A shareholder dispute can have major consequences for the continuity of a company.
When shareholders fundamentally disagree about the direction of the company, this can lead to decision-making paralysis,
financial damage and escalation of the conflict. In this article, you will read what a
shareholder dispute exactly entails, what legal options are available and how you as a
shareholder or entrepreneur can act effectively.
What is a shareholder dispute?
A shareholder dispute occurs when shareholders within a BV (private limited company) or NV (public limited company) come into conflict
with each other regarding, for example, policy, profit distribution, management or control. This type of dispute is common in
family businesses, joint ventures and companies with multiple equal shareholders.
Common causes of a shareholder conflict are:
- differences in vision regarding business strategy;
- discussions about dividends or profit retention;
- accusations of mismanagement or conflicts of interest;
- conflicts between management and shareholders;
- a deadlock situation in 50/50 shareholding ratios.
Why is a shareholder dispute so impactful?
An escalating shareholder dispute can completely block the company. Decisions are no longer
made, investments stall and trust between those involved disappears. In serious cases,
even the survival of the BV or NV is at risk.
In practice, we see that shareholder disputes often coincide with personal tensions, which makes finding
a business-oriented solution more difficult.
Shareholder dispute in a BV or NV: legal step-by-step plan
Step 1: Analysis of articles of association and shareholders' agreement
In a shareholder dispute, it is essential to analyse the articles of association and any
shareholders' agreement. These often contain provisions on voting rights,
dispute resolution mechanisms, transfer restrictions and exit options.
Step 2: Negotiation or mediation
At an early stage, it may be useful to try to resolve the shareholder conflict amicably,
for example through negotiations or mediation. This can prevent further escalation and protect the company.
Step 3: Legal measures against fellow shareholder
When consultation does not provide a solution, legal steps may be considered. Depending on the situation,
this may consist of enforcing information rights, annulling decisions or initiating proceedings.
Step 4: Inquiry procedure
In serious cases, an inquiry procedure can be initiated. This procedure is intended to investigate
the policy and course of affairs within the company. This is a powerful tool in a
shareholder dispute.
Step 5: Exit or expulsion of a shareholder
When cooperation has become impossible, exit or expulsion of a shareholder may be the only
solution. The valuation of the shares plays a crucial role in this process.
Deadlock: stalemate between shareholders
A special form of a shareholder dispute is the deadlock situation. This often occurs
with two shareholders each holding 50% of the shares. Decision-making comes to a complete standstill.
Without a clear deadlock provision, only the court or an exit scenario can offer a way out.
Director liability in shareholder disputes
A shareholder conflict can also raise questions about director liability. When directors
act contrary to the interests of the company or favour certain shareholders, liability
may arise.
Shareholder dispute with foreign shareholders
In international companies, a shareholder dispute regularly involves foreign
investors. Even then, the Dutch court may have jurisdiction, for example when the company is established in the Netherlands.
General information about corporate disputes and shareholder rights can be found at the
Chamber of Commerce (KVK).
Common mistakes in shareholder disputes
- waiting too long to seek legal advice;
- allowing emotional escalation to prevail over business interests;
- not preparing an exit strategy;
- litigating without regard for the company;
- insufficient attention to evidence and documentation.
What can Arslan Advocaten do for you?
Arslan Advocaten assists shareholders and entrepreneurs in complex
shareholder disputes. We advise on strategy, negotiations, proceedings and
exit solutions, with attention to both legal and commercial interests.
Read more about our expertise in
corporate law, and
debt collection and payment disputes
Costs and litigation funding in commercial disputes
In commercial disputes, we generally do not work on a no cure no pay basis. Commercial proceedings
require a careful and strategic approach, with clear agreements made in advance about costs
and litigation management.
In certain cases, however, it is possible to handle the case (effectively) on a no cure no pay basis.
We work together with an independent litigation funder who – after assessing the case –
may be willing to finance (part of) the legal costs.
If litigation funding is granted, the legal costs are borne by the litigation funder. For the client,
this means that litigation is possible without direct financial risk.
About the author
This article was written by Onur Arslan, attorney and founder of Arslan Advocaten. He specialises
in commercial disputes, including shareholder conflicts, corporate disputes and international
trade cases.
Would you like to discuss whether your shareholder dispute can be resolved legally?