8.2 Basic principles of the inquiry procedure

233. The parliamentary history of the amendment to the inquiry procedure in 1970 (see Chapter 2) makes it clear that the purpose of this regulation is to protect minority shareholders, depositary receipt holders and employees of big companies against lack of openness on the part of the management and an unsatisfactory state of affairs, while the investigation ordered by the Enterprise Division and the measures taken by the Division if the report reveals evidence of mismanagement constitute the instruments to achieve this purpose. Although the legislators used vague terms – such as ‘sound reasons to doubt proper management’, ‘mismanagement’ and responsibility for ‘improper management’ – they tailored the procedure precisely to the realization of the purpose referred to above. This is also reflected in the list of parties authorized to f ile an application for an investigation to be held and for measures to be taken, immediately if necessary, and in the measures set out in Article 356, Book 2, Civil Code – and the Minister’s explanatory comments on those measures – which the Enterprise Division can take if the investigation reveals evidence of mismanagement.

234. As is made clear in Chapter 3, in its ruling on the OGEM Holding case the Supreme Court widened the objectives of the inquiry procedure: it found that these objectives comprised not only full disclosure and the restoration of healthy relations through restructuring measures within the company in question, but also the establishment of responsibility for the mismanagement revealed.1 In its ruling on the Text Lite Holding case the Supreme Court added that although in the f irst instance the responsibility in question is likely to be that of various bodies, in the context of handling applications for measures to be taken and for recovery of costs the Enterprise Division is also authorized to establish individual responsibilities for mismanagement or improper management. However, it may not pronounce any judgment regarding the personal liability of executive and supervisory directors for the consequences of the mismanagement.2 In its ruling on the Gucci Group case the Supreme Court stressed that the investigation itself is the core of the inquiry procedure and that if there is no reason to hold an investigation but a need is felt for measures to be taken (I assume that the Supreme Court is referring to both the immediate measures and the measures referred to in Article 356, Book 2, Civil Code) the matter may be brought before the ordinary civil court.3 In my opinion this ruling should be taken to mean that the Enterprise Division is not authorized to handle applications for measures to be taken if the facts are sufficiently clear or the parties have indicated that no investigation is needed. Finally, in its ruling on the DSM case the Supreme Court determined that the Enterprise Division may take immediate measures before it has decided about the application for an investigation to be held, but that it must exercise restraint in using this power, because a provisional judgment made at this stage as to whether there are sound reasons to doubt proper management can be based only on a limited discussion between the parties.4 Although no clear grounds are given relating to this point, I think it is likely that the Supreme Court deems it permissible for the Enterprise Division to postpone the discussion between the parties and the final decision regarding the application for an inquiry, but nevertheless to take immediate measures. However, in my opinion this decision – also in view of the grounds given for the decision on the Gucci Group case and the provisions of Article 349a(1), Book 2, Civil Code which state that the Enterprise Division must treat a request for an inquiry as a matter of urgency – is understandable only if the requirement that the Enterprise Division must ‘exercise restraint’ in using this power is taken strictly and if the circumstances of the company require immediate intervention. I also think that the Enterprise Division should include its provisional judgment that the application for an inquiry is eligible to be granted in its decision, so that the grounds on which the Division determined that it was authorized to make a decision regarding the request for immediate measures can be known (cf.Gucci Group). One final question is whether in cases of this kind the Division always acts in accordance with the fundamental principles of due process of law set out in Article 19 of the Dutch Code of Civil Procedure, specifically the right to be heard and the right to equal chances of success in legal proceedings. This question is particularly relevant if the company does not want the application for an enquiry to be granted.