6.5.8 Against the company

In some situations, it can be helpful to be able to start exit proceedings against the company. This can be helpful when the prejudicial conduct is wholly or partly caused by the company itself. Moreover, it must be taken into consideration that is not always easy to discera between conduct of majority shareholders and conduct of the company. @@1 For instance, a resolution prejudicial to the interests of the minority shareholder and adopted by the general meeting in which the majority shareholder voted in favour of the resolution will be conduct of the company as well. In this situation, it is recommended to initiate the proceedings against the company as well.

If the proceedings are started against the company, there should be a causal relationship between on the one hand the prejudicial conduct and on the other hand the situation in which the continuation of a shareholding can no longer reasonably be expected. In contrast with a claim against a shareholder, the claim can be based on conduct of the company itself, on conduct of the shareholder, or a combination of both. In the situation that the claim is based on the conduct of the shareholder but aimed at the company, one could speak of no-fault liability (risicoaansprakelijkheid). Nonetheless, one must keep in mind that in this situation the company is entitled to contest the presence of the conduct complained of.

With respect to proceedings against the company, an additional requirement applies. This requirement does not relate to the locus standi of the claimant, but determines in what situations an exit claim against the company must be denied. This requirement must be taken into regard after valuation of the shares. Remarkably, this requirement is also contained in Art. 2:343 paragraph 1 DCC. The additional requirement considers the following.

The court cannot reward a claim if application of Art. 2:98 or 2:207 DCC bars acquisition of the shares by the company itself. I will not focus on Article 2:98 DCC as it applies to the NV. With respect to BVs, the aforementioned rule implies that both a balance test and a liquidity test as contained in Art. 2:207 DCC have to be applied in order to assess whether the claim against the company can be rewarded.2 Further to the balance test, it must be assessed whether the net estate (eigen vermogen) of BV minus the consideration to be paid for the shares is not less than the amount of the reserves which must be maintained by law or onder the articles of association. The liquidity test holds the assessment whether the BV can meet its due and payable obligations after payment of the consideration for the shares.

The balance test and (especially) the liquidity test aim to protect creditors of the company. If one of these tests cannot be met, the court must deny the claim against the company. This provision clarifies whose interests prevail: the interests of the creditors and not the interests of shareholders. If this provision is not included, there is a risk that shareholders receive consideration from the company for their shares, whereas creditors are confronted with a company with empty pockets.

Application of the tests by the court raises questions. Practically, the court can only apply the tests as soon as it is clear what will be the price of the shares, therefore after the experts' report hos been delivered. If the price of the shares is available the court will not have much difficulty applying the balance test. It gets more complicated when the liquidity test is applied. Usually, it will be quite difficult for the court to assess whether the BV can meet its due and payable obligations after payment of the consideration for the shares. In this respect, a careful court will rely on information provided by the expert(s) involved in the valuation as well as information provided by the management board of the BV.

As the court performs the balance test and liquidity test, there is no need for application of the rule contained in Art. 2:207 DCC stipulating that the management board applies both tests. Accordingly, there is no need for liability rules which are applicable when managing directors or the transferor involved deliberately act contrary to the rules on the liquidity test. Therefore, Art. 2:343 paragraph 1 DCC, last sentence stipulates Art. 2:207 paragraph 3 DCC does not apply. In the spirit of Art. 2:207 paragraph 3 DCC, the court must be very careful when applying these tests. When there are reasons to doubt that the tests results are satisfactory, the court must decline the claim.

Additionally, Art. 2:343 paragraph 1 DCC, third sentence, lays down that:

Art. 2:98 paragraph 4 DCC only applies to the NV. This provision stipulates that if shares are acquired by the company for consideration, the articles of association must permit such and the general meeting must authorize the management board for the acquisition.3 The rules under (ii) and (iii) may apply to the BV as well. In order to prevent that a majority shareholder can block a claim awarded against the company, the prescription of authorization included in the articles of association does not apply in the exit proceedings. With respect to (iii), for instance an amendment of the articles of association that has the consequence that certain reserves cannot be distributed and should be taken into regard when performing the balance test, can be disregarded.

For a shareholder starting exit proceedings against the company it is uncertain whether eventually the balance test and liquidity test results are satisfactory. It speaks for itself that when it is foreseeable that a company cannot pass the balance test or liquidity test, the shareholder must start proceedings against his coshareholders as well.4In case the minority shareholder has insufficient information with respect to the financial position of the company, he can request the management board of the company for sufficient information. In the situation the management board refuses to provide sufficient information and exit proceedings are started, the shareholder can request the court for a provisional remedy pursuant to Art. 2:338 paragraph 3 DCC in conjunction with. Art. 2:343 paragraph 2 DCC. For instance, the court may order the company to provide sufficient financial information. In the altemative of a provisional remedy, in the same exit proceedings the minority shareholder may request for delivery of relevant financial documents on the basis of Art. 843a Rv.

In the situation that the prejudicial conduct is only caused by the company and it is foreseeable that one or both tests will not be met, the shareholder will be locked up in the company. When prejudicial conduct is caused by the company, it may also constitute well-founded reasons to doubt the correctness of the policy of the company. Consequently, the minority shareholder may choose to start inquiry proceedings.

One could doubt whether many cases will arise in which the proceedings are started against the company. In my view, in most of the cases the prejudicial conduct will be caused by the co-shareholders, provided that a liberal view is taken on the qua shareholder requirement. An argument is found in English law, which also adheres a liberal view on the qua shareholder requirement in the unfür prejudice remedy and which also allows proceedings started against the company. In § 3.3.11.1, I described that up to now no English cases are reported in which an exit claim against the company itself is granted. Nonetheless, I do not favour to abolish the possibility to start exit proceedings against the company. It is possible that practice is even more colourful than the already reported cases show.