9.2.1 What is the relationship between the provider of capital without the right to vote and the company, its management board and the company’s providers of capital with voting rights?

The answer to the question of the relationship between the provider of capital without the right to vote and the company, its management board and the company’s providers of capital with voting rights is determined first and foremost by the nature of the legal concept without voting rights. These legal concepts were discussed in Chapter 4.

Shares without the right to vote are regulated in Article 2:228, paragraph 5 of the Dutch Civil Code (CC). My definition of said shares would be: ‘a share without voting rights is a registered property right, in the shape of a share issued by the private company with limited liability, that represents capital in that private company, to which the rights are statutorily and according to the articles of association of the private company attached, including the right – limited or not – to profits and/or reserves of same private company, to which share, however, no right is attached to cast a vote in the general meeting’. Shares without voting rights are shares of a particular class or indication.

Based on Article 2:216, paragraph 7 CC, several classes of shares may be created which give entitlement to profits and/or reserves, or a combination thereof.

The meeting of shareholders without voting rights is a corporate body pursuant to Article 2:189a CC. This enables this body to have certain powers to be attached to it, including the appointment of managing directors and/or members of the supervisory board. Holders of shares without voting rights have the right to cast their vote in ‘their’ meeting. Managing directors and supervisory board members do not have an advisory vote in the meeting of the shareholders without voting rights. In my opinion, however, the requirements of corporate reasonableness and fairness may give rise to the managing directors (and supervisory board members) being given the opportunity to cast their advisory vote when (important) decisions need to be made, all the more when managing directors are not shareholders at the same time, by the meeting of shareholders without voting rights, if it, in its capacity as a body, has been assigned such powers by the articles of association.

The main rule of Article 2:24d, paragraph 1 CC is that when determining the extent to which the members or shareholders vote, are present or represented, or to which the share capital is contributed or represented shares without voting rights are not taken into account. Exceptions to this main rule are formulated in Article 2:24d, paragraph 2 CC. Based on this main rule, when determining whether a company is a subsidiary in the sense of Article 2:24a CC shares without voting rights are not taken into account. The same applies in the determination of a group company as referred to in Article 2:24b CC. In my opinion, the main rule of Article 2:24d, paragraph 1 CC is inconsistent, because based on Article 2:242 CC in conjunction with Articles 2:244 and 2:252 CC in conjunction with Article 2:254 CC, the authority to appoint and dismiss managing directors and supervisory board members may be vested in the meeting of shareholders without voting rights. If the appointment of managing directors is vested in several classes of shares, many varieties of subsidiaries are possible. Such vesting of authority is a circumstance which in my opinion should be included in the content of the ‘central management’ criterion when determining whether a group or group company is involved.

The exception in Article 2:24d, paragraph 2 CC provides that in the application of Article 2:24c CC shares without voting rights are to be taken into account when determining the presence of a participation. According to the legislator, this prevents companies from using shares without voting rights to evade the obligation to include information on such participations in the financial reports. Article 2:24d, paragraph 2 CC states that when determining whether there is a dependent company as referred to in Article 2:63a, 2:152 and Article 2:262 CC the shares without voting rights should also be taken into account in such private limited company. In the situation where a company holds shares without voting rights in another company, I think this may lead to the structure regime becoming applicable, while such shareholder without voting rights cannot exercise voting powers on the dependent company.

Family companies for which shares without voting rights were issued, may opt for the mitigated structure regime as referred to in Article 2:265a CC, provided the requirement of ‘mutual agreement to cooperate’ and the other requirements of Article 2:265a CC have been met.

The legislator, when introducing shares without voting rights has apparently not realized the implications for several legal provisions of the introduction of such shares. It concerns the concepts ‘majority of the shares’ as referred to in Article 1:88, paragraph 5 CC; ‘ultimate beneficial owner’ in the Wet ter voorkoming vanwitwassen en financieren van terrorisme (Prevention of Money Laundering and Financing of Terrorism Act) and the Wet toezicht trustkantoren (Supervision of Trust Offices Act); the words ‘at least half of the issued capital’ in Article 43 of the Faillissementswet (Bankruptcy Act), and the concept ‘predominantly able’ as referred to in Article 1:141, paragraph 4 CC.

The implementation of shares without voting rights does not lead to problems with transitional rules.

