Last Monday, we went to Nyenrode Business University for a lecture on shareholder agreements. The first topic was the evolution of the Dutch stakeholders model for NVs and BVs. At the core of this model is the concept that each company has its very own interests which by definition is separate from the interests of shareholders. In Dutch literature it is argued that a more contractual approach should apply to partner-related limited liability companies, such as joint ventures. Partner-related companies are founded on a contractual basis between shareholders themselves and the best interests of the companies run parallel to the interests of the shareholders. The ‘modern’ interpretation of the Dutch stakeholders model considers it possible that the interests of a company are primarily focused on the interests of the shareholders.
The second subject of debate was the possibility to deviate from the provisions in Book 2 of the Dutch Civil Code by contract, specifically if the law forbids to do so in the articles of associations. Dutch case law shows that freedom of contract also applies to shareholders, which means that shareholders may deviate from the articles of association and even from some mandatory provisions in the law. In principle, shareholders are to a large extent free to contractually structure their company.
The third crucial question on this topic was whether contractual agreements between all shareholders have consequences for the validity of resolutions of the corporate bodies of the company involved. This is particularly interesting if a shareholder agreement deviates from the articles of association. For answering this question, it is important to differentiate between the various provisions shareholders agree upon. With respect to provisions or agreements requiring a higher voting majority than the mandatory required majority in the articles, both contract and articles need to be complied with. Provisions or agreements requiring a lower voting majority than the articles, however, will not lead to a valid resolution, because the mandatory requirements in the articles are not met. Exit rules, like transfer restrictions, tag along and drag along, lock up, or determination of the value of shares, are in a different category: they are primarily obligations between shareholders. Provisions on exit rules in an agreement between all shareholders may therefore ‘overrule’ deviating provisions in the articles.
Recent Dutch case law shows a more sophisticated approach towards recognizing that corporate bodies have to acknowledge a shareholders’ agreement, especially if all shareholders are a party to the agreement between all shareholders. If resolutions are taken without taking the shareholder agreement into account, such resolution may be declared null and void on the grounds that it is contrary to the principles of reasonableness and fairness. One of the reasons for this phenomenon is that the parties to the contract and the shareholders meeting are in fact the same persons.
As from October 2012, the articles of private limited liability companies may include obligations of a contractual nature towards the company or third parties or between shareholders. This beautiful example of the interaction between contract law and company law contained the fourth main subject of the lecture. One important point of discussion was whether it is possible that the articles provide that a shareholder must offer and transfer his shares pursuant to a resolution of the shareholders meeting. Finally, it was important to note that the articles may provide that, for as long as a shareholder does not comply with an obligation or requirement under the articles, his right to vote, to distributions or to attend meetings will be suspended.
Due to the interesting and vivid discussions, there was unfortunately no time left to talk about incorporation by reference. Incorporation by reference is forbidden by the Dutch legislator, because it should be prevented that future shareholders are bound by an agreement without being a contract party and without knowing the contents of the agreement. Nevertheless, the Dutch legislator permits simple references to a shareholder agreement without the purpose of incorporation.
There is still a lot to say on the subject of incorporation by reference, so you will hear from us any time soon. After all, it was a very interesting afternoon with great discussions. For now we want to thank all the participants and Nyenrode Business University for inviting us.