Emergency financing in the event of an obstructionist shareholder

In times of crisis, it is sometimes necessary to strengthen the equity of the company (NV or BV) through the entry of new shareholders who pay 'fresh' capital against the issue of new shares. For incumbent shareholders, however, this means dilution, and sometimes shareholders try to do everything they can to avoid this.

What if the need arises and one of the shareholders can block the decision-making process without this shareholder being able to provide the necessary financing himself? In this way, an individual shareholder can endanger the continuity of a company, especially if all possibilities to attract external (bank) financing have been exhausted and a liquidity problem must be solved in the short term. This type of situation has occurred in the past, and there is a good chance that history will repeat itself in the corona crisis. That is reason to briefly consider in this blog the criteria developed in case law for breaking such a blockage.

Enterprise Chamber

In the past, the Enterprise Chamber of the Amsterdam Court of Appeal, which is ideally suited to handle this type of relatively complex situation, has already ruled that under special circumstances a so-called "blocking vote" of a shareholder (against the will of that shareholder) can be set aside. However, there are strict requirements for this. There must be:

1. serious liquidity and continuity problems;
2. impasse in decision-making in that the need for funding is recognized but not realized;
3. there is no real prospect of financing by any other means.

If a request to the Enterprise Chamber is granted, the Enterprise Chamber can issue provisional provisions that amount to authorizing the management board to issue shares without the shareholder in question voting in favor of the proposal in question. Incidentally, such a procedure should not be considered lightly, because proceedings before the Enterprise Chamber are drastic for the parties involved and also costly. This is because the Enterprise Chamber has far-reaching powers, and can appoint persons (usually an investigator combined with a temporary director or supervisory director) who can exercise decisive influence within the company.

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