The legal concept of depositary receipts for shares is similar to shares without voting rights. By certification the legal and economic rights of the shares are divided. The shares are transferred to and held by a depositary or administrative office. The depositary or administrative office administrates the shares and issues the depositary receipts to the holder(s) of such depositary receipts. The legal relationship between the administrative office and the holder(s) of depositary receipts is an administrative agreement, embodied in the administration provisions. The relationship between the administrative office and the company is governed by the law and by the articles of association, which means its basis is legal and in accordance with the articles of association. As a shareholder, the administrative office has the control rights initially attached to the shares, while the holders of depositary receipts have the financial rights, such as the right to dividend. Distinction may be made between exchangeable and non-exchangeable depositary receipts, and depositary receipts with limited exchangeability. The distinction between depositary receipts issued with or without cooperation by the company in the former situation has disappeared in the ‘flex-BV’. In the flex-BV the question is whether in the articles of association the right to attend general meetings as referred to in Article 2:227 CC is attached to the depositary receipts. The basic assumption is that the company itself determines whether depositary receipts with voting rights are admitted and if so, in which depositary receipts such right to attend general meetings is vested. The main rule of Article 2:227, paragraph 4 CC provides that the right to attend meetings vested in holders of depositary receipts may only be amended with the consent of such holder. Based on Article 2:227, paragraph 2 CC provisions in the articles of association are possible providing that (i) depositary receipts generally do not have the right to attend general meetings, (ii) all depositary receipts have the right to attend general meetings, or (iii) the right to attend meetings is only vested in certain depositary receipts indicated in the articles of association. Several other rights are statutorily connected with the right to attend meetings, such as the right to be informed of notices convening a general meeting (Article 2:224, paragraph 1 CC), and the right to request the authority to convene a general meeting by a preliminary relief judge (Article 2:220 CC).

The implications of Article 2:227 CC are that when applying Article 3:259 CC to share certificates in a public limited company, only the cooperation of the issuer of the original shares may be accepted if the articles of association provide that the right to attend general meetings is vested in the depositary receipts.

In general terms, Articles 68a and 69 OvergangswetNBW (Transitional law New Dutch Civil Code) are relevant to depositary receipt holders. In addition, Article V.2, paragraphs 1 and 6 of the Overgangsrecht (transitional law of the Implementation act on simplification and greater flexibility of private limited companies) provide specific rules. The company, or at least its management board, should register the depositary receipt holder with the right to attend general meetings in its shareholders’ register as soon as possible, but no later than 1 October 2013. After the law has taken effect, if the shareholders’ register has not been completed one month prior to the date of the first general meeting pursuant to Article 2:194, paragraph 1, last complete sentence CC, then Article 2:223, paragraphs 2 and 3 (old) CC apply. Holders of depositary receipts issued with the cooperation of the company may request in writing that the company registers them in the shareholders’ register as having the right to attend general meetings. If this request is denied by the management board, the depositary receipt holders may request the court to order the management board to register them as having the right to attend general meetings. If depositary receipts of the company’s shares were issued with the cooperation of the company before the moment of the law taking effect, then the company must attach the right to attend general meetings to these depositary receipts in the first amendment of the articles of association, pursuant to Article 2:227, paragraph 2 CC. Until the moment of such amendment of the articles of association, depositary receipts with the right to attend general meetings shall, according to the articles of association, also mean depositary receipts which prior to the law taking effect had the right to attend general meetings attached to them and which are included in the shareholders’ register, and the holders of depositary receipts with the right to attend general meetings may exercise their rights.

The right of usufruct on shares is regulated in Article 2:197 CC. The right of pledge on shares is regulated in Article 2:198 CC. The main rule of both regulations is that the shareholder has the right to vote on the shares on which the right of usufruct or the right of pledge is established. Based on Article 2:197, paragraph 3 CC, and Article 2:198, paragraph 3 CC, respectively, the shareholder loses his right to vote if the voting right is transferred at the time of establishment of the right of usufruct or the right of pledge, respectively, to the usufructuary or the pledgee, respectively, or if such transfer is agreed in writing afterwards between the shareholder and the usufructuary or the pledgee, respectively. Article 2:196a CC is declared applicable, mutatis mutandis. The usufructuary or the pledgee, respectively, must be a person to whom the shares may be transferred freely. If such is not the case, both the regulation on the transfer of the right to vote and the transfer of the right to vote itself should – to put it briefly – be approved by the general meeting. Article 2:197, paragraph 4 CC and Article 2:198, paragraph 4 CC, respectively, provide that the shareholder who does not have the right to vote due to usufruct or pledge, respectively, does have the rights assigned by law to the holders of depositary receipts of shares to which the right to attend meetings is attached. Article 2:22, paragraph 2 CC stipulates that the shareholder who has no right to vote due to a usufruct or a pledge does have the right to attend general meetings. The coming into force of the flex-BV does not alter a legally valid, already established usufruct or pledge on shares, in which the shareholder has transferred his right to vote to the usufructuary or pledgee.

