Background
Current situation
Proposed changes
On September 8 2011 the minister of justice and security sent a draft bill on the amendment of enquiry proceedings to the lower house of Parliament. The reason for the draft bill is to improve enquiry proceedings in certain respects. The draft bill includes amendments regarding access to and procedural aspects of enquiry proceedings. To some extent, the amendments involve the codification of set jurisprudence of the Enterprise Chamber of the Amsterdam Court of Appeal (the Enterprise Court). The draft bill is not expected to come into force for another two years.
Currently, shareholders that jointly hold at least 10% of the share capital or have a minimum interest of €225,000 in a Dutch private limited liability company (BV) or public limited liability company (NV) may request the Enterprise Court to order an enquiry into the management and affairs of the company. Under certain conditions, employee organisations and the advocate general of the Amsterdam Court of Appeal also have this right. If the Enterprise Court finds well-founded reasons to believe that there was improper management, it can order an investigation into the affairs of the company. In addition, the court may order interim measures, such as a temporary order prohibiting the company from implementing certain corporate resolutions or the temporary appointment of supervisory directors (eg, to safeguard minority rights), if it deems that these are necessary given the company's situation or in the interest of the enquiry. If, following the investigation, the court finds that there was mismanagement, it can – at the request of the petitioner – order certain measures such as voiding corporate resolutions or dismissing board members.
Over the years the Enterprise Court has become the specialist court for all types of corporate battles and has issued many high-profile decisions.
Amendment of access to enquiry proceedings
Shareholders
In order to request an enquiry into a BV or NV with an issued share capital of more than €22.5 million, shareholders will need to hold at least 1% of the share capital. If the shares of the company are listed on Euronext Amsterdam, an interest of €20 million will be sufficient. This change is proposed as it is currently very easy for shareholders to access the Enterprise Court, given the low thresholds. Pursuant to the draft bill, persons having a relatively low stake in a large company will no longer be able to initiate enquiry proceedings. The position in respect of BVs and NVs companies with a lower share capital remains unchanged.
Company
Under the draft bill, not only the shareholders but also the company itself will have the right to request the Enterprise Court to order enquiry proceedings. This aims to eliminate the differences in position between the shareholders and the board with regard to bringing disputes involving corporate relations to the court. The board of the company will be able to request the judgment of the court on:
- specific shareholders' resolutions;
- the conduct of the general meeting of shareholders or of individual shareholders; and
- the conduct of the previous board of directors or of another corporate body.
The entity could, for instance, request an enquiry into the conduct and decision making of the general meeting of shareholders in order to break a shareholder deadlock or end an impasse between the board and the general meeting. Not only the board, but also the supervisory directors and the receiver (in case of bankruptcy), can file such requests.
Amendment of procedural aspects of enquiry proceedings
The draft bill includes the following procedural amendments:
- The Enterprise Court will set a date by which every interested party may file a statement of defence against the enquiry request. This date will be scheduled in advance of an Enterprise Court hearing (normally one week in advance) so that each interested party has sufficient time to review the statements of defence and prepare for the hearing. At present, there is no rule on this, and statements of defence can in principle be filed right up to the time of the hearing. As a consequence of the change, the company and other interested parties will no longer be unexpectedly confronted with statements of defence containing a separate request for interim measures just before the hearing.
- The court will be able to order interim measures only if it has provisionally decided to grant the enquiry request. This change is proposed in light of the practice which has developed whereby parties request an enquiry and interim measures, and the court then orders interim measures without ever ordering an enquiry. In effect, the court has increasingly been used as a specialised court for injunctive relief. The draft bill seeks to amend this practice by stipulating that interim measures are possible only if there will also be an enquiry.
- An examining judge appointed by the court will supervise the enquiry to safeguard due process. Interested parties can request that the judge issue instructions regarding the way that the investigations are executed – for instance, regarding the obligation of the investigators to hear both sides. This is a significant change, as the court-appointed investigators currently have relatively free rein and discretion as to how they conduct their investigations.
For further information on this topic please contact Jeroen Ouwehand or Joost Heurkens at Clifford Chance LLP by telephone (+31 20 711 9000), fax (+31 20 711 9999) or email ([email protected] or [email protected]).