Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.2.1:3.2.1 Introduction

Exit rights of minority shareholders in a private limited company (IVOR nr. 72) 2010/3.2.1

3.2.1 Introduction

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

The winding-up of a company offers all of its shareholders a final exit. To start with, it is of relevance that a company can be wound up on a voluntary basis. A voluntary dissolution of the company requires a special resolution, adopted by a three-quarters majority of the votes cast in the general meeting.1 This high threshold makes it practically impossible for a minority shareholder to initiate a winding-up of the company without the support of other shareholders.

An alternative to the voluntary dissolution of the company is the compulsory dissolution of the company. A minority shareholder is entitled to apply to the court for an order aimed at the winding-up of the company. The court will only grant this application if the court considers it just and equitable to do so. This fust and equitable winding-up is the oldest remedy in the English company law system that offers minority shareholders an exit. The just and equitable winding-up is introduced in company law by s. 79 CA 1862, but its roots can even be traced back to s. 5 Joint Stock Companies Winding up Act 1848.

Strikingly, the just and equitable winding-up is not laid down in the Companies Act 2006, but in the Insolvency Act 1986. However, for the application of the winding-up remedy it is not required that the company is insolvent. The provision regarding the just and equitable winding-up remedy is contained in S. 122 (1) (g) IA 1986 and states:

(1) A company may be wound up by the court i f (...) (g) the court is of the opinion that it is fust and equitable that the company should be wound up. (...)

Amongst other things, the remedy offers a solution for shareholders who can no longer cooperate with each other, which non-cooperation resulted into a deadlock situation. In addition to the winding-up solution, the threat of the remedy being applied may also contribute to a solution. The remedy can be used as in terrorem: in order to prevent the winding-up of the company, parties are forced to consider other possibilities to settle their disputes. Courts take this possibility into account. For instance, this consideration is found in the case of Re R.A. Noble & Sons Ltd:

"In accordance with what I believe to have become a regular practice in cases of this kind, I will not make a winding up order today unless both sides are content that I should do so. If either side seeks a short adjoumment to consider the position and explore the possibilities of coming to some accommodation which will make an order unnecessary, I will grant that adjoumment."2

The threat of a winding-up sometimes leads to agreement between the shareholders on the buy-out of one of them.

Deze functie is alleen te gebruiken als je bent ingelogd.