Background of the Wagevoe
The Wagevoe was created to improve the effectiveness of dispute resolution procedures. This was motivated by the idea that dispute resolution procedures are not of substantial value in practice, while both the shareholders and the company itself and its employees benefit from an effective dispute resolution procedure. The company and the interests involved generally do not benefit from bickering shareholders.
In addition, the Wagevoe was introduced to clarify the admissibility requirements for an inquiry procedure, as research has shown that listed companies with a high market capitalization can make access to the inquiry procedure more difficult by assigning a low nominal value to the issued shares. This is consistent with the goals of the 2012 Law on Adaptation of Survey Law and is being rectified through the Wagevoe.
The dispute resolution process
When a conflict arises between shareholders within a company, shareholders have the option of seeking a forced transfer of shares or voting rights through the dispute resolution procedures. Another option is to have the court determine the price at which the shares should be transferred.
The litigation regime provides for four procedures, namely the 1) squeeze-out (Article 2:336 Civil Code ("BW")), 2) transfer of voting rights in case the voting right is vested in a usufructuary or pledgee of shares (Article 2:342 BW), 3) exit (Article 2:343 BW) and 4) friendly exit (Article 2:343c BW). The most common are expulsion and retirement.
So how does the Wagevoe aim to improve the effectiveness of dispute resolution?
Essentially by (I) adjusting the scope; (II) adjusting some procedural aspects; and (III) broadening the grounds for granting the expulsion. Furthermore, the Wagevoe opens up the (friendly) ejection claim to willing and meeting certificate holders.
- Adjustment in scope
Under current law, it is possible for shareholders or depositary receipt holders of a stock exchange B.V. to have access to the dispute resolution system. In fact, it is now the case that shares and depositary receipts for shares in a B.V. are admitted to the stock exchange. The dispute resolution scheme was originally intended for companies where a simple sale of shares is not possible. With the amendments from the Wagevoe, stock exchange B.V.'s are excluded from the dispute resolution scheme and justice is restored to the purpose of the dispute resolution scheme.
- Adjustment of some procedural aspects
The squeeze-out, resignation and forced transfer of voting rights procedures are currently still subpoena procedures, but will become petition procedures with the introduction of the Wagevoe. This will simplify the procedure compared to current law by eliminating complicated summons, joinder and intervention issues now that other shareholders and depositary receipt holders can be summoned by the Enterprise Chamber as interested parties.
After the introduction of the Wagevoe, the Enterprise Chamber will be the first and only de facto court to hear dispute resolution proceedings. This is from the point of view of effectiveness. The Enterprise Chamber has special judicial expertise to adjudicate the dispute settlement procedures as it has specialist knowledge in the field of corporate law and experience in the valuation of company shares. The possibility of appealing in cassation to the Supreme Court remains - rightly in our view -.
- Broadening the grounds for expulsion
Expulsion is the compulsory offering of shares in a company. Currently, the court can only award this if conduct by the shareholder in question in his capacity as shareholder "harms or has harmed the interests of the company to such an extent that the continuation of the shareholding cannot reasonably be tolerated. Thus, under current law, only conduct performed in the capacity of shareholder can lead to expulsion. However, the impasse often occurs at an earlier stage. Consider the situation where two 50% shareholders are also both directors of the company. There, the impasse and the associated conduct occur earlier in the capacity of director than in the capacity of shareholder. It is undesirable that at present one has to wait until conflicts arise in the general meeting of shareholders before proceeding to an expulsion. The new criterion for expulsion is therefore that this is allowed if the conduct of the shareholder harms the interests of the company to such an extent that maintaining the shareholder can no longer reasonably be tolerated. This removes the requirement that the conduct must be in the capacity of shareholder. The Wagevoe also extends the scope of the dispute resolution procedure to holders of depositary receipts whose position is comparable to that of shareholders. For holders of depositary receipts issued with the cooperation of an N.V. and for holders of depositary receipts with a right to attend meetings granted by the B.V. under the articles of association, the dispute resolution procedure is partially opened. The aforementioned holders of depositary receipts can only appeal for withdrawal and the friendly withdrawal.
The admissibility requirements for the inquiry process
As a shareholder, you can file a request with the Enterprise Chamber to order an investigation into the policy and affairs of a company and also request immediate injunctive relief. In order to submit such a request, there are admissibility requirements.
The Wagevoe only adjusts the admissibility requirements for listed companies. Under current law, a distinction is made between listed companies with an issued capital below €22.5 million and an issued capital above €22.5 million. Currently, the amount of the issued capital still determines what the admissibility requirements are.
Research has shown that the admissibility requirement for listed companies with an issued share capital of up to €22.5 million can have an undesirable negative effect on access for capital providers to the Enterprise Chamber to order an inquiry. This is the case when a listed company has assigned a low par value to the shares in the articles of association, but the market value in reality is much higher.
When the Wagevoe is introduced, this distinction will disappear and the same admissibility requirement will apply to every listed company, namely: capital providers representing at least 1% of the issued capital will be admissible in their application as well as capital providers representing at least a market capitalization of €20 million. These are alternative criteria. This means that at least one of the two must be met in order to be admissible at the Enterprise Chamber.
In short, once the Wagevoe goes into effect, things will start to change in corporate law practice in terms of the right of inquiry and dispute resolution.
