7.3.2 Rationale

The underlying thought of this appraisal right is quite similar to that of the appraisal right described in § 7.2.1. This thought is summarized in the explanatory memorandum of Art. 7:835 DCC. In the explanatory memorandum, the Minister refers to the appraisal right of Art. 2:181 DCC:

Applied to Art. 7:835 DCC, this thought does not seem wholly persuasive. After all, a shareholder of a BV, which BV is converted into a partnership, does not have to give up his economic interest as such, because he will be entitled in his capacity as a partner to an economic interest (economische deelgerechtigdheid) in the newly formed partnership. However, in my opinion, overriding arguments can be found when comparing the liability of partner in an OVR with the liability of a shareholder of a BV.

In the legislative history of Art. 7:835 DCC, an important reason can be found justifying the allocation of an appraisal right. The liability of a shareholder of a BV is limited as a matter of principle. This is only different if the shareholder involved expressly consents to take up certain obligations (as follows from Art. 2:192 DCC) or in case of tort (onrechtmatige daad).2If the shareholder expressly consents to take up obligations, this may even imply that he is liable for all debts of the company.3 In that case, the liability of the shareholder is unlimited. An opposite starting point is chosen for partners of an OVR. The liability of partners in an OVR is not limited. A partner of an OVR is confronted with joint liability for obligations of the OVR, pursuant to Art. 7:813 DCC.

A former shareholder of a BV who has become partner of an OVR will be confronted with joint liability for obligations of the OVR that came into existence after the conversion. As appears from the explanatory memorandum, the shareholder ought not to be exposed to this personal liability without his consent. Therefore, he is offered to use his appraisal right:

An additional difference is found with respect to the situation of exit. Pursuant to Art. 7:821 paragraph 4 DCC, in the situation that a partner exits the partnership while the partnership itself continues to exist, the partner concerned transfers his stake to his co-partners. The OVR should then pay an amount equating to the value of the economic interest in the OVR of the exiting partner (Art. 7:821 paragraph 2 DCC). The partnership agreement may provide how the value of this economic interest has to be determined. If the value of this economic interest is negative, the exiting partner has to pay to the OVR an amount equal to the negative value of the economic interest. A shareholder who exits a BV with a negative value, cannot be bound to contribute, unless otherwise agreed (again pursuant to Art. 2:192 DCC).

A third reason, also found in the legislative history, relates to the transferability of interests. A partner in an OVR cannot freely dispose of his interest in the OVR (Art. 7:807 DCC). In contrast to the aforementioned rule, the transferability of shares in a BV cannot be made exceedingly onerous or impossible.5

A fourth difference between a shareholder and a partner is found if at liquidation the value of the BV or OVR appears to be negative. Pursuant to Art. 7:830 paragraph 2 DCC, the liquidator may request former partners to make additional contributions if the value of the former partnership is negative. In contrast, a shareholder of a BV only has to pay up the nominal value of his shares, unless agreed otherwise (Art. 2:192 DCC). If the BV in the process of being liquidated has a negative value and all shares are fully paid-up, in principle the shareholder is not obliged to make any contribution.

Moreover, several other differences can be identified when comparing the rules applying to the OVR and the rules applying to the BV. For instance, the inquiry proceedings, the proceedings for the settlement of disputes and the proceedings for nullification of resolutions do not apply to the OVR. Comparable to the arguments mentioned in § 7.2.1, again the overriding argument for allocation of the appraisal right is that the legal form of the BV is replaced for a fundamentally different legal form.6 A shareholder who does not consent to this fundamental change has to be allowed to exit the legal entity.

The rationale of the appraisal right can even justify the exit of a shareholder of a BV that is converted into a CVR whereby the shareholder becomes a limited partner (commanditaire vennoot). This limited partner, is in principle, not exposed to joint liability for obligations of the partnership. Art. 7:837 paragraph 2 DCC exposes the limited partner to a conditional liability, which liability is similar to that of common partners of a partnership upon fulfilment of the condition. The condition for liability is fulfilled if the limited partner performs either acts of management (daden van bestuur) by representing the partnership or exerts decisive control within the partnership.7 A shareholder in a BV is not exposed to such conditional liability. Because of this principal difference, and the fact that a whole other set of partnership rules applies, I do not recommend limiting the right of appraisal merely to shareholders who become general partners in a CVR after conversion.

Raaijmakers opposes the justification of the appraisal right. He argues that not an appraisal right, yet comparable proceedings like the exit proceedings should apply.8 I agree with the rationale revealed by the legislator and disagree with Raaijmakers.9 In my opinion, an appraisal right is more suitable and efficient than application of the exit proceedings. The justification of the appraisal right as sketched out above is convincing and the situation in which the appraisal right can be invoked is limited and clear-cut. Application of the exit proceedings requires implementation of an open standard by the court, and, as a rule, implementation of a standard is more costly and time-consuming. Moreover, obviously the exit proceedings are not suited for resolving disputes between partners in an OVR.

One could object to the appraisal right by pointing to another difference between the BV and the OVR. As has been elaborated in § 1.4, a shareholder of a BV does not have an exit right at will. However, a partner of an OVR is entitled to withdraw from the OVR if provided for in the partnership agreement (Art. 7:818 paragraph 1 at (d) DCC). It is also possible that the partnership agreement excludes the right of withdrawal. The question can be put as to why a shareholder should be granted an exit right if he is entitled to withdraw as a partner immediately after the conversion pursuant to the partnership agreement. In my view, this possibility does not affect the arguments put forward above. A partner who withdraws from the OVR is confronted with joint liability for obligations of the OVR that came into existence after the conversion up to the moment of withdrawal. In addition, if the value of this economic interest of the exiting partner is negative, he has to pay to the OVR an amount equal to the negative value of the economic interest. In my opinion, the shareholder who does not consent to conversion of the BV into an OVR does not have to run the risk of paying additional obligations to which he did not consent. This argument is even stronger if the right of withdrawal is excluded in the partnership agreement.