24 August 2022

Separation following shareholder dispute: a number of options

Category: Corporate law

Differences of opinion are not uncommon among shareholders – not only in challenging times. And often shareholders aren’t able to settle these arguments between themselves. In such cases, the law offers a number of solutions, including legal procedures. The first option is to demand that the other shareholder transfer their shares. The second option is to force the other shareholder(s) to buy up your shares. Another option is dispute division.

Demanding that other shareholders transfer shares

The first option, demanding that the other shareholder(s) transfer their shares, can be found in Article 2:336 of the Dutch Civil Code. In this way, the shareholder is bought out, in a manner of speaking, which is why the regulation is also known as the buy-out regulation. To realise this, the shareholders instituting the demands must own at least 33% of the shares.

Moreover, it is a prerequisite that the actions of the shareholder to be removed do in fact also harm the company’s interests. These are actions, performed in the capacity as shareholder, that jeopardise the company’s operations. They are actions against the company. A shareholder’s actions toward other shareholders are not at issue here.

Forcing shareholders to buy up shares

The second option, forcing the other shareholder(s) to buy up your shares, can be found in Article 2:343 of the Dutch Civil Code. There is no minimum percentage of shares to be held in order to achieve this. What is required is that the rights or interests of the shareholder instituting the demand due to the actions of one or more co-shareholders are harmed in such a way that they cannot reasonably be expected to continue holding shares.

In this process, shareholders’ shares are bought up, in a manner of speaking, which is why the regulation is also known as the buy-up regulation. This mainly applies to minority shareholders who are placed in an untenable situation by majority shareholders. Unlike with the buy-out regulation, misconduct on the part of (other) shareholders is not a requirement in this case. Actions performed in the capacity as shareholder are furthermore not a requirement.

Dispute division

A dispute division is a solution if both parties wish to continue with the same company (or part of it). The law makes it possible to implement this in a legally and fiscally facilitated way. The shareholders continue with a section of the organisation, subsumed into two new companies. The former organisation then ceases its activities. Although this may sound like a straightforward solution, it does also bring its own share of challenges.

These include dividing up the profit capacity, the staff and the debts, among other things. Blenheim would be happy to explain the options and challenges that a dispute division entails.

Blenheim assists you after shareholder disputes

Have you been unable to resolve a dispute with your co-shareholders? Jeroen Latour has overseen numerous processes between shareholders separating after a disagreement. If you have any questions about disputes between shareholders or other corporate law issues, please feel free to get in touch. Blenheim is happy to help.