Abstract
All over Europe, we see drastic changes being made to simplify company law and make it more flexible. A fundamental principle of this reform movement is the freedom of shareholders to determine internal structure and power balance. At the same time, as a consequence thereof we may see more situations in which minority shareholders at some point may feel trapped. More freedom and flexibility will therefore need to be supplemented with a credible and efficient level of minority protection. Until now, the general approach in Europe (but also to a certain extent in the United States) is that shareholders only have a right to exit through a buy-out if the conduct of the controlling shareholder(s) is unfair and/or oppressive. One can doubt whether this provides an acceptable level of protection in terms of efficiency and effectiveness. In this article, it will be submitted that it might be economically sound, as well as efficient, effective and satisfactory from a legal point of view, for the law to go further and award minority shareholders a right to exit the company ‘at will’ provided that (i) a reasonable notice period is observed and (ii) additional costs of financing are taken into account.
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The members of the expert group were H.J. de Kluiver (chairman), G.J.C. Rensen (secretary), J.A.M. ten Berg, M. Brink, P.J. Dortmond, G. van Solinge, A.J.S.M. Tervoort, W.J.M. van Veen and D.F.M.M. Zaman.
The full report and a summary in English are available at: http://www.minjus.nl. For a discussion of the Draft Bill, see H.J. de Kluiver, ‘Towards a Simpler and More Flexible Law of Private Companies: A New Approach and the Dutch Experience’, European Company and Financial Law Review (2006) p. 45 et seq.
TK 2003–2004, 29 752, No. 2, p. 16. For a comprehensive overview of Dutch company law, see, inter alia, the contributions of S.F.G. Rammeloo and H.J. de Kluiver, in H. Hirte and T. Bücker, eds., Grenzüberschreitende Gesellschaften (Cologne/Berlin/Munich, Carl Heymanns Verlag 2005) pp. 178–240.
This Commission is chaired by L. Timmerman (Advocate-General of the Dutch Supreme Court and Professor at Leiden University). The other members of the Commission are M.W. den Boogert, P.J. Dortmond, P.H.J. Essers, A. Hammerstein, J. Klaassen, P. van Schilfgaarde and G. van Solinge. The report of the Commission was published in the journal Ondernemingsrecht (2007) pp. 14–19.
The expert group underlined the importance of comparative legal analysis. See, for example, ch. 1, section 9 et seq. of the report.
I will not discuss these cases here. It is evident that they have led to a fundamentally modified orientation to company law. An interesting aspect of these three cases is that two of them (Überseering and Inspire Art) were rooted in Dutch law. In this respect, as well as for an overview of further literature on this subject in this journal, see, inter alia, H.J. de Kluiver, ‘Inspiring a New European Company Law?’, European Company and Financial Law Review (2004) pp. 121–135.
Compare, amongst others, L. Timmerman, ‘Is versoepeling van het Nederlandse n.v./b.v. recht wenselijk?’, TWS (1992) pp. 163–168 and ‘Het krakende gebouw van het vennootschapsrecht’, TWS (1995) pp. 178–181; H.J. de Kluiver, ‘Het vennootschapsrecht moet worden versoepeld en verscherpt’, TWS (1994) pp. 174–179 and ‘Mag het nog ietsje meer zijn?’, NJB (1996) pp. 143–145; C.W. de Monchy, ‘Op weg naar een joint venture regime’, TWS (1996) p. 2 et seq. Furthermore, see, recently, P. van Schilfgaarde, ‘De ontwikkeling van de rechtspersoon in het privaatrecht’, NJB (2000) p. 1097, who advocates a ‘total reorientation’; M.J.G.C. Raaijmakers, ‘Herziening van het Nederlandse ondernemingsrecht’, WPNR (2002) p. 683 et seq.; T.P. van Duuren, ‘De positie van de Nederlandse BV ten opzichte van haar buitenlandse equivalenten en de Europese BV’, Ondernemingsrecht (2004) p. 4 et seq.; and E.D.G. Kiersch, ‘Grensoverschrijdende samenwerking en de noodzaak van een eenvoudig BV-recht’, in Nederlands ondernemingsrecht in grensoverschrijdend perspectief (Deventer, Kluwer 2003).
See, inter alia, F.K. Buijn, ‘Statuten: terug naar de overeenkomst?’, Ondernemingsrecht (1999) p. 123; J.A.M. ten Berg, ‘Statuten versus aandeelhoudersovereenkomsten’, in W. Bosse, et al., Statuten zonder bezwaar, preadvies KNB (Lelystad, Koninklijke Vermande 2002) pp. 186–189; and P. van Schilfgaarde, ‘Statuten zonder bezwaar’, 133 WPNR (2002) p. 641.
