Inquiry proceedings: when is mismanagement not a mandatory conclusion?
ICTS International: an issue of shares without authorisation affects a minority shareholder
On 13 March 2026 the Supreme Court dismissed the appeal in cassation brought by a minority shareholder of ICTS International N.V. The Enterprise Chamber had earlier held that there had been improper policy, but not mismanagement. The shareholder was unwilling to accept that outcome.
ICTS is the holding company of a group of aviation and airport security providers with approximately 10,000 employees worldwide. In June 2019 ICTS issued 3 million shares to supervisory directors and senior management at USD 0.40 each. The audit committee and compensation committee had approved that issue, but the supervisory board had not been designated as the competent body by the general meeting. At the same time, ICTS reduced the conversion price for majority shareholder Spencer Corporation.
In June 2022 the Enterprise Chamber ordered an investigation. The investigator concluded that the decision-making showed serious defects and made recommendations: to add an independent supervisory director, to withdraw the share issue or have it valued, and to reverse the conversion. ICTS largely followed those recommendations. New supervisory directors took office, additional payments were made, and a buy-back arrangement for the issued shares was agreed.
Supreme Court and Advocate General Assink: discretionary latitude in a finding of mismanagement
In November 2024 the Enterprise Chamber held that the defects amounted to improper policy, but not to mismanagement. The objectives of inquiry proceedings — disclosure of the facts and restoration of sound relations — had been achieved. A finding of mismanagement could seriously harm ICTS, particularly abroad, where the specific meaning of such a finding cannot always be correctly assessed. In these circumstances no interest deserving of legal protection was served (ECLI:NL:GHAMS:2024:3140).
The Supreme Court confirmed this on 13 March 2026. The legal view that the Enterprise Chamber is always obliged to establish mismanagement in the case of serious defects is, in its generality, incorrect. The Enterprise Chamber may attach weight to remedial measures, even where these date from after the first-phase decision (Section 2:355 DCC).
Advocate General Assink provided the legal reasoning in his opinion. He placed the power of the Enterprise Chamber within the statutory framework: the inquiry regime is directed at the interest of the legal entity, the powers are discretionary, and Section 2:355(5) DCC expressly leaves room for the legal entity itself to take measures. Assink referred to the Zinkwit decision, in which the Enterprise Chamber had already left the question of mismanagement open in 1994 after the company had itself remedied the defects. The case annotator IJsselmuiden wrote at the time that a finding of mismanagement "serves no reasonable purpose where the legal entity has itself taken the necessary measures."
Assink also emphasised the difference in gravity between improper policy and mismanagement. The Supreme Court has described mismanagement as "far-reaching". For a company such as ICTS, with foreign clients and a listing on the American OTCQB market, there is a real risk that a finding of mismanagement will be understood as even more far-reaching than it is intended to be.
What does this mean for shareholders and directors?
For majority shareholders and directors, this judgment confirms that prompt and serious remedial measures can prevent a finding of mismanagement. New independent supervisory directors, buy-back arrangements and governance improvements carry weight. The Zinkwit line from 1994 has now been confirmed by the Supreme Court.
For minority shareholders the picture is less favourable. The objectives of inquiry proceedings — including the attribution of responsibility and a preventive effect — may yield to the interest of the legal entity where the harm of a finding of mismanagement outweighs its usefulness. A party conducting second-phase proceedings must set out specifically why a finding of mismanagement remains necessary despite remedial measures. See also the analysis of almost 4,000 Enterprise Chamber decisions and corporate litigation expertise.
Frequently asked questions
Can the Enterprise Chamber always refrain from a finding of mismanagement after remedial measures?
No. The power is discretionary, not automatic. The Enterprise Chamber weighs all the circumstances: the seriousness of the defects, the quality of the remedy, the interest of the legal entity and the position of minority shareholders. A remedy is a factor, not a free pass.
What is the difference between improper policy and mismanagement?
Improper policy is the finding that the policy was not correct. Mismanagement is a more far-reaching qualification that unlocks the possibility of measures under Section 2:356 DCC, such as the dismissal of directors or the transfer of shares. Advocate General Assink emphasises that the gravity of mismanagement is demonstrably greater.
What role does the Advocate General's opinion play in a Supreme Court judgment?
The Advocate General advises the Supreme Court independently. Advocate General Assink's opinion here contained an extensive analysis of the statutory framework, precedents and academic literature. The Supreme Court followed his advice to dismiss the appeal, but gave more concise reasons. The opinion therefore provides the deeper legal foundation.
ECLI:NL:HR:2026:403, Supreme Court, 13 March 2026 | Advocate General's opinion: ECLI:NL:PHR:2025:916, 29 August 2025
Cited case law
Supreme Court: ECLI:NL:HR:2026:403
Advocate General: ECLI:NL:PHR:2025:916
Courts of Appeal: ECLI:NL:GHAMS:2024:3140