7.7 Debate about additional appraisal rights

Apart from the aforementioned debate, the debate about introduction of additional appraisal rights in Dutch company law has been limited. Some legal authors pleaded for the introduction of appraisal rights in various situations. These situations are comparable to a certain extent. These situations have in common that the company encounters a fundamental change. All these arguments seem to have in common that a shareholder should not be confronted with a fundamental modification of the company without his consent. If the majority of shareholders nonetheless insist on a fundamental modification, their wish should not be neglected, but the minority shareholder should be granted an appraisal right.

Already in 1972, Prins recommended the introduction of appraisal rights into Dutch company law. In his opinion, appraisal rights must be conferred in situations that the company is fundamentally changed. The appraisal rights have to be conferred on the minority shareholder who does not consent to the fundamental change. Fundamental changes, as mentioned by Prins, would comprehend for instance a legal merger of the company or material changes to the company's constitution.1

In 1983, Timmerman took a comparable position.2 In 2002, Timmerman reiterated his aforementioned view.3 Timmerman held that an appraisal right has to be available if the company performs a legal act initiated by the majority shareholder changing the character of the shareholding. In his opinion, the appraisal right has to be available for a shareholder that disagrees with the change of the character of the shareholding. Examples of such legal acts would be the sale of the business of the company, the sale of the business of a vital subsidiary of the company and the legal merger or demerger of the company. With regard to the situation of legal merger and demerger, Timmerman held that an appraisal right is justified as the mirror image of the right to expel a shareholder. As onder Dutch law, mergers and demergers can be used to squeeze out minority shareholders, the allocation of an appraisal right in such situation would therefore be justified.

In this respect, it is interesting to regard the alternatives of the squeeze-out proceedings, more particular in the field of legal mergers. Firstly, I point to the triangular legal merger of Art. 2:333a DCC. If this type of legal merger is used, shareholders in the disappearing company do not receive shares in the acquiring company, but in a group company of the acquiring company. This type of merger is only possible if the group company in which shares will be allocated holds the total issued capital of the acquiring company solely or jointly with other group companies. Consequently, by means of this triangular legal merger, minority shareholders can be squeezed out, but receive shares in a group company in return.

Moreover, on the basis of Art. 2:311 paragraph 2 DCC, minority shareholders can be cashed out if pursuant to the exchange ratio there is no right for them to even receive one single share. As already mentioned in § 7.4.6.3., Art. 2:325 paragraph 2 DCC stipulates that payments made pursuant to the exchange ratio may not exceed 10% of the total amount of the shares allocated in the process of merger. As can be derived from the Versatel case, according to the Supreme Court using the means of legal merger in order to (eventually) squeeze out a minority shareholder can be but not necessarily is in conflict with the principles of reasonableness and faimess.4

In this situation, a comparable imbalance can be spotted as in the situation of application of the squeeze-out proceedings. However, if an appraisal right is introduced as mirror image of the squeeze-out proceedings, there is less need to introduce a far-reaching appraisal right in the situation of legal merger. Then, the minority shareholder who is confronted with a 95% majority shareholder could anyhow invoke the appraisal right for the period of one month as suggested above. As currently Dutch law provides for an appropriate level of protection for minority shareholders in the situation of legal merger and demerger, I am not in favour of this view.5

Bartman pleads for an appraisal right in the situation of a change of control within a group of companies, particularly with respect to non-listed companies.6 This appraisal right has to be conferred on a minority shareholder, confronted with a change of control. In Bartman's view, the company will be altered by way of the change in control, to such an extent that the company is fundamentally different from the company in which the shareholder initially took part. This would justify the exit of the shareholder.

According to Bartman, the freedom of association necessitates the introduction of the appraisal right. This freedom right follows from Art. 8 of the Constitution, and is embodied in Art. 2:35 DCC, and guarantees the free entrance and exit of members of associations. In my opinion, associations and BVs differ fundamentally and, according to Dutch law, each is governed by its own set of mies. Therefore, Art. 2:35 DCC cannot form a sufficient basis for an appraisal right in a BV. Furthermore, in my view, Art. 8 of the Constitution applies to associations and not to private limited companies. The fact that a change of control may result in a completely different perspective for the minority shareholders is not sufficient justification for an appraisal right. In my opinion, Dutch law provides a sufficient level of protection in the event of a change of control.