Claiming transfer of shares in preliminary relief proceedings in The Netherlands

The two shareholders of a Dutch private limited company ( Ltd.) A legal person of which the registered capital is divided in shares
» Meer over private limited company ( Ltd.) private limited company (BV) agree that shareholder A (seller) shall sell 5,850 share The portion of registered capital of a private or public limited company
» Meer over share shares to shareholder B (buyer) against a price of €1. This means that the buyer acquires 90% of the shares. Afterwards, the seller has doubts about the sale and refuses to cooperate in the transfer. The buyer institutes preliminary relief proceedings and demands the transfer. The court in preliminary relief proceedings takes a strong line: transfer, or pay a penalty. Corporate lawyer in The Netherlands Hidde Reitsma explains.

Purchase contract shares transaction 

In the preliminary relief proceedings, the seller argues that at the time he signed the purchase contract he was under a great deal of pressure. He therefore informed the buyer, within 24 hours after signing the contract, that he had doubts. The buyer had alleged to the seller that the financial position of the private company was very poor. The seller began to doubt this story and asked the buyer if he could inspect the company’s financial administration but this had not yet been granted. For this reason he does not want to transfer the shares (yet).

Contract without terms and conditions: a perfect contract

The court completely sets aside this defence. The court finds that the contents of the contract shows that the seller sold the shares to the buyer without any (additional) terms and conditions. This means that this is a perfect unconditional contract and the seller is unconditionally obliged to transfer the shares.

Doubts about an agreed deal? Too late!

That the seller doubts whether he did the right thing does not affect his obligation to transfer the shares. The court also points out that the argument that the seller was under a great deal of pressure and that he might not have been informed fully/correctly about the financial position, is not substantiated by facts and evidence. The court therefore allows the claim of the buyer and orders the seller to transfer the shares subject to a penalty.

Annulment for undue influence or error

In this case the seller had no chance at all: there was a perfect contract and there was no cause for annulment. This might have been different if the seller could have shown that he was indeed under a great deal of pressure at the time the contract was concluded. In that case it could have been argued that the buyer was misusing the situation by influencing the seller into concluding an – obvious – disadvantageous contract. The seller could also successfully have invoked annulment for reason of error if he could show that the buyer intentionally misinformed him or kept information from him and that, if the seller would have had this information, he would not have concluded the contract.

Dutch coporate law firm in Amsterdam

If these situations do not occur or if there is insufficient evidence, you are obliged to comply with the contract. Whether or not there are doubts. We cannot emphasize enough how important it is to always take the time to read a contract carefully before entering into a contract. It is also advisable, if this concerns major contracts or contracts with far-reaching consequences, to seek advice from a lawyer. A lawyer is not only able to assess the risks better, but can also have terms and conditions included in the contract which protect the position of the seller or the buyer. In this case a proviso concerning, for example, inspection of the financial administration might have meant a different outcome.