Participation certificates are acquired by payment or contribution and represent capital in the company. Sometimes all rights attached to shares are vested in a participation certificate, except the right to vote. Holders of participation certificates are entitled to part of the profits and/or the liquidation balance (distributions). Participation certificates have a basis in the articles of association and in contracts. The legal relationship between the holder of a participation certificate and the company is regulated by the participation certificate provisions. The coming into force of the flex-BV does not alter the validity of already issued participation certificates.

The relationship between the provider of capital without voting rights and the company, its management board and the company’s providers of capital with voting rights is not solely determined by the nature of the legal concept without voting rights. The internal relationships within the BV also have their role. These relationships were discussed in Chapter 5. These are the mutual relationships between the provider of capital and the general meeting, the management board of the company or the company itself. These relationships reflect the area of tension in which the provider of capital without voting rights finds himself. From an economy and law perspective, these relationships may be analysed with the principal-agent theory. The providers of capital without voting rights must be able to ensure that their interests are also served by the several actors in the corporate context. In the flex-BV, its closed or private nature remains one of the factors governing the internal relationships. The same is applicable to the nature of the cooperation in or through the BV. Both factors, but not only these factors, determine the (legal) standards in the internal relationships. The interest of the company acts as a guideline for the acts of the company’s management board and supervisory board. The legislator seems to take its departure from the combined views on corporate interests.

The management board is autonomous in the exercise of its duties and powers. The dualistic structure is maintained in the flex-BV. According to the articles of association, the general meeting can have the power to instruct the management board. This power is a breach of the dualistic structure and the autonomy of the management board.

The articles of association may provide that the management board must act in accordance with the instructions of another body of the company. The management board must follow such instructions, unless they are contrary to the interests of the company and its undertaking. This also includes the legitimate interests of the provider of capital without voting rights. Based on the concept of ‘body’ in Article 2:189a CC, instructional powers may also be vested in the general meeting of shareholders without voting rights. In my opinion, instructional powers according to the articles of association may be vested in several bodies, pursuant to Article 2:239, paragraph 4 CC.

The freedom of the shareholder to exercise his voting rights is limited by the standard of Article 2:8 CC and the interests of the company. His voting behaviour shall or may be tested against this standard.

In addition to the nature of the legal concept and the internal relationships in the BV, the rights of the providers of capital without voting rights determine the relations between the provider of capital without voting rights and the company, its management board and the company’s providers of capital with voting rights. These rights were discussed in Chapter 6.

All rights are attached to the shares without voting rights, except the right to vote in the general meeting. Section 6.2.3.1 shows an overview of the rights attached to shares without voting rights. The (whole or partial) right to profits and/or the reserves (distributions) of the company is an important right for the shareholder without voting rights. However, according to Article 2:216 CC, this right is not unconditional.

In the general meeting of shareholders without voting rights the power to appoint, suspend and dismiss a managing director and to determine his remuneration may be vested pursuant to Articles 2:242, 2:244, and 2:245 CC, unless the appointment of managing directors is done on the basis of the (full) structure regime. The bottom limit for the appointment is that every shareholder with voting rights may participate in the decision making in respect of the appointment of at least one managing director. Pursuant to Article 2:244 CC several bodies may be authorized to dismiss a managing director. Shareholders without voting rights may enlarge their influence in the company by appointing a managing director of their own. Such managing director will have to take the corporate interests into account and not just the interests of his supporters. The assignation and deprivation of the power by the meeting of the shareholders without voting rights to appoint, suspend or dismiss a managing director may only be done in unanimity during a meeting in which the issued capital is represented in its entirety. In such a resolution to amend the articles of association, the shareholder without voting rights is protected by the provisions in Article 2:231, paragraph 4 CC. The articles of association may provide that the meeting of the shareholders without voting rights may also appoint a managing director on nomination, pursuant to Article 2:243, paragraph 5 CC.

