Short Reads

District Court of Amsterdam: The requirements imposed by law on assignment of claims for deprivation of voting rights on shares are largely the same as the requirements for claims for compulsory transfer of shares

Deprivation of voting rights on shares

District Court of Amsterdam: The requirements imposed by law on assignment of claims for deprivation of voting rights on shares are largely the same as the requirements for claims for compulsory transfer of shares

19.12.2016 NL law

That the corporate interests of a company are harmed through the actions of a pledgee holding the voting rights in respect of shares, does not in it itself increase support for a claim for deprivation of such voting rights as would be the case when claiming compulsory transfer of the actual shares - on the contrary, it appears.

Amsterdam District Court 4 May 2016 (ECLI:NL:RBAMS:2016:5819).

The relevant facts in this judgment are that the shares in the Dutch company were held by the claimant and a third party, who were both also the managing directors of the company. The company was party to a junior loan agreement. As security for the obligations under this junior loan agreement, the shareholders of the company  granted, among other things, a right of pledge over the shares in the company in favour of a well-known financial institution. Following an event of default which is continuing, under the junior loan agreement, the voting rights on the shares were transferred to the financial institution.

After several years, the financial institution was requested by the claimant and its co-director to cooperate in convening a formal shareholders' meeting on a number of matters, including the dismissal of the claimant and its co-director as directors of the company and the subsequent appointment of new directors. The financial institution refused,  stating it was not in the corporate interests of the company to replace the directors and that the voting rights did not permit it to convene a formal shareholders' meeting. The claimant asked the court to rule that the decision reached by the financial institution was not in the company’s best interests and that it was no longer possible to expect the financial institution to reasonably exercise its voting rights. The claimant requested the financial institution be deprived of its voting rights and that such voting rights be transferred back to the company's shareholders.

The court ruled that the requirements the law imposes on assignment of a claim for deprivation of voting rights are not materially different to the requirements for a claim for compulsory transfer of shares. The standard of conduct for either claim is composed of the following three elements: (i) it must concern conduct of the shareholder or pledgee, (ii) which harms the corporate interest of the company in such a way that (iii) exercising the voting rights on the shares by either the shareholder or pledgee can no longer be reasonably expected to continue. The second element in this standard of conduct is difficult to fulfil under both types of claim, as the pledgee has a legitimate (financial and practical) interest vested in the use of the voting rights. The court acknowledged that this interest may not always coincide with the interests of the company, but held that the corporate interest must sometimes give way to the vested  interests of the pledgee in order to prevent the erosion of a share pledge as a form of security in financial transactions. In light of this judgment, caution should be exercised when assessing whether the conduct of a pledgee damages the company's corporate interests in such a way that its voting rights should be transferred back to the shareholders.

Team

Related news

23.07.2018 NL law
Evaluatie Wbfo en start consultatie over mogelijke wijzigingen/wettelijke maatregelen voor vaste beloning

Short Reads - Op 17 juli 2018 heeft de minister van Financiën de twee rapporten over de evaluatie van de Wet beloningsbeleid financiële ondernemingen (Wbfo) aangeboden aan de Tweede Kamer. Tevens is een maatschappelijke consultatie naar drie wettelijke maatregelen met betrekking tot de vaste beloningen geopend.

Read more

11.07.2018 NL law
Update initiatiefwetsvoorstel introductie instemmingsrecht en aanscherping vaste beloning bankiers

Short Reads - Op 25 april 2018 heeft de Afdeling advisering van de Raad van State (hierna Raad van State) een kritisch advies uitgebracht over het initiatief-wetsvoorstel om de wet op het financieel toezicht (Wft) te wijzigen. Op 5 juli 2018 is dit advies tezamen met de reactie van de initiatiefnemers van het wetsvoorstel op het advies van de Raad van State gepubliceerd, evenals het aangepaste wetsvoorstel dat is aangeboden aan de Tweede Kamer.

Read more

16.07.2018 NL law
ISDA publishes consultation on benchmark fallbacks

Short Reads - ISDA publishes consultation on benchmark fallbacks. As part of an initiative to amend its standard derivatives documentation to facilitate the replacement of existing interbank offered rates (IBORs) by risk free rates (RFRs), the International Swaps and Derivatives Association (ISDA) has published a consultation paper on certain adjustments required to such RFRs.

Read more

10.07.2018 EU law
Hof van Justitie EU oordeelt over reikwijdte 'beroepsgeheim' financiële toezichthouders voor bedrijfsgegevens

Articles - In een arrest van 19 juni 2018 oordeelt de Grote kamer van het Hof van Justitie EU over de reikwijdte van het 'beroepsgeheim' van financiële toezichthouders voor bedrijfsgegevens. Het hof oordeelt dat de informatie die zich in het toezichtsdossier bevindt niet onvoorwaardelijk vertrouwelijk van aard is en bijgevolg onder het beroepsgeheim van de toezichthouder valt. Gegevens die mogelijk commerciële geheimen zijn geweest, worden in beginsel geacht niet meer actueel en dus niet langer geheim te zijn, wanneer die gegevens ten minste vijf jaar oud zijn.

Read more

Our website uses cookies: third party analytics cookies to best adapt our website to your needs & cookies to enable social media functionalities. For more information on the use of cookies, please check our Privacy and Cookie Policy. Please note that you can change your cookie opt-ins at any time via your browser settings.

Privacy – en cookieverklaring