2.4.3 Right of withdrawal

The appraisal rights were found in Article 18 of the Regulation, as proposed by the European Commission. Paragraph 1 of Article 18 of the Regulation proposed by the Commission reads as follows:

The European Parliament proposed to change Article 18 paragraph 1 of the proposed Regulation in the following way:

As stated above, the European Parliament proposed to delete the serious harm requirement in paragraph 1. Nonetheless, it did not propose to change Article 18 paragraph 6 of the proposed Regulation. Pursuant to Article 18 paragraph 6 of the proposed Regulation, the shareholder wishing to enforce his appraisal right by means of court proceedings is still required to prove that he has suffered serious harm. Article 18 paragraph 6 of the Regulation, as amended by the Parliament, stipulates:

Remarkably, this has the consequence that the scope of the appraisal right contained in Article 18 paragraph 1 is wider than that of Article 18 paragraph 6. A prima vista it seems that if the circumstances mentioned in paragraph 1 do not lead to serious harm, the appraisal right is not enforceable in court.

The literal wording of Article 18 paragraph 1 of the Regulation as proposed by the Commission and as amended by the Parliament seems to exclude the option to invoke the exit right in other circumstances. For instance, it seems that a court has to deny a claim under the exit proceedings if the company is converted into another legal entity, or when a shareholder has been dismissed as a managing director of the SPE. An argument for the view that Article 18 includes only a limited list of circumstances in which an exit is possible is also found in recital 10 of the Regulation, proposed by the Commission. This recital states that the shareholder,

Secondly, the European Parliament proposed to limit the scope of the remedy in the way that only shareholders who did not subscribe to the resolutions are eligible for appraisal rights. This limitation is not found in the Commission's proposal. In my opinion, when looking at the literai wording of this limitation, not only shareholders who voted against the resolutions may invoke the appraisal rights, but also shareholders who did not cast a vote, abstained from voting, or cast a blank or invalid vote, are eligible for the appraisal rights.

Moreover, in line with the explanatory memorandum, and Annex I, Chapter III of the proposed Regulation, the provision proposed by the European Parliament explicitly clarifies that the articles of association of the SPE may provide for additional appraisal rights. It is very likely that it is not possible to exclude the application of Article 18 of the proposed Regulation in the articles of association. The explanatory memorandum, Article 18 and Annex I, Chapter III of the proposed Regulation recognize that additional appraisal rights can be introduced but do not facilitate opting out of this provision.1

The foor circumstances mentioned in Article 18 paragraph 1 of the proposed Regulation raise many questions. The first situation, a deprivation of a significant portion of the assets of the SPE, for instance by sale of most of the assets of the SPE, can be very favourable for all shareholders if a good price can be secured. In this situation, the requirements of paragraph 1 will be met, but the shareholder will not be able to enforce his exit for the reason that he has not suffered serious harm. A similar question can be put in the second and third situation.

In the third circumstance it is not clear when the shareholder is entitled to enforce his exit right, either before or after the transfer of the registered office.2 Similar to the situation of a cross-border merger, I prefer to grant the shareholder the appraisal right before the transfer of the registered office of the SPE has been effectuated.3

Circumstance four relates to the freeze-out of a shareholder.4 Whereas in principle the shares reflect the non-distribution of profits, one could doubt whether serious harm is suffered. Furthermore, the period of three years is arbitrary. For example, changing market conditions or the wish of the SPE to acquire other companies or certain valuable assets may justify reservation of profits during a certain period. Moreover, this ground will be easily circumvented by distribution of very low dividends. De Kluiver and Roest have pointed out that even the distribution of one eurocent may prevent application of the appraisal right.5 In my opinion, more fundamentally, one could doubt whether court intervention in the dividend policy of the SPE is desirable too readily. In my opinion, it would not be desired if a court scrutinizes the dividend policy of each SPE once every three years. I think that limitation to more obvious occurrences of freeze-outs would be more attractive.