12.8 Chapter 8: detailed analysis of the valuation framework in respect of Dutch law proceedings

When considering corporate law proceedings, enterprise and subsequently equity valuation is not only relevant in respect of proceedings regarding transfer restrictions (blokkeringsregeling), as was discussed in chapter 4. Also, amongst others, in respect of the forced exit proceedings (geschillenregeling), the squeeze-out proceedings (uitkoopprocedure), legal demerger legislation (afsplitsing) and the Dutch Intervention Act (Interventiewet) valuation is important. In the applicable Dutch legislation, jurisprudence, legal literature and valuation reports, various different definitions of value are applied.

The jurisprudence with respect to the forced exit proceedings (geschillenregeling) and the squeeze-out proceedings (uitkoopprocedure) refers to the highest bid a market participant would be willing to make, after being able to optimally preparing such a bid and doing due diligence and/or other research.

The jurisprudence with respect to the proceedings regarding transfer restrictions (blokkeringsregeling) refers to the “true value”, without further reference to what is exactly meant by such a description. In this respect, the more well- known term “fair value” is however not used.

The Dutch Intervention Act prescribes that in respect of the damages to be paid (because of the intervention by the Dutch State, i.e. a legal compensation) also the true value should be compensated. In this act, it is indicated that the true value is the price, which can be assumed to be the market price, given a scenario which most likely would occur.

The jurisprudence in respect of a legal demerger indicates that in such a situation the “value of the demerged assets” is the relevant value for purposes of assessing the so-called remaining liability (ex article 2:334t section 3 Dutch Civil Code) of the demerging legal entity in respect of certain obligations which have been transferred by means of the demerger. Since also shares in the share capital of a subsidiary may be demerged, this general description of value is also applicable to those shares. According to the Enterprise Chamber of the Amsterdam Court of Appeal, this value refers to the “objective value”. In the Dutch legal literature it is indicated that in order to assess the objective value, one has for the purpose of protecting creditors look at the “real economic value” of the assets at the moment of the demerger.

All those different principles or definitions of value used, do not contribute to a transparent single definition. On the contrary, all those definitions lead to multiple interpretations of value, a term which is already arbitrary by nature, also because valuation is very much based on reasonable estimates of various variables and the amount of reliable information that is available and based on which reliable forecasts may be made.

In addition, literature about valuation also indicates that different situations may lead to a different approach about how to assess the value. As also indicated in Chapter 3, the outcome of the valuation analysis, or the valuation range, is of less value if it cannot be derived in which kind of situation, or for what purpose, a valuation has been prepared. The same steps as presented in Chapter 3 do apply to most of the corporate law proceedings. However, step 1 (“Choosing the standard or premise of value, being either the value in exchange or the value in use”) is generally given in the respective legal situation of the indicated corporate law proceedings, either being a squeeze out (situation in which a buying shareholder already possesses more than 95% of the shares in the share capital and envisages to buy-out the remaining minority shareholders), a forced exit (this can be applicable independent of the amount of shares of the respective shareholder that is bought out), a demerger or the Dutch Intervention Act. Although also for this purpose the standard or premise of value also has to be chosen (step 2), the other steps remain more or less the same, namely choosing the valuation concept, being either the concept based on financial economics or on financial accounting, choosing additional valuation assumptions, and lastly, choosing the valuation methodology.