In a dispute between brothers, the Enterprise Chamber declared the applicant inadmissible in his inquiry request (see: Amsterdam Court of Appeal (OK) December 17, 2024, ECLI:NL:GHAMS:2024:3438). Applicant C, as director on behalf of the StAK (Stichting Administratiekantoor), submitted a request for an inquiry. However, a required second signature to validly represent the StAK was found to be missing. Indeed, the StAK board's power of representation is subject to a two-signature clause. Emile Sahhar explains this case further in the blog below.
Date: April 10, 2025
Modified April 12, 2025
Written by: Emile Sahhar
Reading time: +/- 3 minutes
This case involves a conflict between fraternized brothers (A, B and C). Ostensibly, it is a classic case of "two against one" in a three-member board (A and B against C). The brothers are all statutory directors of a StAK, each with equal voting rights. The StAK in turn holds all shares in the issued capital of Montagne Development B.V. (the "Company"). C single-handedly, without the cooperation of A and B, initiates an inquiry procedure on behalf of the StAK with the request to order an investigation into the policy and course of affairs of the Company and to take immediate provisions thereon. It is relevant that (a) the three brothers do not hold, directly or indirectly, any shares or depositary receipts for shares in any of the legal entities belonging to the group, (b) the three brothers are contractually entitled to the results of the Company and (c) the Articles of Association of the StAK contain a two-signature clause.
C seems aware of the potential admissibility problem and anticipates this by invoking the doctrine of impermissible interference with the right of inquiry, and more specifically the broad scope and accessibility intended by the right of inquiry. However, the OR ruled that the StAK was inadmissible in its request because the StAK was unauthorized to be represented. This blog briefly discusses two noteworthy elements in the decision, namely: (i) the power to file an inquiry request and (ii) the impermissible interference with the right of inquiry.
Shareholders and holders of depositary receipts are entitled to submit a request for an inquiry if they meet certain thresholds(Article 2:346(1)(b/c) of the Dutch Civil Code). The Supreme Court and the OK have ruled several times in the past decade on equating beneficial owners with shareholders or holders of depositary receipts. A landmark ruling in this regard is Amsterdam Court of Appeal (OK) February 7, 2012, ECLI:NL:GHAMS:2012:BV7329 (Chinese Workers), which was later upheld by the Supreme Court.
In this case, C did not argue, even in the alternative, that he - in person - can be equated with a shareholder/certificate holder within the meaning of Article 2:346(1)(b/c) of the Dutch Civil Code. Such an appeal might have had a chance of success since "the vast majority of Montagne Development's profits" accrued to the three brothers on the basis of profit-sharing loan agreements. Apparently, a large part of the profits thus accrued to C, while the (indirect) shareholder had virtually no economic right to the result. An interesting question is whether, based on his contractual claims, C could in the given circumstances have been equated with the shareholder/certificate holder as the beneficial owner for whose account and risk the shares and certificates in the Company are held. The OR does not express an opinion in this ruling on whether the Chinese Workers doctrine should be applied more broadly.
The legal entity itself is also authorized to submit a request for an inquiry(Article 2:346(1)(d) of the Dutch Civil Code). This requires, in principle, legally valid representation of the legal entity in question. On several occasions, the Enterprise Chamber has declared a director, who can no longer lawfully represent the company to be surveyed as a director, admissible in his request against that company (see paragraph 3.3 of this ruling where C refers to such rulings). A self-inquiry request filed by a director who is not (or no longer) authorized to represent the company may be admissible in its appeal because inadmissibility would lead to an unacceptable thwarting of a proper functioning of the right of inquiry (see, inter alia, Court of Appeal Amsterdam (OK) 12 May 2020, ECLI:NL:GHAMS:2021:1364 (Johema)). In this case, however, C is not a director and has never been a director of the Company. For this reason, the exception for admissibility due to unauthorized representation does not apply, the OR ruled.
C invokes an impermissible interference with the right of inquiry if the StAK is declared inadmissible. The OR does not agree with this and points to a number of important circumstances. First, the structure of the group came into being after a long-running dispute was amicably settled by means of a settlement agreement. Second, the OK seems to take into account that the current governance structure, including a two-signature clause, was partly shaped by C himself. Third, the OK weighs in that C has other remedies available.
A claim of impermissible interference with the operation of the right of inquiry does not readily follow. This case shows that at least it does not in a set of circumstances where the applicant himself has recently contributed to shaping the governance structure. This is well to follow.
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