Many shareholder agreements contain provisions setting out exit mechanisms allowing shareholders to exit the shareholding in the future, for instance when a shareholder is no longer operationally involved (hereinafter the “departing shareholder”), e.g. a put option (“verkoopoptie”), a withdrawal right (“uittredingsrecht”) or a mechanism of buyback of own shares by the company (“inkoop van eigen aandelen”). In case of a put option, the departing shareholder can oblige the other shareholders to purchase his shares and pay the purchase price. In the event of a withdrawal or buyback of own shares, the buyout will be funded by the company itself. Whether…
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1. Many shareholders’ agreements (and some articles of association) include exit mechanisms in the form of call and put options. In the case of unlisted companies, these agreements are conceived as a regulation of corporate relationships, and mainly focused on terminating the shareholdership without requiring the intervention of the court or a third party-transferee. Financial investors, for instance, often negotiate for themselves a put option so that they will be able after a given period of time to valorize their investment, potentially at a guaranteed minimum price. Agreements between or with operationally active shareholders also often include options which, according…
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To limit the risk which is inherent to entrepreneurship, entrepreneurs can choose to conduct their business through the use of a company. Depending on the type of company, the shareholders can benefit from a limited liability. This implies that their loss, if any, will be limited (in principle) to the loss of their contribution in the company. Is it possible for a shareholder to go even further and even safeguard his contribution in the company? In other words, can he participate as a risk-free shareholder in the company? The most common strategy to create a risk-free participation makes use of…
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A shareholder sells his shares to a third party without having given to the other shareholders priority to acquire these shares pursuant to the right of first refusal included in the articles of association. Is this transfer to a third party valid? Or is it possible to oppose the transfer restriction to the third party-buyer? The Code for Companies and Associations stipulates that transfer restrictions included in the articles of association (such as right of first refusal, standstill provisions, tag along, clause of approval, etc.) are always opposable to third parties. The new Code thus confirms the majority opinion in…
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The Code for Companies and Associations includes the obligation to record the transfer restrictions arising out of the articles of association in the share register. This obligation must be complied with by the company’s governing body. It aims at informing the third party-transferees as fully as possible of the existing transfer restrictions. As the transfer of nominal shares only becomes opposable to the company and third parties after having been recorded in the share register, it is to be expected that third party-transferees will always consult the share register, at the latest when recording their transfer. Transfer restrictions which…
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The draft of the new Companies and Associations Code (CAC) includes a new governance model for public limited companies (‘naamloze vennootschappen’, abbreviated into ‘NVs’). Henceforth, companies will have the choice between three governance models: the already existing monistic model; the sole director model; and the dualistic model consisting of a management board and a supervisory board. The new CAC also broadens the possibilities for appointing the managing director and defining his/her/its powers. Monistic governance model – weakening of the ad nutum withdrawal Publicly listed companies governed in accordance with the monistic model are managed by a traditional board comprising at…
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The “geschillenregeling” (forced sale proceeding) is a special procedure in corporate law in which a shareholder can oblige another shareholder to sell shares (i.e. a put obligation) or purchase shares (i.e. a call obligation) if there are ‘justified reasons’. Although in practice this procedure is often used when a (serious) conflict between shareholders has arisen, there are some flaws in its practical application. Perhaps one of the greatest shortcomings is the setting of the price of the shares concerned, in particular the low predictive value of the valuation exercises that are normally carried out by a court expert under supervision…
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