THE BOTTOM LINE
- A contractual right to acquire shares or depositary receipts in the future does not automatically grant you the powerful right to initiate a corporate inquiry proceeding in the Netherlands.
- To be treated as an “economic shareholder” with inquiry rights, your capital contribution must be truly risk-bearing and your interest must be equivalent to a current shareholder, not a conditional, future possibility.
- Companies should not rely on corporate inquiry procedures to enforce contractual rights; the proper venue for enforcing agreements remains the civil courts.
THE DETAILS
In a clear-cut decision, the Amsterdam Court of Appeal’s Enterprise Chamber has reinforced the high threshold required for non-shareholders to initiate a corporate inquiry—one of the most potent tools in Dutch corporate law for investigating mismanagement. The case involved a petitioner, Wood Participations B.V., that had a cooperation agreement entitling it to 20% of the depositary receipts in a target company. However, the actual transfer of these receipts was contingent on future conditions, including achieving a specific loan-to-value ratio and obtaining third-party consents. As these conditions had not been met, Wood was not yet a formal holder of the receipts.
The court centered its analysis on the established legal principle that, in exceptional cases, a party providing risk-bearing capital can be “equated” with a shareholder for the purpose of inquiry rights. It assessed whether Wood’s position met this standard. The court concluded it did not. Wood’s claim was merely a conditional, future right to become a holder of depositary receipts. Because it was uncertain if or when the conditions for the transfer would be fulfilled, the court determined that the receipts were not being held for Wood’s “account and risk.” This future, uncertain interest was deemed insufficient to place Wood on equal footing with a current shareholder.
The court also dismissed Wood’s other arguments. An unfulfilled contractual obligation to grant a pledge on the receipts was insufficient, as was a simple debt claim styled as a “risk-bearing” current account. The ruling underscores a crucial distinction: the Enterprise Chamber is not the venue for enforcing contractual obligations. The court noted that denying Wood access to the inquiry procedure was not an “unacceptable frustration” of its rights. Wood remains free to pursue its claims for information or performance of the agreement through the regular civil courts. The decision serves as a vital reminder for investors, lawyers, and CEOs: if you want the robust oversight powers of a shareholder, a contractual promise for future equity is no substitute for holding the actual shares.
SOURCE
Source: Gerechtshof Amsterdam
