6.2.3 Legislative proposal and final introduction in 1985

In 1985, over a decade later, a legislative proposal was published.1 In this proposal, the proceedings for the settlement of disputes was composed of

(i) expulsion proceedings, (ii) proceedings for the transfer of the voting right vested in a holder of a right of usufruct or pledge of shares, and (iii) exit proceedings.2 In addition to BVs, the scope of the proceedings was broadened to NVs with a closed character, as the legislator was of the opinion that similar disputes could occur in these companies of comparable nature.3

The threshold for the expulsion proceedings was lowered to one third of the issued capital of the company.4 It was held that large minority shareholders should be entitled to start expulsion proceedings, especially in the event that other co-shareholders do not wish to join such proceedings or cannot be found. A winding up-remedy was no longer included.5 Furthermore, the legislator opted for public hearings, as is common practice by proceedings started with summons, instead of private hearings initially recommended by the Company Law Committee.

Contrary to the expulsion proceedings, the scope of the exit proceedings was restricted by the legislator. The exit proceedings could no longer be started against the company itself, but only against one or more of the co-shareholder(s). Moreover, the legislator narrowed the scope to prejudicial conduct of one or more co-shareholders and excluded conduct of the company itself as a ground for exit. For botte the expulsion and exit proceedings, the legislator opted for two instances instead of one instance.

Like the Company Law Committee, the legislator thought the proceedings to be a useful as well as a necessary addition to the inquiry proceedings and proceedings for the nullification of resolutions. According to the legislator, the proceedings would especially be a necessary addition to the nullification of resolutions conflicting with the principles of reasonableness and fürness.6 The proceedings would be useful and necessary, because nullification of resolutions would only lead to incidental intervention in shareholders' disputes. Moreover, because the inquiry proceedings would not always be available, this would constitute a heavy measure and would not always provide the most desired result.7

Case law examined by the Minister of Justice shows that, in many cases dealt with under the inquiry proceedings, an order for the transfer of shares would have presented the best solution. The Minister of Justice noted that, under the supervision of the OK, parties often negotiate a share transfer and enter into an amicable settlement,8but the Minister also noted that when parties do not reach an amicable settlement, the OK eventually may order the winding-up of the company when there is an irresolvable deadlock.9I note that a compulsory buy-out order could not be granted and stil cannot be granted by the OK under the inquiry proceedings.

As indicated in the explanatory memorandum, the purpose of the proceedings is to provide a solution for shareholders involved in a dispute, which dispute leads to the cooperation being at risk or even to a lack of cooperation. The proceedings would particularly offer a solution when the decision-making process within the company is paralyzed and there is a deadlock.10 However, the scope of the proceedings for the settlement of disputes is not limited to deadlock situations. I recall that, as exposed in § 5.2, the winding-up proceedings were designed to bring a solution to the same situation.

As the new proceedings would be aimed at the level of shareholders, these would differ from the inquiry proceedings, while the inquiry proceedings are aimed directly at the company and consequently indirectly at the shareholders:

An additional purpose of proceedings for the settlement of disputes, especially in connection with the exit proceedings, is to provide relief to the minority shareholder who is oppressed by the majority shareholder and cannot exit the company. The aforementioned quotation continues:

All the same, the exit of a shareholder provides a solution for an unbearable situation at the level of the shareholders and, consequently, can provide relief to the company as well:

In this context, it is relevant to point to the different nature of the expulsion proceedings and the exit proceedings. The exit proceedings are designed for a shareholder who is stuck in an unbearable situation caused by his co-shareholders and is not able to exit the company. The expulsion proceedings are designed for the situation in which a co-shareholder prejudices the interests of the company whereas a shareholder wishes to expel his co-shareholder because of that prejudicial conduct. In the laffer situation, the interests of the claimantshareholder usually coincide with those of the company. By prejudicing the interests of the company, the interests of the shareholders are indirectly prejudiced.

After several years, the legislative proposals were adopted. On the 1 st of January 1989, the statute on proceedings for the settlement of disputes came into force and was included in the DCC.15