The rules governing the appointment, suspension and dismissal of supervisory board members follow to a high degree such rules in respect to managing directors. These powers may also be vested in the meeting of the shareholders without voting rights by the articles of association.

Article 2:206a CC stipulates that the shareholder without voting rights does not have a pre-emption right in respect of an issue of shares of any class. The articles of association may derogate from that. If that is the case, then such pre-emption right may, in my opinion, be circumvented by issuing ordinary shares and subsequently certifying them and issuing them with new providers of capital without voting rights. In situations concerning a pre-emption right in respect of an issue of shares, shareholders without voting rights may derive protection from corporate reasonableness and fairness. The holder of ordinary shares has no pre-emption right in respect of an issue of shares without voting rights. Shareholders without voting rights may, as part of the right of first refusal provision in Article 2:195 CC, only consider offered shares without voting rights. The articles of association may derogate from these main rules.

In many cases, shareholders without voting rights are protected. I refer to the overview in section 6.2.3.6. Two of these protection rules call for special attention, Articles 2:216, paragraph 8 and 2:231, paragraph 4 CC. In my opinion, the right of consent as referred to in Article 2:216, paragraph 8 CC calls for a narrow interpretation. It regards amendments to the articles of association affecting the financial rights directly attached to those shares rather than an amendment to the articles of association affecting the right to profits and/or reserves (distributions) in the company, but nonetheless affecting such financial rights attached to those shares indirectly. Article 2:231, paragraph 4 CC provides that for shareholders without voting rights a resolution to amend the articles of association that specifically affects any of their rights requires a consenting resolution from this group of shareholders. It concerns affecting specific rights attached to these shares and a limitation of rights which are also attached to other shares, but whose limitation then only applies to the specific shares referred to rather than to other shares. The right to amendment may be reserved at the time of the assignation of the rights in the articles of association pursuant to the unless-clause in Article 2:231, paragraph 4 CC. In my opinion, the article of association can be formulated so that a single resolution of the general meeting can amend or remove such right. To my mind, Article 2:231, paragraph 4 CC will quickly be applicable in practice, considering the purpose and content of the provision.

Shareholders without voting rights must consent to decision making outside a general meeting. The absence of consent renders the decision contrary to it (only) voidable, in my opinion, considering the intended liberalization of the decision making outside the general meeting. Consent is not necessarily explicit and may be given electronically. In decision making outside a general meeting the role of the provider of capital with the right to attend general meetings but without the right to vote appears marginal to me.

Shareholders without voting rights may be bound to obligations under the articles of association as provided in Article 2:192 CC, but not necessarily so. They have the option not to consent to the proposed obligation under the articles of association. Then it is a matter of ‘being personally not bound’ (persoonsgebonden nietgebondenheid), whether or not the shareholder without voting rights has acquired more shares after the amendment of the articles of association, by which the obligations were introduced.

For the application of the buy-out provision in Article 2:201a CC the shares without voting rights in a BV are also taken into account, as provided in Article 2:24d, paragraph 2 CC.

The articles of association of a BV may include a provision that shares without voting rights may be converted to ordinary shares. As a result of such conversion, the shareholder without voting rights gains the right to vote in the general meeting.

Based on Article 2:181, paragraph 1 CC, in case of conversion of a BV to an association, a cooperative, or a mutual insurance society, the shareholder without voting rights becomes a member of such legal person, unless he files a request to the company for compensation of his loss of the shares. At first instance, the parties will have to negotiate an agreement on the scope of the rights of the shareholders without voting rights in the converted legal person. Article 2:181, paragraph 3 CC provides the withdrawal right of the shareholder without voting rights if the private company with limited liability (BV) is converted to a (public) company limited by shares (NV). Shares without voting rights are not part of any NV. In a conversion, the shareholder without voting rights must therefore become a shareholder with a right to profits and a (perhaps small) right to vote in the general meeting. If the shareholder without voting rights does not consent to the conversion, he may request compensation.

