Introduction
Conflicts that arise within or around a company, between shareholders, between shareholders and directors, or between the company and its directors. Sometimes the issue is money, sometimes control, and sometimes both. Where relationships have broken down and the business suffers as a result, company law offers powerful instruments, but they require the right timing and strategy. The same conflict can often be approached along different routes, and it is that choice which determines how quickly, and with what result, a deadlock is broken. What has the best prospect of success depends on the objective: an investigation into the policy, the restoration of control, a definitive separation or financial redress. Set out below are the situations that arise most often, and for each the route that leads to the objective.
A shareholder is being cornered
Two shareholders who fundamentally disagree can bring a company to a standstill: decisions are blocked, profit distributions stall and the working relationship becomes untenable. For that deadlock the law provides a statutory dispute procedure with two opposing outcomes. One shareholder can be forced to transfer their shares (expulsion), or can themselves withdraw and compel the others to take over their shares. In neither case is the other party’s cooperation required: the court can order the transfer. The real fight then rarely concerns whether it happens, but the value of the shares and the reference date on which that value is fixed. On withdrawal the price can moreover be increased on equitable grounds where conduct of the fellow shareholders has depressed the value of the shares.
Doubt about the company's policy calls for intervention
The inquiry procedure is the most far-reaching instrument in company law, and is heard before the Enterprise Chamber. Shareholders who meet the capital threshold, trade unions and, after bankruptcy, trustees can request an investigation into the company’s policy. If the court sees valid reasons to doubt sound policy, it can intervene immediately: suspending directors, appointing an interim director or supervisor, or departing from the articles of association. This can happen within weeks, which also makes the procedure an effective means of pressure. The immediate measures are in practice often the turning point, because they shift the balance of power at once. Only in the second phase can the court establish mismanagement and impose measures, which may carry over into the question of the liability of those involved.
A director has harmed the company or its creditors
A director acts for the account of the company, but may in certain circumstances be held personally liable where they have improperly performed their duties. This can arise along three routes: internally by the company itself in the event of a serious personal reproach, by creditors where the director entered into obligations on the company’s behalf knowing they could not be met, and after bankruptcy by the trustee for manifestly improper management. A high threshold applies throughout: a clumsy or, with hindsight, mistaken decision is not yet a ground for liability; a serious personal reproach is required. The outcome is therefore rarely determined by the standard itself, but by the evidential position, whether the administration was in order and whether the director was granted discharge.
A supervisory director has failed to exercise adequate oversight
A supervisory director oversees the management board and may, where that oversight falls seriously short, be liable on a footing comparable to a managing director. The bar is high, but not out of reach: a supervisory director who ignores clear warning signs, fails to probe while the risks were apparent, or keeps relying on the board where intervention was called for, may have culpably neglected their task. What is decisive is what the supervisory director knew or ought to have known, and whether they then acted as a reasonably acting supervisor should. The more serious the signals and the greater the interests, the more their role shifts from watching to actively intervening. A supervisory director’s liability rarely stands on its own, but tends to arise alongside that of the board where the same shortcoming affects both.
More on supervisory board liability
Two partners in a general or professional partnership fall out
Unlike a private limited company, a partnership has no shares and no separate legal personality, so a conflict between partners runs along an entirely distinct route. Where the cooperation breaks down irretrievably, the court can dissolve the partnership on serious grounds, or allow a single partner to withdraw so that the others can continue the business. The sting usually lies in the winding-up: the partners remain jointly and severally liable for the debts incurred during the partnership, even after they leave, and it is over the valuation and the final settlement that the hardest battle is fought. The forthcoming Modernisation of Partnerships Act overhauls this area and changes, among other things, the rules on admission, withdrawal and liability.
More about partnership disputes
A conflict within a foundation or association
A foundation or association has no general meeting of shareholders to correct the board, so a conflict over the management has to be resolved along its own path. In the case of a foundation, the district court can remove a director for neglect of duty, mismanagement or other serious grounds, and can itself fill the vacancy so that the organisation remains governable. Such a removal can be requested by an interested party or by the public prosecutor. Disputes further often turn on the validity of decisions taken, for instance where the statutory or internal rules were not followed. Since the WBTR (the Management and Supervision of Legal Entities Act), stricter standards moreover apply to the performance of duties and the liability of directors and supervisors, and the grounds for removing a foundation director have been broadened, including in the not-for-profit sphere.
More about foundation and association law
The annual accounts are incorrect
Where an interested party considers that annual accounts do not meet the statutory requirements, the Enterprise Chamber can be asked to order the legal entity to redraw them in accordance with the court's directions. The procedure is open to anyone with a reasonable interest in correct annual accounts and has its own, relatively short lead time. It is rarely an end in itself: incorrect or unclear annual accounts are often challenged as a prelude to, or in support of, a liability or inquiry procedure, because the figures can shed light on deeper problems within the company. The ruling moreover has effect beyond the procedure itself, because creditors and fellow shareholders can rely on corrected annual accounts in their own assessment of the company.
More on the annual accounts procedure
The works council brings an appeal
Where a works council considers that its right to advise on a major decision has been disregarded, it may appeal to the Enterprise Chamber. The review is deferential: the court does not assess whether the decision is wise, but whether the entrepreneur could reasonably have reached it and whether the consultation process was followed carefully. It is especially relevant to reorganisations, takeovers and decisions affecting employment, because there the interest of the business and that of the employees stand in sharpest opposition. If the appeal succeeds, the Enterprise Chamber can require the entrepreneur to withdraw the decision or to undo its consequences.
More on works council proceedings before the Enterprise Chamber
Proceedings before the Enterprise Chamber
Some corporate disputes are not resolved by an ordinary claim before the district court, but through a dedicated procedure before the Enterprise Chamber of the Amsterdam Court of Appeal, the specialised court for corporate disputes. These cover a range of distinct procedures: from the inquiry into the company's policy, the statutory dispute resolution and the squeeze-out, to the annual accounts procedure, the works council's appeal and the Chamber's role in mergers and demergers. Which route fits depends on the goal: investigation, a definitive separation or reversing a decision. Each procedure has its own admissibility threshold, burden of proof and timeline, and it is precisely those differences that determine which route yields the most in a given dispute.