5.2 History

The Dutch winding-up remedy is of a relatively recent date. In this respect, the remedy differs from its English and German counterparts, which were introduced in the 19th century.1It took a large amount of time before the Dutch winding-up remedy was finally introduced. The late introduction of the winding-up remedy can perhaps be explained by the late introduction of the legal form of the BV in Dutch law, in 1971. Before that, the NV was the only available company form with limited liability as well as a capital divided into shares. Similar to a BV, an NV could and still can be used as a closed company.2 Yet, this explanation of the late introduction of the winding-up remedy is not wholly convincing. In closed NVs similar problems may occur as in closed BVs. One could state that the Dutch level of protection of minority shareholders was quite poor before 1971, taking into consideration that the scope of the inquiry proceedings was very limited and taking into consideration that the proceedings for the settlement of disputes were not yet introduced.

Until the enactment of the winding-up remedy, the grounds to wind up a BV or an NV were comprehensively listed in Art. 55WvK.3 This section did not confer on the court the competency to wind up a company at the request of a shareholder.4 Neither in case law,5 nor as to the leading view in legal literature,6 a deviation of this limitation was accepted. Some legal writers, however, dissenting from the leading view, argued that an analogy could7 or should8 be drawn with partnership law. Statute recognized, and nowadays still recognizes, the possibility to wind up a partnership (personenvennootschap) if there are important reasons (gewichtige redenen) to do so.9

In addition, in the early twentieth century, Kist and Visser held that a company is dissolved if the purpose of the company can no longer be achieved:

This could for instance be the case if a company was established for the purpose of operating a ship and the ship was destroyed or no longer in the possession of the company. In the view of Kist and Visser, this type of dissolution does not need a statutory basis, whereas the dissolution would automatically follow from the articles of association. In later years, the leading legal opinion opposed to the view of Kist and Visser in favour of the view that pursuant to Art. 55 WvK (currently: Art. 2:19 DCC) Dutch law has a closed system of grounds for dissolution.11

The first developments on the topic of the winding-up remedy were triggered by the introduction of the BV in 1971. Two years before that, the Company Law Committee (Commissie Vennootschapsrecht), presented an interim report regarding a legislative proposal for the BV to the Minister of Justice. This proposal included a winding-up remedy as separate proceedings. This winding-up remedy was open to shareholders owning at least one third of the shares in the capital of the BV. Such shareholders could request the court to order the winding-up of the company on the basis of important reasons (gewichtige redenen).12As was argued, the winding-up remedy could be one of the features that would distinguish the legal form of the BV from the legal form of the NV.13

One of the members of the Company Law Committee was of the opinion that in addition to the winding-up remedy, exit proceedings should be introduced, to the effect that a minority shareholder could exit a BV if important reasons (gewichtige redenen) would justify this.14 However, the remaining members of the Committee were not convinced of the need for exit proceedings. According to the Company Law Committee, the practical consequence of a winding-up remedy in particular would be that parties involved are encouraged to negotiate with each other.15 These negotiations could lead to an exit of one of the shareholders or to another solution, such as the legai demerger (splitsing) of the company.

The Company Law Committee recommended the introduction of the winding-up remedy as separate proceedings, especially with respect to BVs that have two or three shareholders with an equal shareholding. The Company Law Committee stressed that this typical kind of BV factually resembles a partnership. In the English part of this study, this type of company is indicated as a quasi-partnership.16According to the Committee, the fact that partnerships are familiar with a winding-up remedy would be a sound reason to introduce a winding-up remedy applying to the BV:

The Minister of Justice did not adopt this recommendation, advancing that he would await a report of the Company Law Committee that would focus in more detail on resolution of disputes between shareholders. The report would focus in particular on solutions less far-reaching than winding-up of the company.18

In contrast with his previous remarks, the Minister of Justice did not await the report of the Company Law Committee. In 1971, the inquiry proceedings were changed substantially.19 These changes were based on the proposals of the Verdam Committee.20 The alteration of the inquiry proceedings encompassed inter alia the introduction of the competente of the OK to order remedies as listed in statute. The most severe remedy that was introduced, allowed the OK to order the winding-up of the company.21 The legislator motivated the winding-up remedy as a measure of last resort, as an ultimum remedium.22 The legislator held that the winding-up remedy is to be applied in particular when a deadlock paralyzing the decision-making process in the company cannot be solved in any other way.

