8.3 Breaking impasses

235. The salient feature of most of the 220 impasse cases discussed in Chapters 4 and 5 is that the relations between the shareholders are so severely impaired that there is no question of continued collaboration. The main goal of these proceedings is for the collaboration to be terminated, in most cases through one of the shareholders transferring his or her shares to the other or others. The Enterprise Division makes every effort to achieve this transfer of shares. In about 25 cases the Division’s mediation efforts resulted in an amicable settlement being reached during the first stage of the court proceedings. In most cases in which an amicable settlement was not reached immediately, the Enterprise Division intervened forcefully, both at the first stage and the second stage of the proceedings.1 The purpose of intervention at both stages is in the first place to safeguard continuity and peace within the company (among other things by getting decision-making moving again), to protect the company and any other parties involved from further losses, and/or to ensure that the inquiry procedure is not frustrated by the applicants and the Enterprise Division being confronted with a fait accompli pending the proceedings. Moreover, the investigators, executive directors or supervisory directors appointed by the Enterprise Division also attempt to arrive at an amicable settlement between the shareholders. In approximately half of the cases these mediation attempts resulted in an amicable settlement being reached during the first stage of the inquiry procedure, while during the second stage of the investigation proceedings an amicable settlement was reached in slightly less than a third of the cases.

236. In my opinion, if the analyses in Chapter 4 and 5 are taken together we may conclude that on the whole in view of its nature and structure the inquiry procedure is an appropriate instrument to break impasses between shareholders and that past experiences in these cases do not suggest that the procedure should be reinforced, for example by introducing a second fact-finding hearing. The advantages of this procedure are its speed, the great expertise of the Enterprise Division and the pro-active way the Division behaves and may behave at both stages; because the inquiry procedure is set in motion by an application, the Enterprise Division is less passive than courts in summons proceedings and has more room to guide the course of events. Moreover, as a rule impasse proceedings do not involve difficult legal issues. However, I do believe that the Enterprise Division should state the grounds for its decisions in more detail, particularly in the case of decisions to take immediate measures. Another point of concern is whether the principle of hearing both sides – set out in Article 19 of the Code of Civil Procedure – and the principle of equality are sufficiently safeguarded in all cases at the first stage of the proceedings, on the one hand because sometimes an application for immediate measures is handled orally within a few days and on the other because by virtue of Article 282 of the Code of Civil Procedure until the day before, or – with the permission of the Enterprise Division – on the very day the application is dealt with, any interested party may file a defence with a counter-request concerning the immediate measures in question. I have therefore proposed (in Chapter 4.6.1) that the inquiry procedure itself should include time limits – in derogation from Article 282 of the Code of Civil Procedure – within which requests and defences must be filed, in order to guarantee that the parties have enough time read each other’s documents and to prepare themselves thoroughly for the hearing. Moreover, in order to prevent interested parties from deliberately neglecting to file a defence and only putting their views forward at the hearing, it should be specified that participation in the hearing is conditional on filing a defence.

237. The analyses in Chapters 4 and 5 show that the answer to the question whether in view of the powers of the Enterprise Division the inquiry procedure is an appropriate instrument to break impasses between shareholders is only partly affirmative, and that this applies to both stages.

In my opinion the Division’s powers in the first stage are certainly adequate for the purpose of taking any necessary measures in the interests of the company and any parties involved for the duration of the proceedings; the Enterprise Division may intervene in existing legal relationships, take other immediate measures than those requested, and if necessary contravene mandatory provisions. Moreover, according to the Supreme Court there can be no objection to the fact the immediate measures in question may have irreversible consequences. However, the Enterprise Division may not intervene more drastically than necessary, it must take all interests involved into account when forming its opinion, and it may not make surprise decisions: it may not make a decision which the parties involved could not have expected and which would have consequences they have not been able to discuss. A final condition is that the immediate measures must be temporary in nature.2 I refer to this condition last because it significantly limits the Division’s capacity to achieve the goal of ending the collaboration between shareholders: by virtue of Article 349a (2) of Book 2 of the Civil Code, the Enterprise Division may not bring about the definitive transfer of shares without the cooperation of the titleholders (who must enter into a agreement for this purpose). I have already pointed out another, more fundamental limitation: if there is no reason to hold an investigation because the facts are sufficiently clear or the shareholders’ only goal is immediate relief and/or mediation, then by virtue of the Supreme Court ruling on the Gucci Group case the Enterprise Division should refuse the application for an inquiry. The consequence of this is that it cannot deal with the application for immediate measures and/or mediation.

The fact that in many cases attempts are also made at the second stage to achieve the transfer of shares by one of the shareholders means that the measures taken in this context may also be characterized as disciplinary measures, in this case for the duration of the mediation or negotiation process. However, the powers of the Enterprise Division to safeguard the company and any interested parties for this period are somewhat more restricted than in the first stage. For example, because the list of measures in Article 356, Book 2, Civil Code is exhaustive, the Division is not authorized to impose any provisional measure it may consider appropriate. In my opinion Article 355(3), Book 2, Civil Code does not provide a remedy either, because under law the immediate measures taken in the second stage – just as those taken in the first stage – are terminated as soon as the Enterprise Division issues a decision in accordance with Article 355(1), Book 2, Civil Code. On the other hand, the provisions of Article 356, Book 2, Civil Code, especially in combination with the power to regulate their consequences (Article 357(2), Book 2, Civil Code), do enable the Division to intervene drastically in the composition and powers of the various bodies and their members in order to safeguard the continuity of the company. As far as the ultimate goal is concerned – to achieve a definitive transfer of shares – the powers of the Enterprise Division are inadequate to the same degree as in the first stage. While it may order a shareholder to transfer his or her shares to a fiduciary, this measure is only temporary. In the second stage, as in the first, the cooperation of the parties is required for a definitive termination. A significant limitation in this context is that although the Enterprise Division can extend the duration of temporary measures upon request (see Article 357(1), Book 2, Civil Code), for the Division to do this the expectation must be justified that within the extended time limit an amicable settlement will be reached, or at least brought substantially closer.3 In my opinion the implication is that if this is not the case and dissolution of the company is not an option, the Division must refuse the request for an extension and terminate the proceedings.

238. The observation that there are serious problems associated with the powers of the Enterprise Division has led me to propose an amendment to the law to address these problems. In order to deal with the problem that the Enterprise Division may not deal with applications for immediate measures and/or mediation if there is no reason for an investigation to be held and the parties do not feel it is needed, in Chapter 4.6.2 I propose the introduction of a separate legal procedure – in addition to the current one – which is specially designed for breaking impasses. This procedure would be initiated by an application for enforced division of a company because of a quarrel, or for a bid procedure to be initiated. In Chapter 5.6 I propose that these provisions should also be added to Article 356, Book 2, Civil Code for those cases in which there is a reason to hold an investigation and the parties feel it is needed.