See, for example, M.J.G.C. Raaijmakers, Rechtspersonen tussen contract en instituut (Deventer, Kluwer 1987), ‘Dezelfde “besloten” vennootschappen: quasi-n.v. of quasi-vof’, Ars Aequi (1994) pp. 340–348 and ‘Over de rechtsbetrekking tussen aandeelhouders in een “Quasi-vof”’, in B.W.M. Nieskens-Isphording, et al., eds., In het nu, wat worden zal: opstellen aangeboden aan prof. mr. H.C.F. Schoordijk (Deventer, Kluwer 1991) pp. 203–222. More recently, see, in particular, M. Meinema, Dwingend recht voor de besloten vennootschap. Een beschouwing over de contractsvrijheid van aandeelhouders in rechtsvergelijkend perspectief, IVO series No. 43 (Deventer, Kluwer 2003).
I refer to the documents produced by the Department for Trade and Industry and the study group it established (under the heading ‘Modern Company Law for a Competitive Economy’) to restructure company law. The reports are available at: http://www.dti.gov.uk/cld/review.htm.
There is an abundant literature available about the Delaware phenomenon. In this context, I just wish to mention a few contributions: R. Romano, The Genius of American Corporate Law (Washington, AEI 1993) and ‘State Competition for Close Corporation Charters’, 70 Washington University Law Quarterly (1992) p. 409 et seq.; W.J. Carney, ‘The Political Economy of Competition for Corporate Charters’, in J. Wouters, et al., eds., Current Issues of Cross-Border Establishment of Companies in the European Union (Antwerp, Maklu 1995) p. 249 et seq.; H.J. de Kluiver, ‘Disparities and Similarities in European and American Company Law’, in J. Wouters, et al., eds., Current Issues of Cross-Border Establishment of Companies in the European Union (Antwerp, Maklu 1995) p. 287 et seq.; L. Bebchuk and S. Ferrel, ‘A New Approach to Takeover Law and Regulatory Competition’, Virginia Law Review (2001) p. 111–164; and H. Hirte, ‘Wettbewerb der Rechtsordnungen nach “Inspire Art”’, GmbHR (2003) R 421.
Compare, inter alia, the overview in H.J. de Kluiver and W. van Gerven, eds., The European Private Company? (Antwerp, Maklu 1995); and M.J.G.C. Raaijmakers, ‘Een Europese BV of hervorming van nationaal recht voor “besloten ondernemingsvormen”’, Ondernemingsrecht (2001) pp. 322–327.
See section 1.1 of the report of the expert group.
E.B. Rock and M.L. Wachter, ‘Waiting for the Omelet to Set: Match-Specific Assets and Minority Oppression in Close Corporations’, first published in 24 Iowa Journal of Corporation Law (1999) p. 913. I refer to the version published in J. McCahery, T. Raaijmakers and E. Vermeulen, The Governance of Close Corporations and Partnerships (Oxford, Oxford University Press 2004) p. 93 et seq.
Rock and Wachter, loc. cit. n. 14, at p. 98.
L. Kaplow and S. Shavell, Fairness versus Welfare (Cambridge, Harvard University Press 2002). I refer to the paperback edition of 2006.
Kaplow and Shavell, op cit. n. 16, at p. 186 et seq.
Kaplow and Shavell, op cit. n. 16, at p. 192.
Kaplow and Shavell, op cit. n. 16, at p. 197. It is interesting, for example, that Kaplow and Shavell note that the attempt to punish particular behaviour ex post will be reflected in the price negotiated ex ante (p. 202), while Rock and Wachter note that investors would be unwilling ex ante to make matching investments for fear that they will be held up ex post (p. 99).
See recently, inter alia, J. Payne, ‘Sections 459–461 Companies Act 1985: The future of shareholder protection’, 64 Cambridge Law Journal (2005) pp. 647–677.
See K. Schmidt, Gesellschaftsrecht, 4th edn. (Cologne/Berlin, Heymans Verlag 2002) §35 IV No. 3.
Compare, for example, the RMBCA (§ 13.31), which determines that the costs are for the company unless shareholders acted arbitrarily, vexatiously or not in good faith with respect to the appraisal rights provided by the RMCBA.
See Rock and Wachter, loc. cit. n. 14, at p. 100.
Kaplow and Shavell, op cit. n. 16, at p. 192.
This argument for a buy-out right ‘at will’ actually builds on earlier publications which I have devoted to the subject. See H.J. de Kluiver, ‘Overname door ondernemingen en bescherming van minderheidsaandeelhouders. Een rechtsvergelijkend pleidooi voor een algemeen uittredingsrecht na overname’, in H. Pasman, et al., eds., Overnemen: een hele onderneming (Deventer, Kluwer 1998) p. 277 et seq.
To make the system as practicable as possible, one may consider, by way of a default rule, to apply the same (relatively high) interest rate which would apply in case of default on contractual obligations.
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de Kluiver, HJ. Private Ordering and Buy-Out Remedies Within Private Company Law: Towards a New Balance Between Fairness and Welfare?. Eur Bus Org Law Rev 8, 103–119 (2007). https://doi.org/10.1017/S1566752907001036
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DOI: https://doi.org/10.1017/S1566752907001036