Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/6.6.2:6.6.2 Foreign parties

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/6.6.2

6.6.2 Foreign parties

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

Residency of one of the parties in the exit proceedings in another EU Member State may impact the jurisdiction of the court. In this respect, the provision of the Brussels I Regulation governs jurisdiction and the recognition and enforcement of judgments in civil and commercial matters within the European Community are of relevance. Further to the principal rule of Art. 2 paragraph 1 of Council Regulation (EC) No. 44/2001 (also known as the 'Brussels I Regulation'), parties (in this case: shareholders) must be sued in the courts of the State that governs their nationality.

I highly doubt whether the exception to the principal rule, found in Art. 22 paragraph 2 of the Brussels I Regulation, applies in the exit proceedings. Art. 22 paragraph 2 of the Brussels I Regulation confers competence to the court of the Member State in which the company has its registered seat:

The following courts shall have exclusive jurisdiction, regardless of domicile: (..) 2. in proceedings which have as their object the validity of the constitution, the nullity or the dissolution of companies or other legal person or associations of natural or legal person, or of the validity of the decisions of their organs, the courts of the Member State in which the company, legal person or association has its seat. In order to determine that seat, the court shall apply its nules of private international law (..).1

This provision refers to proceedings related to the validity of the constitution of the company, the nullity or dissolution of the company and the validity of resolutions of bodies of the company.2 This provision does not explicitly refer to disputes between shareholders. In the case of exit proceedings, a dispute between shareholders may even consider conduct performed in another capacity than the capacity of a shareholder, and may even be partly performed outside of the company's affürs.

In the ESI case, exit proceedings were started against a French majority shareholder, which was a société anonyme, with registered seat in Paris.3 When the case was brought before the court, the predecessor of the Brussels I Regulation was applicable. The Court of Rotterdam held that the predecessor of Art. 22 paragraph 2 of the Brussels I Regulation, which had a similar wording, did not apply in the situation of exit proceedings. The court held that the exit proceedings do not deal with matters referred to in this provision. As Art. 22 paragraph 2 of the Brussels I Regulation did not apply, the principal rule of (the predecessor of) Art. 2 Brussels I Regulation applied. Pursuant to the principal rule, the proceedings could only be started in the Member State in which the defendant has residency (which was France). Consequently, the court held that it did not have jurisdiction with respect to the exit claim.

The judgment of the Court of Rotterdam has been criticized by Van Solinge and Bulten for sound reasons, inter alia for the reason that is most appropriate that a Dutch court deals with Dutch exit proceedings.4 A similar view is taken Vlas, who submits that competence of a Dutch court in case of Dutch exit proceedings is in accordance with the rationale of Art. 22 paragraph 2 of the Brussels I Regulation.5 Until the ECJ has provided a judgment with respect to the scope of Art. 22 paragraph 2 of the Brussels I Regulation, or the European legislator has clarified its scope, uncertainty remains.

In order to create certainty with respect to jurisdiction in EC context, the articles of association may include that the District Court of the company's registered seat is solely competent in matters that are appropriate to be solved in proceedings for the settlement of disputes. Further to the Powell Duffryn judgment, such stipulation would fall within the ambit of Art. 23 paragraph 1 of the Brussels I Regulation.6 Art. 23 paragraph 1 of the Brussels I Regulation stipulates:

"If the parties, one or more of whom is domiciled in a Member State, have agreed that a court or the courts of a Member State are to have jurisdiction to settle any disputes which have arisen or which may arise in connection with a particular legal relationship, that court or those courts shall have jurisdiction. Such jurisdiction shall be exclusive unless the parties have agreed otherwise."

In Powell Duffryn, the Court considered that the concept of agreement as contained in (the predecessor of) Art. 23 paragraph 1 of the Brussels I Regulation should be autonomously interpreted, disqualifying interpretation according to national mies. Subsequently, the Court held that for application of (the predecessor of) Brussels I Regulation the articles of association must be regarded as a contract covering both the relations between the shareholders and also the relations between them and the company. Remarkably, the Court held that even shareholders who voted against including the jurisdiction clause in the articles of association are bound by that clause. All shareholders are bound by the jurisdiction clause:

"18. It is immaterial that the shareholder against whom the clause conferring jurisdiction is invoked opposed the adoption of the clause or that he became a shareholder after the clause was adopted.

19. By becoming and by remaining a shareholder in a company, the shareholder agrees to be subject to all the provisions appearing in the statutes of the company and to the decisions adopted by the bodies of the company, in accordance with the provisions of the applicable national law and the statutes, even if he does not agree with some of those provisions or decisions.

20. Any other interpretation of Article 17 of the Brussels Convention would lead to a multiplication of the heads of jurisdiction for disputes arising from the same legal and factual relationship between the company and its shareholders and would run counter to the principle of legal certainty." @@7

Consequently, the court designated by the jurisdiction clause has exclusive competence. Although the case of Powell Duffryn concerned a dispute between the company and a shareholder, the situation of a dispute between shareholders does not seem to make a difference.

This view of the Court leads to a remarkable difference between the interpretation of a jurisdiction clause from the angle of the Brussels I Regulation and the Dutch legal interpretation. These views seem to diametrically oppose each other. As clarified in § 6.4.2.4, according to the Dutch legal interpretation, shareholders are not bound by jurisdiction clauses without their consent.

I do not favour the Powell Duffryn judgment, but favour the Dutch view. The European view places too much emphasis on the majority rule and gives the minority shareholder no other option than to take it or leave it. And leaving the company is often not an option. I am not convinced by the argument of legal certainty put forward by the ECJ. The minutes of general meetings in which the resolution for amendment of the articles of association is adopted can show which shareholders have voted against the resolution.

In order to prevent uncertainty about the competence of the Dutch court, in general it is recommended to include a jurisdiction clause in the articles of association conferring exclusive jurisdiction on the District Court of the registered seat of the company.8 In the alternative, the jurisdiction clause can be included in a shareholders' agreement preferably to which all shareholders and the company are party.

Deze functie is alleen te gebruiken als je bent ingelogd.