Welcome to Penrose corporate law
Penrose specialises in the field of Dutch corporate law. We advise and assist entrepreneurs, directors, and shareholders in the drafting of contracts, company takeovers, joint ventures and we give legal strategic input in connection with the decision-making process. We also act as attorneys in the Netherlands in conflicts involving shareholders and directors. Some of the company law issues and situations that we encounter regularly are outlined below.
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Mergers and acquisitions (M&A)
The sale of a company generally follows a process that has been developed in the legal profession internationally and that practice is also adopted in the Netherlands. Agreements, such as a Non-Disclosure Agreement (NDA), a Letter of Intent (LOI), or a Sales and Purchase Agreement (SPA), due diligence and contracting will depend on the nature of the business, the preferred acquisition structure and whether Dutch law applies. The type of transaction (assets / liabilities sale or a sale and transfer of shares) and the warranties, indemnities and securities for the purchaser will ultimately determine the contents of the Dutch law Asset Purchase Agreement (APA) or Share Purchase Agreement.
Investors and shareholders
Company shareholders, investors (such as private equity and venture capital investors) often demand clear participation conditions as well as a shareholders agreement under Dutch law. Such agreements are essential in order to guarantee a good allocation of roles and risk within the company and help for the safeguarding of each party’s interests. What major decisions of the management board need prior approval by the shareholders meeting? What are the rights of the priority shareholders in the Netherlands? How will the benefits package for the board turn out? Also, bad leaver, good leaver, drag along and tag along clauses: all these issues call for careful planning under Dutch law when dealing with an exit, shareholder dispute or underperformance by the board.
The Board, General Meeting of Shareholders and Supervisory Board
A company in the Netherlands (e.g. a B.V.) is bound by the decisions of the Board of Directors, the General Meeting of Shareholders and (at times) the Supervisory Board (SB) or, alternatively, the non-executive board. Dutch law provides for either a one tier board with executives and non-executive directors and, alternatively, a board of directors and a supervisory board. The latter is more common in Holland. The internal allocation of duties, authorisations and responsibilities within the board(s) can give rise to many misunderstandings and problems in practice. Next to Dutch law, provisions in the Articles of Association, the shareholders agreement or for example board regulations are a good starting point to approach corporate governance matters. The decision-making process within a board of directors or the general shareholders meeting is subjected to strict formal requirements in the Netherlands. If these requirements have not been met, a board decision may be contested or adversely affected to the extent that it will be invalid.
Executive director’s liability
It has become regular legal practice in the Netherlands that executive board members are being held personally liable for decisions or actions for the Dutch company. On the one hand, this can present opportunities for creditors of a Dutch BV. On the other hand, directors on the board are becoming more aware of how they should defend themselves against the risk of personal liability. Generally speaking, it is difficult to hold a director personally liable under Dutch corporate law. However, if successful, the consequences of director’s liability are serious. Especially when the company has become bankrupt in the meantime. In the event of insolvency, the director may even be held liable for the entire (residual) debt of the Dutch bankrupt company. A good defence against director’s liability is paramount.
Disputes within the company
It is becoming more common that executive directors, shareholders and the works council are sued in legal proceedings in the Netherlands. Also, shareholders that may want to break a deadlock situation within their Dutch company may see no other option than to instigate inquiry proceedings or enforcing a share transfer. Dutch corporate law offers a number of possibilities to break through conflict situations and start legal proceedings utilizing the possibilities under Dutch corporate law (supplementary to exercising rights under the shareholders agreement). Often, such inner company disputes are resolved by the stakeholders through a settlement agreement and do not make their way to the Dutch court.
Financing and security
A company that wants to attract funds (for example for a company acquisition) by means of a share issue (equity), a bank loan or bond issue (debt) or a mix of debt and equity. Also crowdfunding for companies is popular nowadays in the Netherlands. The loan provider or bondholder usually seeks to have securities in place for the event that the loan is not (timely) repaid, especially in the event of suspension of payments or bankruptcy under Dutch law, where securities under Dutch law such as mortgage and pledge should have priority over other (subordinated) creditors. It is important for the board of a Dutch company to ensure that the interests of the company are properly protected when entering into finance agreements and to safeguard that other creditors are not being disadvantaged, in order to avoid directors’ liability. In addition, the approval of shareholders or other creditors may be required in connection with raising new funding or issuing securities.