Article 2:181, paragraph 4 CC contains a provision for the compensation which must be included in the proposal for the conversion. The share valuation provision, the compensation provision or a similar provision in a shareholders’ agreement or in the articles of association as referred to in Article 2:181, paragraph 4, third sentence CC must regard conversion specifically, in my opinion, if said provision should be applicable in case of conversion. Article 2:181, paragraph 5 CC excludes the application of Article 2:231, paragraph 4 CC, because it does not speak for itself to grant voting rights to shareholders without voting rights when far-reaching decisions need to be made. Double protection is thereby prevented. Article 2:181, paragraph 6 CC states that the judicial authorization required for the conversion of a BV to a foundation or an association shall be denied if the interests of the shareholders without voting rights have not sufficiently been considered.

I question the regulation of the position of the shareholders without voting rights in the case of conversion. It is uncertain whether shareholders without voting rights will be able to return in a comparable position, considering the nature of the converted legal person. If such shareholder does not choose to do so, then it is doubtful whether the amount of compensation can easily be established.

Another point of criticism is that it is unclear what ‘shares cease to exist’ means. To me, it speaks for itself that at the same time as the conversion takes effect, the BV decides to revoke the shares without voting rights.

If a BV is converted to a general partnership (vennootschap onder firma) the BV is legally dissolved. Pursuant to Article 2:23b CC the shareholders without voting rights are entitled to the liquidation balance, unless such is excluded by the articles of association. In the situation where a partnership (personenvennootschap) is converted to a BV, during or after the incorporation the owners of such partnership are free to choose to have shares without voting rights in the capital of the BV.

In case of merger and division the position of the shareholders without voting rights is to a great extent comparable to their position in case of conversion to another legal person. The merger between a BV ceasing to exist and an acquiring NV are especially relevant to the shareholders without voting rights and to the legal practice. Shares without voting rights are not part of any NV. Negotiations will have to be conducted with the shareholders without voting rights on their position as shareholders after the merger. After the merger, such negotiations may result in a BV in which their position as shareholders without voting rights is the same, or they may result in conversion of their shares to shares with voting rights or with rights to profits. Both parties may also decide to part ways or either party may decide not to wish to continue with the other party. In that case, compensation will need to be negotiated. The position of the shareholders without voting rights can be strengthened pursuant to Article 2:317, paragraph 4 CC, for instance because the merger resolution requires the consent of every shareholder without voting rights or the approval of the general meeting of shareholders without voting rights.

Article 2:330, paragraph 1 CC contains a main rule for the merger resolution of the general meeting. In addition, pursuant to Article 2:330, paragraph 2 CC an approving resolution is required of each group of holders of shares without voting rights whose rights are affected by the merger. The reason for such protection is that the BV itself may also be an acquiring company. Moreover, special powers may have been assigned to the meeting of shareholders without voting rights. In that case, Article 2:231, paragraph 4 CC does not apply. In derogation from Article 2:311 CC the shareholder without voting rights of the BV ceasing to exist may file a request for compensation, if he is not a shareholder in the acquiring NV, pursuant to Article 2:330a CC. The regulation therefor is the same as for conversion.

In a triangular merger as referred to in Article 2:333a CC the obligation to compensation pursuant to Article 2:330a CC lies with the group company; the acquiring company is exempt. If the group company is a BV, shares without voting rights in the group company-BV can also be acquired by the shareholders without voting rights of the company ceasing to exist.

In case of cross-border mergers pursuant to Article 2:333h CC the shareholder without voting rights of the company ceasing to exist may request compensation from that company, up to a month after the merger resolution. Article 2:330a CC does not apply to cross-border mergers.

The regulation concerning division and the related position of the shareholders without voting rights is to a great extent comparable to the regulation concerning merger. Article 2:334m CC contains general regulation for division resolutions. For divisions, pursuant to Article 2:334m, paragraph 4 CC the articles of association may, in derogation from paragraph 3 of said Article, also contain a regulation for division resolutions, so that the position of the shareholders without voting rights may be strengthened. Among others, Articles 2:334ee and 2:334ee1 CC are relevant to the division of a private limited company or of a private limited company being incorporated as part of a division. The latter Article stipulates the compensation for shareholders without voting rights if the acquiring company is not a BV. These provisions are the counterparts of the applicable provisions in case of merger (Articles 2:330 and 2:330a CC). Also, an approving group resolution is required from the shareholders without voting rights whose rights are affected by the division. In that case, Article 2:231, paragraph 4 CC does not apply either.

