Clarity on transfer of shares by title of management

The Enterprise Chamber of the Amsterdam Court of Appeal ("Enterprise Chamber") is authorized to take fairly far-reaching measures with immediate relief. Those provisions are intended to sanitize and restore mutual relations. In essence, this is the Enterprise Chamber's toolbox for curing sick legal entities. One of these provisions is the transfer of shares by title of management. This temporary measure aims to break a deadlock at the shareholder level, by transferring shareholder rights to an administrator appointed by the Enterprise Chamber. Until recently, the implications for the shareholder and the administrator were not entirely clear. It raised numerous questions, such as whether an administrator could sell the shares, who was entitled to dividends, and who had to report the shares in their tax returns.

Enterprise Chamber: shares transferred not property of manager

Essentially, these questions all trace back to the question of whether ownership passes. Quite recently, the Enterprise Chamber clarified this (hyperlink). It ruled that shares transferred by title of management are not part of the manager's assets. In other words, the transferred shares remain the property of the original shareholder. Many questions have thus finally been answered.

Specifically, which rights does the shareholder retain and which rights pass to the manager?

What does this mean specifically? The transfer by title of management ensures that the corporate law powers associated with the shares are temporarily transferred to the manager, but that the other shareholder rights remain with the shareholder. Even more concretely, the manager may attend shareholder meetings and exercise voting rights on the shares. However, the affected shareholder retains his dividend and pre-emptive rights, in case new shares are issued. The affected shareholder also retains his rights under the dispute resolution and buyout procedure in case he wants to get rid of his fellow shareholder. Incidentally, the Enterprise Chamber does not comment on another important shareholder right, namely the agenda-setting right. Mindful of the rationale of the statutory regulation, however, it seems logical that that right, too, should rest with the manager.

Implications for practice: attachment, lien or sale?

The judgment of the Enterprise Chamber also provides more clarity on these scenarios. An attachment of the shares at the trustee's expense will not be effective, the trustee cannot create a legally valid lien on the shares, the transferred shares will not fall into the estate in the event of the trustee's bankruptcy, and a trustee remains a trustee if the affected shareholder sells his shares