The Bottom Line
- Delayed payments in M&A deals are expensive. Withholding payment pending a dispute can trigger substantial statutory commercial interest, which in this case accrued for nearly six years on a multi-million euro sum.
- Contractual dispute procedures are not a shield for non-payment. A clause requiring an expert determination (like an independent accountant) cannot be used to justify withholding payment if the underlying basis for the dispute has already been legally invalidated.
- Shareholder rights require specific actions. Minority shareholders who disagree with dividend policies must formally challenge shareholder resolutions using corporate law remedies, not just claim damages for lost profits in a separate contractual dispute.
The Details
This case revolves around the final payment for a multi-tranche share purchase agreement (SPA) signed in 2015. The buyer, Forbon, was due to purchase the final tranche of shares from the seller, HNC, by July 2018. The price was tied to the company’s Normalised EBITDA for 2017. A dispute arose when Forbon attempted to lower the EBITDA by making adjustments for bad debt and commission accruals. HNC rejected these adjustments, and the SPA’s prescribed dispute resolution mechanism—appointing an Independent Accountant to make a binding decision—was never triggered.
The core of the dispute hinged on the interpretation of a prior Court of Appeal ruling. Forbon argued this ruling mandated that the parties complete the Independent Accountant procedure before the purchase price became due, thus justifying their non-payment for several years. However, the Amsterdam District Court forcefully rejected this interpretation. The court clarified that the Court of Appeal had not ordered the parties to start the procedure; it merely interpreted how that procedure should be conducted if it were triggered. Because the appeal court had already ruled that Forbon’s proposed EBITDA adjustments were invalid under the SPA, there were no legitimate grounds left for an expert determination.
With no valid dispute to resolve, the court concluded that the purchase price of over €9.3 million had been due and payable all along. Forbon’s failure to pay constituted a breach of contract, making it liable for statutory commercial interest. While the original payment date was July 2018, the court set the interest accrual date to October 15, 2018—the point at which correspondence between lawyers made it clear that Forbon would not pay without further litigation. The buyer’s counterclaims were dismissed, resulting in a costly final bill that included the principal amount, years of compounded interest, and legal costs.
Source
Rechtbank Amsterdam