The literature states, in my opinion aptly, that it is inexplicable that in case of a contentious division (ruziesplitsing) pursuant to Article 2:334cc CC shareholders without voting rights in the dividing BV should not be given an equivalent position in the acquiring (limited) companies. Moreover, the legislator apparently and mistakenly, as is equally aptly stated in the literature, presupposes that all shares without voting rights are placed under one of the acquiring companies and all other shares in the other acquiring company. That is also not necessarily the case. If it is, this situation can easily be resolved. In a division, the acquiring company may issue shares with voting rights to the (former) shareholders without voting rights.

In the simplified division of Article 2:334hh CC the shareholder without voting rights has no right to compensation. After all, there is no company ceasing to exist. In a proportionate division, pursuant to Article 2:334hh CC the shareholders without voting rights may become the holders of a different ‘class’ of share without voting rights. Other financial rights may be attached to such shares than to the original shares, for instance a more limited right to profits. They are protected by the approving group resolution of Article 2:334ee, paragraph 2 CC.

The provision of the triangular division pursuant to Article 2:334ii CC is identical to the triangular merger provision as referred to in Article 2:333a CC. For the position of the shareholders without voting rights Article 2:334ii, paragraph 3 CC is relevant, whose basis is that the obligations of the acquiring company are imposed upon the group company issuing the shares as well as upon the acquiring company. As the compensation provided in Article 2:334ee1 CC for holders of shares without voting rights is related to the assignation of shares, the acquiring company in Article 2:334ii, paragraph 3 CC is exempted from the obligation as referred to in Article 2:334ee1, paragraph 1 CC. It is, in my opinion aptly, stated in the literature on this matter that if the group company is a BV, the shareholders without voting rights of the dividing company may also acquire shares without voting rights in the group company-BV.

It is my opinion that from the foregoing follows that the legislator has not succeeded in formulating a simple regulation concerning shares without voting rights.

By certification the legal and economic rights of the shares are divided. An overview of the rights attached to depositary receipts in the triangular relationship between the holder of the depositary receipt, the administrative office and the BV is found in section 6.3.3.1.

The literature states that the administrative title leads to the basic assumption that the administrative office has to take the short-term and long-term interests of the holders of depositary receipts into account in exercising their right to vote in the general meeting, irrespective of the standards arising from the articles of association of the administrative office and of its administrative provisions. These interests may not be disproportionately affected. The influence of the holders of depositary receipts on the voting behaviour of the administrative office depends on each separate case and is determined by the content of the articles of association of the administrative office and its administrative provisions. If the holders of depositary receipts have the right to attend general meetings, their influence on the decision making shall increase (further), as is also the case for shareholders without voting rights.

The assignation of the right to attend general meetings determines the position of the holders of depositary receipts. The right to attend general meetings and the associated rights are relevant both to their influence on the decision making and to the validity of the decision making. These are important rights for these holders of depositary receipts. Based on Article 2:228, paragraph 2 CC provisions in the articles of association are allowed providing that depositary receipts generally do not have the right to attend general meetings; that all depositary receipts have the right to attend general meetings; or that the right to attend general meetings is only vested in certain depositary receipts indicated in the articles of association. The basic assumption is that the company, or at least its general meeting, determines whether depositary receipts with the right to attend general meetings are admitted and if so, in which depositary receipts such right to attend general meetings is vested. There are two ways to attach the right to attend general meetings to depositary receipts, namely (i) assignation by articles of association, and (ii) assignation by a body to which this power is assigned in the articles of association. Article 2:227, paragraph 4 CC stipulates that the right to attend general meetings assigned to holders of depositary receipts by the articles of association may only be amended with the consent of such holders of depositary receipts, unless the power to amend was explicitly reserved in the articles of association with the assignation of the right to attend general meetings. Depriving depositary receipts of the right to attend general meetings can be done in three ways. Firstly, in articles of association the right to attend meetings is attached to the depositary receipt, but deprivation or amendment of that right has not been reserved. The holder of depositary receipts will have to consent to depriving his depositary receipt of the right to attend general meetings. Secondly, in articles of association the right to attend meetings is attached to the depositary receipt, and deprivation or amendment of that right has been reserved in the same provision of the articles of association. The depositary receipt may be deprived of the right to attend general meetings pursuant to the unless-clause in Article 2:227, paragraph 4 CC (without consent from the holder of the depositary receipt for such deprivation being required). Thirdly, the power to assign and deprive the right to attend general meetings is assigned to a body of the company as referred to in Article 2:189a CC. Such body may deprive the depositary receipt of its ght to attend general meetings without consent from the holder of the depositary receipt.

