The new dispute resolution process

A useful way to end an impasse between shareholders?

It was once so beautifully conceived. An impasse between shareholders could be resolved through the legal dispute resolution process starting in 1989. With this, a shareholder could easily have his shares taken over, or force another shareholder to transfer his shares.

In practice, unfortunately, this dispute resolution scheme proved somewhat less useful. Despite a simplification round in 2012, the processing time remained long (and easy to delay further), the standard for allocation is quite high and there is little room for compensation for damages. Then, when, after long litigation, you finally got the judge to agree to transfer the shares, the next dispute awaited, moreover: the determination of the purchase price. And when that too was finally decided, you usually encountered a company that had long since fallen victim to the dispute. The then chairman of the Enterprise Chamber put it this way: "(...) the cow as the initial stake in the proceedings has shriveled up to its skeleton at the time of partition, with no meat on its bones in other words." So that didn't work. In practice, therefore, the procedure was little used.

We are now 30 years on and the legislature has heard the objections. In 2019, consultations will be completed on a new dispute resolution scheme. This new regulation provides for broadening the grounds for expulsion and retirement as well as shortening the processing time.

Under the old litigation rules, for example, it was still possible to raise the somewhat schizophrenic defense that transfer of shares was not allowable if someone had misbehaved, but not in his capacity as a shareholder. It may sound like an open door, but that defense will soon no longer be valid. A claim to resign can then be brought against one or more co-shareholders who have acted contrary to what is required by reasonableness and fairness to such an extent that the continuation of the shareholding of the shareholder can no longer be reasonably demanded of him. Separately, the procedure will also be simplified. For example, the dispute resolution procedure will be brought into line with the (relatively quick) inquiry procedure, and under circumstances the discussion about the question whether or not a resignation should be granted can be skipped, so that an appropriate purchase price can be determined sooner.

Will this new dispute resolution scheme soon be usable? Personally, I wonder whether it has added value compared to the existing alternatives (such as summary proceedings and inquiry). Nevertheless, I welcome the addition of a means to end a disappointing cooperation between shareholders.

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