Buy-out / squeeze-out proceedings in The Netherlands
I. General and special buy-out proceedings
For a majority shareholder there are two possibilities to buy-out the minority shareholder(s).
A shareholder with more than 95% of the issued share capital of a Dutch company can initiate
general buy-out proceedings (in Dutch: “Uitkoopprocedure¨) against the (possibly: unknown) minority shareholder(s).
This is determined in article 2:92a Dutch Civil Code (in Dutch: “Burgerlijk Wetboek”).
After implementation of the Takeover Directive (Directive 2004/25/EC) it is also possible to commence a special buy-out proceedings that can be initiated after completion of a public offer (in Dutch: “Openbaar Bod”) for shares listed on the regulated market. The special buy-out proceedings is implemented in article 2:359c Dutch Civil Code.
Shareholders holding less than 95% of the share capital in a target company have different possibilities obtaining 95% and thus trying to squeeze-out or dilute minority shareholders, for instance through acting in concert, legal merger, issue of new shares, et cetera.
The (compentent) court for both proceedings is the Entreprise Chamber of the Court of Appeal (in Dutch: “Ondernemingskamer”), located in Amsterdam. As of 2013 the High Court will be located at “Wester IJdock”, no more than 100 meters away from Blenheim attorneys.
In both proceedings the shareholder with 95% will have to initiate proceedings with a writ of summons, served to the minority shareholder(s). If it is a listed company, unknown shareholders will have to be served by placing an advertisement in a national daily newspaper. An important difference between both proceedings is that the special buy-out proceeding has to be intiated within three months after the public offer. In both proceedings it is possible that two or more companies (together holding 95% of the issued and voting rights) jointly commence proceedings for the (forced) transfer of shares.
The Enterprise Chamber decides whether or not the minority shareholders are forced to transfer their shares and is to determine the buy-out price. The minority shareholder who has no desire to be forced to sell his shares, may escape under certain circumstances. If the claiming party (bidder) loses the percentage of 95% during the procedure, the claim will be denied (for instance if purchase options are exercised during the proceedings). If the presented valuation is not clear for the Enterprise Chamber or parties dispute about the value, it is a possibility the Enterprise Chamber appoints one or more valutators/experts to determine the fair price. The bidder is usually required to pay the costs of any expert appointed.
In the general buy-out proceeding the Enterprise Chamber must deny the buy-out
claim in three circumstances, which circumstances do not apply in case of the special buy-out proceedings.
Another important difference between the general and special buy-out proceedings, is that the squeeze-out in the special buy-out proceedings can only be exercised in the class of shares in which the 95% has been reached. The general buy-out proceedings does not have this limitation.
It is also important to know that in the special buy-out proceedings, the price offered in the public tender is considered to be the reasonable price, but only if at least 90% of the shares was acquired throughout the public offer. It is nevertheless still possible that the Entreprise Chamber appoints valuators/experts.
If the majority shareholder holds 95% or more of the issued share capital, the buy-out proceedings will result in a verdict that the minority shareholder(s) must transfer their shares to the majority shareholder against payment by the majority shareholder of the buy-out price as determined by the Enterprise Chamber.
III. Blenheim Attorneys
For further information, please feel free to contact Jasper Hagers.