Shareholders’ agreement decisive in conflict

In January 2014, the judge hearing the application for interim relief at the Amsterdam district court was required to pronounce on the continued operativeness on a company of a shareholders’ agreement. Company law specialist Marco Guit explains the judgment by the judge hearing the application for interim relief on this question.

Company statutes or shareholders’ agreement more important?

An authorised director who was threatened with dismissal demanded a prohibition of his dismissal, citing the shareholders’ agreement between the parties. The provisions of this shareholders’ agreement deviated from those in the articles of association A document, drawn up when a Dutch company or legal person is set up, and which regulates the operations of the company and defines its purpose.
» Meer over articles of association Articles of Association relating to the dismissal of an authorised director. The question before the judge was therefore in effect whether greater weight should be given to the articles of association the shareholders’ agreement in this case.

‘Authorised director must stand down’

The limited company (B.V.) in question had four shareholders, three of whom were also authorised directors. Apparently, the partnership between them had foundered and one of the authorised directors was told by the others that he must stand down. The issue was therefore the threatened dismissal of a statutory director. The articles of association of the B.V. specified that a statutory director could be dismissed if the general meeting of shareholders so decided by a two-thirds majority.

Director invokes shareholders’ meeting

If three of the four shareholders were to agree to the dismissal, the majority required by the articles of association would therefore have been achieved. However, the shareholders had also concluded a shareholders’ agreement, and that agreement specified that a decision to dismiss an authorised shareholder could only be taken by a unanimous vote. The director who was threatened with dismissal demanded a prohibition of his dismissal in interlocutory proceedings, citing the shareholders’ agreement between the parties.

Continued operativeness on the legal relationship within the company

The judge hearing the application for interim relief ruled that agreements laid down in a shareholders’ agreement under article 2:8 of the Dutch Civil Code are operative on the legal relationship within the company. Article 2:8 stipulates that all those involved in a legal person must behave reasonably and fairly towards one another. The judge did observe that exceptional circumstances may arise which can lead to shareholders not being required to observe a shareholders’ agreement in full.

Exceptional circumstances not demonstrated

The judge did therefore make a caveat here. However, in the judge’s view, there were no such exceptional circumstances in this case, or at least they had not been demonstrated. The authorised director who was threatened with dismissal could therefore invoke the shareholders’ agreement and successfully demand a prohibition of his dismissal. After all, the required unanimity stipulated by the shareholders’ agreement was absent.

Lawyer in dispute over shareholders’ agreement

As in the judgment we dealt with in this blog on 17 June, great importance was attributed in this judgment to the agreements made between the parties in the shareholders’ agreement. A good shareholders’ agreement can therefore be decisive when disputes arise between shareholders. The company law specialists at AMS Advocaten have years of experience with shareholders’ agreements.