In decision making outside the general meeting the position of holders of depositary receipts with the right to attend general meetings is equal to the position of shareholders without voting rights. In decision making outside the general meeting the depositary receipt holder without the right to attend general meetings does not have to be taken into account. After all, he does not have the right to attend general meetings.

The legal right of pledge is vested in the holder of a depositary receipt, pursuant to Article 3:259 CC. In my opinion, no distinction needs to be made between depositary receipts whereby the right to attend general meetings has been assigned by the articles of association and whereby such right has been assigned by a body. he deprivation of the right to attend general meetings from the depositary receipts by a body appointed to do this by the articles of association causes the legal right to pledge to cease to exist, just as the attachment of the right to attend general meetings to the depositary receipt causes the legal right of pledge to come into existence.

The question whether depositary receipts are exchangeable or not is also relevant to the relationship between the holder of such depositary receipt and the company. Depending on the answer to that question, the depositary receipt holder may exchange his depositary receipt for a share, so that his right to vote ‘is resurrected’ and he will see – depending on the balance of votes in the general meeting – an increase in his influence on the decision making. If in the administrative provisions the exchangeability of depositary receipts is not mentioned, my opinion is that the basic assumption should be that they are not exchangeable.

In case of conversion of the BV to a partnership, the position of the depositary receipt holder is the same as that of the shareholder without voting rights, except that the administrative office – as a shareholder – exercises its voting right on the dissolution resolution. The depositary receipt holder with the right to attend general meetings shall be involved in the decision making process due to this right to attend general meetings. If a BV is converted to an NVand the NV considers the depositary receipts as having been issued with the cooperation of the company, then the consent of the depositary receipt holder with the right to attend general meetings is, in my opinion, not required in respect of the necessary amendment of the articles of association as part of the conversion. If depositary receipts issued with the cooperation of the company are not part of the NV or if the NV regards them as issued without cooperation, the depositary receipt is then deprived of the right to attend general meetings and, pursuant to Article 2:227, paragraph 4 CC the consent of the holder of the depositary receipt is required.

In a merger resolution pursuant to Article 2:317 CC the administrative office exercises the right to vote on the shares in the general meeting on behalf of the holders of depositary receipts. The administrative office will thereby have to take the interests of the holders of depositary receipts into account. The articles of association of the administrative office may provide that the merger resolution, or more generally the resolution to amendment of the articles of association, requires approval by the meeting of depositary receipt holders. In important resolutions, such as mergers, dissolutions and conversions, the administrative office should, in my opinion, consult the holders of depositary receipts – insofar as such an obligation is not yet included in the administrative provisions – before casting its vote in the general meeting. The administrative office will have to vote for or against the merger resolution, taking into account the results of the vote in the meeting of the depositary receipt holders, corresponding to the number of votes for and against in the meeting of the depositary receipt holders. Considering the procedure as described in Article 2:317 CC, the holders of depositary receipts with the right to attend general meetings shall also in this case be involved in the decision making in the BV in respect to the dissolution. I think Article 2:227, paragraph 4 CC does not apply in case of merger and division. Nor do Articles 2:216, paragraph 7 and 2:330, paragraph 2 CC offer protection to the holders of depositary receipts.

In a merger between a company ceasing to exist with depositary receipts with the right to attend general meetings and an acquiring company without depositary receipts or only with depositary receipts without the right to attend general meetings, the position of depositary receipt holders in the company ceasing to exist is in my opinion that they should in principle be given identical membership rights in the acquiring company.

In a merger of two BVs I think that the legal right of pledge pursuant to Article 3:259 CC becomes invalid if there are depositary receipts with the right to attend general meetings in the company ceasing to exist and depositary receipts without the right to attend general meetings in the acquiring company.

The shareholder whose right to vote is transferred to the usufructuary or the pledgee has a membership relationship with the company. They share the same rights as depositary receipt holders with the right to attend general meetings, as stipulated by Articles 2:197, paragraph 4 and 2:198, paragraph 4 CC, respectively. In addition, pursuant to Article 2:206a CC they have a pre-emption right in respect to an issue of shares, as opposed shareholders without voting rights.

