For many companies and institutions operating in the Netherlands or internationally, a shareholders' agreement is an essential foundation for cooperation. But what happens if the cooperation ends? And how do you avoid lengthy settlement disputes?
The judgment of the Arnhem-Leeuwarden Court of Appeal of 15 November 2022 (ECLI:NL:GHARL:2022:9759) offers valuable insights for entrepreneurs and directors facing the termination of a shareholder agreement. In this article, you will read what the legal points of interest are, how to avoid disputes and what steps you can take to ensure a smooth settlement.
The importance of clear agreements upon termination
A shareholders' agreement regulates the mutual relations between shareholders, for instance on the transfer of shares, non-competition and confidentiality. When the cooperation ends, it is crucial to make clear agreements on the conditions under which the agreement is terminated. This prevents ambiguity and legal proceedings.
In the case dealt with by the Arnhem-Leeuwarden Court of Appeal, the parties had eventually agreed on the termination of their cooperation. This was done through an e-mail exchange between both parties' lawyers, in which it was agreed, among other things, that one shareholder would transfer his shares at a set price and abide by existing relationship and non-competition clauses.
Case study: The case of Velthuijzen Beheer B.V. vs Crayé B.V. and Ithec ICT B.V.
In this case, Velthuijzen Beheer B.V. and Crayé B.V. were joint shareholders of Ithec ICT B.V. In 2016, the intention to terminate the cooperation arose. After negotiations, Velthuijzen accepted Crayé's proposal to transfer its shares for €300,000 and abide by the existing relationship and non-compete clauses. These agreements were confirmed by e-mail.
Nevertheless, a dispute arose as to whether Velthuijzen should be considered a 'bad leaver' (with adverse financial consequences), or whether the termination had been agreed by mutual consent. The court ruled that the e-mail agreements were binding and that the shareholder agreement had been terminated by mutual consent. As a result, the bad leaver provisions no longer applied.
Legal considerations and final judgment
The court emphasised that the e-mail exchange clearly showed that the parties had agreed on the termination of the cooperation and its terms. The fact that the arrangements had not been set out in a formal written agreement did not alter this. What was decisive was that both parties had agreed to the core terms through their lawyers.
The legal key points from the judgment:
- Mutual agreement: If parties mutually agree to terminate the shareholders' agreement, specific provisions on, for example, 'bad leaver' or 'good leaver' no longer apply, unless otherwise agreed.
- Proof of agreement: A clear e-mail exchange between lawyers may be sufficient to prove that a binding agreement has been reached.
- Non-competition and relationship clause: If the termination agreements confirm that these clauses continue to apply, the parties are bound by them.
- No interest in additional declarations of law: If it already follows from the agreements that a certain clause applies, a party has no interest in an additional declaration of law by the court.
The court set aside the court's earlier judgment and rejected the other party's claims. It also ruled that the litigation costs should be reimbursed by the losing party.
Practical tips for your business
As a company or institution, do you want to terminate a shareholders' agreement? Then pay attention to the following points:
- Record agreements clearly: Make sure all agreements on termination, transfer of shares and applicability of clauses are confirmed in writing, preferably through lawyers.
- Check the shareholder agreement: Look carefully at the provisions on termination, transfer and possible arbitration. Sometimes arbitration is mandatory before you can go to court.
- Be alert to the consequences of 'bad leaver' and 'good leaver' provisions: These can have major financial consequences. By reaching agreements by mutual consent, you can override these provisions.
- Avoid unnecessary procedures: Clear communication and recording of agreements prevents lengthy and costly disputes.
What can TK help you with?
TK has extensive experience in contract law, shareholder disputes and procedures concerning termination of collaborations. We can advise you on drafting, amending or terminating shareholder agreements, both nationally and internationally. We also assist you in negotiations and proceedings, so that you limit your risks and your interests are represented in the best possible way.
More information or advice?
Would you like to know more about terminating a shareholder agreement, or do you have a dispute about contract law or litigation? Feel free to contact us for a no-obligation consultation. We will be happy to think along with you and provide a practical and legally sound solution for your company.
