8.2.4 Exit proceedings

The Dutch exit proceedings offer a solution in the event of continuing disputes between shareholders and in the event of continuing prejudice to the interests of minority shareholders (§ 6.5.1). The literai wording of Art. 2:343 DCC reveals that a shareholder only has an exit right if his interests are prejudiced by the conduct of a co-shareholder to such an extent that his shareholding can no longer be expected of him Therefore, there must be a causal connection between the conduct of the co-shareholder and the prejudice to the interest of the shareholder.

Taking into regard the far-reaching consequences of the exit right for co-shareholders and the company, a specific justification is required for the allocation of the exit right. In my view, the element of causality is not sufficient. The specific justification can be found in the element of culpability. Support for this view is found in the legislative history of Art. 2:343 DCC (§ 6.5.4).

This study demonstrates that there are numerous ways in which the majority shareholder can prejudice the interest of the minority shareholders (§ 6.5.9). Therefore, it is not recommended to introduce a closed system of exit rights, but it is better to maintain exit proceedings with an open standard.

In § 6.5.9.2I explained that a shareholder can invoke the exit proceedings if he is dismissed as a managing director, provided that the cooperation within the BV takes place on a personal basis as if it were a partnership. A comparable ground justifying an exit is found in English law (§ 3.3.9.2). Other examples of situations in which the exit proceedings offer a way out are the siphoning off of the equity of the company by means of tunnelling, the situation in which the company faces competing activities initiated by one of the shareholders; the freeze out of a minority shareholder; the dilution of shares; non-compliance with the articles of association or statute; and an irresolvable deadlock (§ 6.5.9).

The view that solely conduct performed in the capacity of co-shareholder and conduct in the company's affürs is relevant when implementing the standard of the exit proceedings is too restricted. Conduct outside of the company's affürs can also lead to the conclusion that the interests of a shareholder are prejudiced to such an extent that it can no longer reasonably be expected of him to maintain his shareholding (§ 6.5.6). An example of this is the establishment of a competing company by one of the shareholders, as a result of which the interests of all shareholders are prejudiced.

An interesting finding of this study is that several of the aforementioned grounds to exit the company are also found in English law (§ 3.3.9) and German law (§ 4.3.5). In contrast with the Netherlands, England and Wales, in Germany it is assumed that a shareholder is also allowed to exit in certain personal circumstances (chronic illness, emigration or the threat of insolvency). In my opinion, this personal misery should be for the account of the person involved, however pitiful this misery may be. In principle, the co-shareholder or the company should not have to take the consequences of this misery (§ 6.5.4). In addition, the current standard of Art. 2:343 DCC, which requires a causal connection between the conduct of the shareholder or the company and the intolerable situation, does not provide for a foundation for an exit right if the circumstances relate exclusively to the personal affürs of the shareholder (§ 6.5.4).

Furthermore, I am not in favour of the German view that, in order to invoke an exit ground, no court intervention is needed. As appears from § 4.3.6, this German approach is ambiguous about how the exit right can be exercised.