Bill to Review the Right to Institute an Inquiry; Improved Position of Legal Persons
Right to Institute an Inquiry
The right to institute an inquiry is an important tool
to solve disputes and deadlocks within a company. The Enterprise
Section of the Court may interfere in the affairs of a legal person
on the basis of inquiry proceedings. It may appoint one or more
persons to investigate the policy and the course of affairs of a
legal person, if there are valid reasons to doubt the soundness of
management. On the basis of the inquiry, the Enterprise Section
rules whether there is mismanagement, and if so, it may provide
relief if so desired. This way it is possible to suspend or annul
resolutions of the shareholders’ meeting, the board of directors
and the supervisory board, to suspend or dismiss directors and
supervisory directors, and to appoint other directors and
supervisory directors temporarily, and to deviate from the articles
of the association temporarily. In practice it has proved very
important that the Enterprise Section can also provide immediate
relief at each stage of the proceedings, if this is necessary
because of the state of the legal person or in the interest of the
inquiry. In principle, the company bears the costs of the
inquiry.
Bill to Review the Right to Institute an Inquiry
An evaluation of the right to institute an inquiry has
revealed that in general, the right to institute an inquiry
functions well: the proceedings are swift, solution-driven, and
meet the needs from practice. However, there are a number of points
that would benefit from improvement. This is the reason why the
bill was proposed (see the Government Gazette of 2011, no. 16586).
In brief, the following amendments are included in the bill:
- the access to the inquiry proceedings for big public and
private limited companies (NV’s and BV’s) – having an issued
capital of €22.5 million – will be changed: shareholders of
such NV’s and BV’s must have a bigger shareholders’ interest
(of at least 1%) to be allowed to submit a request for an
inquiry;
- the legal person and, in case the legal person goes
bankrupt, the receiver, will be granted the right to initiate
inquiry proceedings on their own;
- the Enterprise Section will give each interested party the
opportunity to submit a written defense up to a certain time
prior to the hearing;
- the weighing of interests developed in case law for the
allowance of immediate relief will be enshrined in law;
- in the event that no inquiry has been ordered yet,
immediate relief will not be provided before the Enterprise
Section has pronounced the preliminary opinion that the right
to institute an inquiry may be allowed;
- if immediate relief is provided before an investigation is
ordered, the Enterprise Section will decide within a reasonable
term after that whether an inquiry will be held;
- the liability exposure of the investigators is limited, and
the expenses scheme concerning the investigators and
temporarily appointed directors and supervisory directors will
be amended;
- the investigators will have to give the persons mentioned
in their report the opportunity to express their views on the
findings (hearing both sides of the argument); and
- an examining magistrate will supervise the inquiry
phase.
Position of Legal Person – and Consequently, Board and
Supervisory Board – Improved
For daily practice, an important change is especially
the right of the legal person to submit its own request for an
inquiry to the court. As it is, the legal person cannot request an
inquiry into the policy and course of affairs. Moreover, the review
framework has been stretched in the bill so that also a
shareholders' meeting or individual shareholders may be
subjected to an inquiry.
With these amendments, the board and/or the supervisory board
may have the conduct and decision-making process of the
shareholders' meeting tested by the Enterprise Section. This
improvement may break a deadlock in the shareholders' meeting,
for example in a 50%-50% situation, where it is impossible to take
decisions. Another example is a deadlock between the board and the
general meeting, when they are supporting substantially different
policies, while the board thinks that the continuation of the
company depends on short-term decision-making. When the general
meeting refuses to consent to the policy supported by the board in
such a case, or gives instructions that the board does not wish to
follow, the interest of the company could be at stake, for example
because there is a risk of large-scale layoffs. Such conduct has to
be sufficiently serious and/or drastic to conclude that there are
valid reasons to doubt the soundness of
management.
Conclusion
If you have any further questions and/or remarks about the
possibilities of the right to institute an inquiry, please contact
Bart de Ruijter or
Pieter Koetsier.