Participation certificates are not legally provided for. For the relevant rights and obligations the participation provisions, which have contractual freedom, will have to form the solution. As there is no membership relation between the holder of a participation certificate and the company, such holder has a different organizational relationship with the company. The (meeting of) holders of participation certificates (is) are not a body of the company. Generally speaking, the participation provisions will mainly assign financial rights, not control rights, to the holders of participation certificates. The most important right is the right to profits, and perhaps a right to liquidation surplus (distributions). Such right to profits is based in the articles of association. In my opinion, a basis in articles of association is not required for the issue of participation certificates. The holder of a participation certificate is protected by Article 2:232 CC when the rights attached to his participation certificate are affected. He must consent to an amendment of the articles of association affecting his rights, unless the power of amendment has already been reserved at the issuing of the participation certificate.

Participation certificates may be (re)purchased by the company. In doing so, the requirement of Article 2:207, paragraph 2 CC will have to be met. Participation certificates cease to exist by such (re)purchase, due to intermixture. Unless a withdrawal clause has been included in the participation provisions, to my mind, participation certificates may only be withdrawn with the consent of its holder.

Article 2:320 CC contains a provision for the holder of a participation certificate in the company ceasing to exist in case of a merger. This Article stipulates that the holder of a participation certificate in the company ceasing to exist shall receive an equivalent right in the acquiring company, or a compensation. Regarding the position of the holder of a participation certificate in case of a division, Article 2:334p CC applies. This article is almost identical to Article 2:320 CC. For conversions, mergers and divisions it is stipulated that corporate reasonableness and fairness towards the holder of the participation certificate must be observed. In conversions, the holder of a participation certificate may also derive protection from Article 2:232 CC.

Based on Article 2:216, paragraph 3 CC the shareholder without voting rights and the shareholder whose voting rights have been transferred to the usufructuary or the pledgee can be liable for distributions received by them, even if these holders of the right to vote in general meetings may not cast their votes on the distribution resolution. If they were informed by the management board on the possibility of adverse effects of any intended resolution, they may not invoke their good faith.

Whether the holder of a depositary receipt pursuant to Article 2:216, paragraph 3 CC is obliged to repay what he has received, in my opinion depends on the answer to the question whether the depositary receipt does or does not have the right to attend general meetings attached to it. I think the holder of a depositary receipt with the right to attend general meetings should be put on a par with the shareholder without voting rights and the shareholder whose voting right has been transferred to the usufructuary or the pledgee. As a beneficiary shareholder, the administrative office will be able to seek recourse from such holder of a depositary receipt. A relevant provision will be or will have to be included in the administrative provisions. If the latter is not the case, I think the suppletive effect of the reasonableness and fairness pursuant to Article 6:248, paragraph 1 CC can be invoked. In my opinion, the holder of a depositary receipt without the right to attend general meetings cannot be liable, at least that he can invoke his good faith, unless the management board informs him on adverse effects of the resolution of distributions prior to the passing of that resolution.

The holder of a participation certificate can invoke good faith if he is being held liable for reimbursement of what he has received, unless the management board of the company also informs the holder of a participation certificate of the adverse effects of an intended resolution prior to the decision making in the general meeting on such distributions.

Absent providers of capital with the right to attend general meetings but without the right to vote cannot be informed about the warnings of the management board. Such providers of capital with the right to attend general meetings should receive a convening notice as well as the meeting’s agenda. It seems to me that not attending the general meeting is a risk to providers of capital in that respect.

The shareholder without voting rights, the holder of a depositary receipt with the right to attend general meetings and the shareholder whose right to vote has been transferred to a usufructuary or a pledgee can (voluntarily) decide not to exercise their right to attend general meetings, provided that it is sufficiently definable, for instance for a certain period of time, or for several general meetings. Considering the far-reaching consequences, I would not just like to assume that deciding not to exercise one’s right to attend general meetings can be assumed by implication. Deciding not to exercise the right to attend general meetings also means aiving the rights attached to such right to attend general meetings, such as the right to convene general meetings. Deciding not to exercise the right to attend general meetings in my opinion also means that the person with the right to attend general meetings waives his right to consent in respect of decision making outside the general meeting.