The shareholders resolution of a Dutch company
Following our blog about board resolutions of a Dutch company (BV), we have written this legal blog about the ins and outs of the shareholders resolution under the laws of the Netherlands. When does a Dutch company need such a formal corporate decision, when is it advisable and how do the shareholders conclude such resolution? We also address when a resolution of the stockholders can be annulled or void and when shareholders liability may be an issue. Finally, this blog also provides a link to an example shareholders resolution of a Dutch BV, i.e. the most common limited liability company in the Netherlands.
Corporate decision making in the Netherlands
Under Dutch company law, shareholders resolutions by companies in the Netherlands raise certain issues. This mostly concerns the Dutch limited liability company (the BV) and Dutch public limited liability company (the NV, similar to the Anglo-Saxon Plc or Inc).
The legal requirements under Dutch law regarding the decisions of shareholders are not always clear, even to Dutch lawyers. Also the reasons why such resolutions should best be concluded, are not always evident. But for Dutch corporate governance and director liability purposes, it is important that especially executive and non-executive board members grasp the basic rules. There are best practices in the Netherlands that can be followed here. For this reason, we have written this blog and we have included a template shareholder resolution under Dutch law (link provided below).
This blog addresses questions such as: what is a shareholders resolution and how is it concluded for a limited liability company in the Netherlands. How do shareholders get involved in the process? In which events is a formal resolution obligated under the laws of the Netherlands and when is it advisable. What are the legal consequences in Holland when such formal decision has not been taken or not taken correctly?
What is a shareholders resolution under Dutch law?
A shareholders resolution is a resolution of the general meeting of shareholders as an -internal- body of a Dutch company, i.e. a Dutch limited liability company (Dutch acronym: BV) or a Dutch public limited liability company (acronym: NV).
Strictly taken, a shareholders resolution does not have to be in writing under Dutch law, unless the resolution is concluded without convening a meeting. Of course, from a corporate housekeeping perspective it always a good idea to put the resolutions in writing as to prove the decisions of the general meeting of shareholders as well as the considerations pertaining to such decisions. General meetings of shareholders need to be held in the Netherlands in the place that is so determined in the Articles of Association. Under certain conditions, participation and voting may be by electronic means rather than attendance of the shareholders meeting in the Netherlands.
Why is a shareholders resolution for a Dutch company necessary?
Under Dutch company law, the shareholders meeting decides on all matters that the board can or may not decide on. In order to give effect to several actions, a shareholders resolution is mandatory under Dutch law. Examples are: amendment of the Articles of Association, firing of a board member (unless the supervisory board may do so) and a merger. It depends on the facts and circumstances whether a resolution of the stockholders is required for an acquisition of a company.
Shareholders resolutions may also be required on the basis of the shareholders agreement (SHA) to approve certain major board decisions, for example for M&A transactions or to enter into financial commitments surpassing a certain threshold.
How to conclude a shareholders resolution of a Dutch company?
The Articles of Association and the Dutch company law of the BV provide how a shareholders resolution should be taken. Firstly, a general meeting of shareholders needs to be properly convened by the board. Shareholders may instruct the board to convene a meeting.
The invitation for the shareholders meeting should include an agenda and the supporting documents. The Articles of Association determine the minimum time period between the invitation and the meeting. Dutch company law provides a minimum of eight days in between for the B.V., but the Articles may provide a longer period.
Generally each share represents one vote, but it is necessary to check this since there can also be non-voting shares, priority shares (golden share) and/or preference shares that would deviate from the Dutch law principle of one-share-one-vote.
The general shareholders meeting will appoint a chairman according to the procedure of the Articles of Association and also a secretary to take the minutes. It is not uncommon that in case of contentious stock holder meetings an independent notary takes the minutes of the meeting.
Note that some corporate matters will require the involvement and approval of the works council and / or the supervisory board.
Can a Dutch court overrule or annul a shareholder decision?
A decision from the shareholders can have large consequences for a Dutch company and its stakeholders, especially the (other) shareholders.
A shareholders resolution that directly contravenes with Dutch company law or with the company’s Articles of Association is null and void. A Dutch corporate lawyer would consider it non-existent and, thus, the company can not execute such a decision and nobody can enforce it. An example of a resolution that is null and void is when the articles of incorporation stipulate an increased majority of votes for a certain major decision and such majority is not met. Such decision is deemed not taken. These rules are the same for board resolutions that we address in this blog.
A shareholders decision that is not concluded in accordance with certain formalities is not null and void by operation of law, but it can be declared null and void by a ruling of a Dutch court upon the request of an interested party, including another shareholder. Until such court ruling, the decision of the shareholders is valid.
Shareholder liability in the Netherlands
Shareholder liability is very rare in the Netherlands. The principle under Dutch law is that a shareholder may act and vote in its own best interest rather than that of the company it -partly- owns. Here, there is a clear distinction with board members who ought to primarily act in the best interest of the company. As you can imagine, this clear line becomes convoluted if a director of the company in the Netherlands is also a shareholder.
Shareholders resolution without actual meeting
Dutch corporate law provides the possibility to come to a formal resolution of the shareholders without holding an actual meeting, also in case of multiple shareholders. This is very practical if all shareholders agree with the decisions that are required, for instance a new investment round.
For this, it is required that:
- all shareholders agree with this form of corporate decision making;
- the votes need to be recorded in writing; and
- the board of directors has been given the opportunity to advise about the shareholders resolutions.
We have included a template for a shareholders resolution where a general meeting will not be actually held.
Checklist and template for shareholders resolution of a Dutch company
We have also drafted a template for a shareholders resolution of a company in the Netherlands where the company does organize a meeting for the stock holder. The example shareholders decision can be accessed through this link. We also recommend using the following checklist to conclude a proper shareholders resolution under Dutch corporate law:
- Who wants to and who can convene the general meeting of shareholders? The board typically organizes the shareholders meeting, out of its own accord or at the request of a shareholder holding a certain percentage of the share capital. If the articles of incorporation so provide, also someone else may organize a meeting of the shareholders directly, e.g. a shareholder.
- What is the minimum period of time between the invitation and the meeting? The law says eight days for a non-listed company, but the articles of association may stipulate a longer period.
- Are prior corporate actions required such as a decision of the supervisory board / non-executive board or the works council?
- The agenda and supporting documents should be ready for the invitation. Tip: make a clear distinction between voting items and non-voting items.
- Think of who will chair the shareholders meeting and who will take the minutes. The minutes can best also -briefly- reflect the relevant considerations and if applicable the objections of the shareholders.v
Corporate lawyer Amsterdam
The corporate attorneys of Penrose in Amsterdam are happy to assist with Dutch corporate household matters including resolutions of shareholders. Please feel free to contact Hans Klaver if you have any questions about corporate resolutions of a Dutch company.
Law firm Penrose, Amsterdam.
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