Initially, it was proposed that the winding-up of the company could not be ordered if the interests of the shareholders or if the interests of the employees would oppose this. An example of the laffer is given by the Verdam Committee; a winding-up of the company resulting into liquidation of the company, whereas its employees would face great difficulties in finding new jobs.23 The Verdam Committee stressed, however, that the winding-up of a company not necessarily leads to the liquidation of business of the company, while someone else could buy and continue the business.

In the final legislative proposal the scope of the winding-up remedy was further restricted. The legislator added the public interest to the list of interests that bar a winding-up order, which interest is now found in Art. 2:357 paragraph 6 DCC. Remarkably, the legislator did not explain why this addition was introduced. Currently, these provisions are found in Art. 2:356 sub f DCC and Art. 2:357 paragraph 6 DCC.

Four years later, in 1975, the report of the Company Law Committee on the introduction of the proceedings for the settlement of disputes in a BV was published. In this report, the Committee repeated its recommendation for the introduction of separate winding-up proceedings.24 In the meantime, as appears from its report, the Company Law Committee altered its views on the oppression remedy. Although it initially opposed the remedy, the Committee now recommended the introduction of an oppression remedy as well. This oppression remedy would include both expulsion proceedings and exit proceedings.25

The winding-up remedy as proposed by the Company Law Committee was meant as a measure of last resort. It could be applied in cases in which a continuous conflict between the shareholders would be present resulting in a deadlock in the decision-making process. Remarkably, this situation is similar to the situation for which the winding-up remedy included in the inquiry proceedings is intended. Nonetheless, the winding-up remedy as proposed by the Company Law Committee could fill up gaps in legislation. It could offer a solution in case the inquiry proceedings could not be used, because mismanagement could not be established. Furthermore, this proposed winding-up remedy could offer a solution when proceedings for the settlement of disputes (as included in the proposal as well) could not be applied, due to lack of financial resources of the shareholders and company involved:

The proposed winding-up remedy comprised the rule that the competent court, the OK, ought not to order a winding-up of the BV when weighty reasons (zwaarwichtige redenen), would resist this.27 Examples of these weighty reasons would comprehend the continuity of the company's business and the employment (werkgelegenheid) the BV provides. Similar to the Verdam Committee, the Company Law Committee added that the winding-up of a BV does not necessarily have to lead to liquidation of its business.

The winding-up remedy, as proposed by the Company Law Committee, was given shape as proceedings by application (verzoekschrifiprocedure). One or more shareholders holding jointly at least one third of the issued capital of the company was (or were) entitled to start these proceedings. These proceedings consisted of one instance at the OK, with the option to bring appeal in cassation.

The recommendations of the Company Law Committee of 1975 were discussed for several years. After a preliminary draft was launched in 1981, a legislative proposal based on the report of the Company Law Committee was published in 1985. Remarkably, this new proposal did no longer contain a winding-up remedy, yet only a less drastic remedy, viz. proceedings for the settlement of disputes.28 Proceedings for the settlement of disputes were considered to deal appropriately with conflicts between shareholders and to eliminate the need for separate winding-up proceedings:

The legislator preferred proceedings for the settlement of disputes above winding-up proceedings, while the former would lead to a less drastic result.30 Moreover, the legislator put forward that the fact that the financial resources of parties involved would be insufficient to finance a purchase of the shares does not justify barring application of the oppression remedy in favour of application of the winding-up remedy. The legislator thought it to be reasonable holding a shareholder that requests for expulsion of a shareholder accountable for the consequences of his request. The Company Law Committee made a similar recommendation:

This reasoning is not wholly convincing, as it seems to relate only to expulsion proceedings. While in the exit proceedings the claimant does not acquire shares, this reasoning cannot apply in this situation. It is conceivable that the winding-up of the company could provide a für solution if application of the exit proceedings shows that the defendant does not have enough funds to purchase the shares of the claimant.

Moreover, it does not entirely explain why a winding-up remedy is available onder the inquiry proceedings and not outside of these proceedings. As initially was put forward by the Company Law Committee, it is plausible that a solution cannot be found in the inquiry proceedings, because mismanagement cannot be established. On the other hand, one could doubt whether there is currently a legal loophole in this respect. As case law shows, the OK consequently allows parties entry to the inquiry proceedings, if they can convincingly demonstrate that there is a classic deadlock situation. The fact that there is deadlock in the decision-making process, which deadlock paralyzes the company, is enough ground for the OK that there are well-founded reasons to doubt the correctness of the policy of the company.32