In two earlier blogposts on this blog (here and here), I commented (together with Thom Wetzer for the first post) on the two recent decisions of the Dutch courts in the AkzoNobel case. In a recently published article in the journal “European Company Law”, I further develop my arguments about this case.
In the AkzoNobel case, activist shareholders (including Elliott International L.P.) complained about the decision of AkzoNobel’s board not to engage in negotiations with PPG Industries (PPG) concerning its takeover bid on AkzoNobel. More specifically, the activist shareholders requested the board to convene an extraordinary general meeting (EGM) to dismiss AkzoNobel’s chairman of the supervisory board. When the board refused this request, the activist shareholders filed a request with the Dutch courts, but both the Enterprise Chamber (Ondernemingskamer) and the Tribunal of Amsterdam in summary proceedings (voorzieningenrechter) denied the request to convene an EGM.
In the article, I argue that these decisions are understandable, considering earlier Dutch case law, such as the Boskalis case and the Cryo-Save case. Indeed, it seems generally accepted in Dutch company law that the rights of shareholders to convene a general meeting or to add items to the agenda of the meeting can be restricted when these rights are used to change a company’s strategy, as the board has a large autonomy to decide on the strategy. This is also consistent with the Dutch stakeholder model, according to which the board should consider “the interests of all stakeholders, including those of shareholders” (ABN AMRO case).
Whether or not the Dutch approach is a good idea is up for debate. The argument I make in the article, however, is that the Dutch approach to shareholders’ rights might be contrary to the Shareholder Rights Directive.
Under the text of article 6 of the Shareholder Rights Directive, member states are only required to ensure that shareholders have the right to add items to the agenda of the general meeting. The right to convene a general meeting is not protected under the directive, unless member states restrict the right to add items to the agenda to the annual general meeting. Therefore, the decisions in the AkzoNobel case, which concerned the right to convene an EGM, are not as such contrary to the directive.
However, I argue that the Dutch legislator has de facto restricted the right to add items to the agenda, by setting the statutory deadline for adding items to the agenda (60 days) earlier than the deadline for announcing the general meeting (42 days), and by imposing some kind of reasonableness test. This means that, de facto, there is no possibility to add items to the agenda outside the annual general meeting, at least not in the AkzoNobel case.
In my opinion, an “effect utile” interpretation of the Shareholder Rights Directive requires that the Dutch legislator should then ensure that shareholders have the right to convene an EGM, but this is made impossible by the AkzoNobel and Cryo-Save case law, which impose an addition “reasonableness” test.
Indeed, if the Dutch rules are taken together, they almost completely eliminate the possibility for shareholders to influence the general meeting, either through convening an EGM or through adding items to the agenda, as became clear in the AkzoNobel case. This seems a violation of the purpose of the Shareholder Rights Directive.
The argument that I develop in the article is similar to one made by Eikelboom, who has argued that Dutch law violates the Shareholder Rights Directive, although on slightly different grounds. [1] Overkleeft, on the other hand, has argued that the right to add items to the agenda and the right to convene the general meeting should be strictly separated, and by consequence, that there is no violation of the Shareholder Rights Directive. [2] I disagree with Overkleeft, because of the “effect utile” argument I stated above.
It remains unclear what the practical impact of this argument will be, however, as the Shareholder Rights Directive was not invoked in the AkzoNobel case. In any case, the point is moot, because PPG stated that it does not intend to launch another takeover bid on AkzoNobel, and because Elliott has come to a standstill agreement with AkzoNobel.
Therefore, the question remains unanswered for now: does the Dutch approach to shareholder rights violate the Shareholder Rights Directive? Perhaps a future decision from the Court of Justice of the European Union will bring clarity.
Tom Vos
PhD Candidate at the Jan Ronse Institute of Company and Financial Law at KU Leuven
[1] F. EIKELBOOM, “Wat onder de oppervlakte bleef in de rechtspraak rond AkzoNobel”, Maanblad voor Ondernemingsrecht 2017, afl. 10-11; F. EIKELBOOM, “Naschrift naar aanleiding van: ‘Reactie: convocatierecht en agenderingsrecht – een rechtspolitieke wens als vader van Eikelbooms gedachten’”, Maanblad voor Ondernemingsrecht 2017, afl. 10-11; F.M. PETERS and F. EIKELBOOM, “De strijd over het agenderingsrecht tussen Elliott en Akzo”, WPNR 2017/157.
[2] F.G.K. OVERKLEEFT, “Reactie: convocatierecht en agenderingsrecht – een rechtspolitieke wens als vader van Eikelbooms gedachten”, Maanblad voor Ondernemingsrecht 2017, afl. 10-11.
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