to become final and conclusive (in kracht van gewijsde), will the order be effective. Nevertheless, in contrast with Art. 2:358 paragraph 1 DCC, the OK has declared winding-up orders provisionally enforceable in a range of four decisions.34 In a more recent decision, though, the OK broke with this tendency.35

Several authors pointed to the remarkable fact that outside the inquiry proceedings, a winding-up by the court on the basis of Art. 2:21 DCC can be declared provisionally enforceable.36 With regard to winding-up pursuant to Art. 2:21 DCC, the legislator considered that pursuant to Art. 459k RV (currently Art. 288 RV), it is up to the court to decide whether immediate effect is suitable.37 To declare such a decision provisionally enforceable encounters the risk that its consequences cannot be revoked if the decision is reverted in appeal. The court though, could assess whether there is a considerable risk that such undesirable consequences will occur. Therefore, in my opinion, it is questionable whether fear of undesirable consequences should be an overriding argument to categorically reject the possibility to declare a winding-up order provisionally enforceable in the inquiry proceedings.

In this context reference can be made to the debate about the question whether a resolution of the general meeting to dissolve the company can be reverted by a subsequent decision of the same body.38 In 2007, the Court of Appeal of The Hague held that there are no principal grounds to assume that reversal of a resolution for dissolution is impossible under all circumstances.39 The Court of Appeal deemed reversal possible in the situation that the company is in liquidation but not yet ceased to exist. In order to protect interests of third parties from abuse of the reversal and for practical reasons, the Court of Appeal held that such reversal should be possible only under the supervision of the court.40 When the court decides on the reversal of the dissolution, it should examine whether third parties face negative consequences because of a reversal. Lastly, the Court of Appeal held that reversal of the dissolution of the company does not have to imply that all of the consequences of the reversal of the dissolution are reversed as well.

Let us return to the inquiry proceedings. In Willem III, the OK initially ordered the winding-up of the company. After this decision became final and conclusive, in a subsequent decision, the OK reversed the order.41 The circumstances under which the OK ordered the reversal seem to be very exceptional. The liquidator involved assisted parties in reaching an amicable settlement of their dispute. In order to carry out this amicable settlement the reversal of the winding-up order was required. The parties involved strongly preferred the reversal of the dissolution above liquidation of the company, because the liquidation would lead to negative tax consequences. The OK considered the reversal possible and argued that the initial winding-up order was given conditionally. The later qualification, though, cannot be derived from the former decision.

Two questions arise from this case. A first question that can be put is whether the OK is allowed to reven its winding-up order. The possibility of an order for reversal of a winding-up does not seem to be created in statute and seems not to be provided for by the legislator. The order to wind up the company does not concern a temporary order, which application the OK may extend or limit on the basis of Art. 2:357 paragraph 1 DCC.42

Moreover, the recognition of the possibility to reven a winding-up order fits poorly with the careful and deliberate way such an order should be given. Before the court orders the winding-up of the company, it ought to consider whether less far-reaching measures can be taken and whether the interests of shareholders or employees or the public interest oppose the winding-up. The court should not order a winding-up, unless it is convinced that it ought to do so. In the case of Willem III, reversal of the winding-up was impossible, while the decision had become final and conclusive. The limited circumstances in which a decision can be reverted appearing from Art. 382 RV, notably deception or forgery, were not present in this case. Therefore, it seems unlikely that the Supreme Court would approve of this decision.

All the same, one could doubt whether the nature of the winding-up (order) fundamentally opposes reversal, at least until the company has ceased to exist. The OK may investigate consequences of the reversal prudently and may safeguard interests of third parties. In other words, the reversal is court controlled. In view of the reasons included in the aforementioned judgment of the Court of Appeal of The Hague, I recommend introducing or at least allowing this possibility. When reversing the dissolution, the OK again should take the interests of shareholders and employees as well the general interest into regard.

The second question is whether it is possible to order a winding-up of the company under a condition subsequent (ontbindende voorwaarde). Though this possibility could be assumed on the basis of Art. 2:357 paragraph 2 DCC,43 with Geerts, I think it is hard to accept this possibility, while it is neither provided for by the legislator, nor follows from statute. Moreover, it creates legal uncertainty, especially towards third parties. Furthermore, it seems to be an unnecessary addition to the wide discretion the OK already has to remedy mismanagement. The discretion of the OK already includes the option to intervene by way of immediate and final remedies as well as the possibility to postpone a decision on the basis of Art. 2:355 paragraph 5 DCC.44 In conclusion, I have no principal objections against a winding-up order under a condition precedent (opschortende voorwaarde).

After having ordered the winding-up of the company, the OK should appoint a liquidator responsible for the liquidation.45 The balance remaining after payment of the debts of the company is paid to the persons entitled to this balance. The persons entitled to the balance are usually the shareholders, in proportion to the aggregate nominal value of the shares held by each of them.