Transfer of shares under administration: when is this permitted in the Netherlands?

In the unbundling of a Dutch family enterprise, two brothers became involved in a drawn-out legal dispute about the transfer of share The portion of registered capital of a private or public limited company
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. Carl and Boudewijn (through their personal holdings) each held a part of the shares in the flower bulb company Bloemenbollenbedrijf Brouwer. An additional complication was that during the proceedings in court, the Enterprise Division appointed an administrator for the shares held by Carl. Who then was responsible for transferring the shares? What role does an administrator play in the Netherlands? Dutch corporate law expert Marco Guit discusses this interesting case.

Claim for the transfer of shares

In counterclaim proceedings, Boudewijn Holding demanded that Carl Holding be ordered to cooperate in the transfer of the shares held by Carl Holding in the capital of the flower bulb company to Boudewijn Holding in accordance with the statutory pre-emptive rights clause. In an interlocutory judgment, the judge ruled that the shares should indeed be sold to Boudewijn Holding. He subsequently appointed an expert to establish the price of the shares.

Inquiry proceedings before the Dutch Enterprise Division

During the expert investigation, inquiry proceedings into the operational management of the flower bulb company were held before the Enterprise Division . In a so-called second phase judgement, the Enterprise Chamber provisionally transferred the shares in the company held by Carl Holding to an administrator.

Corporate lawyer in the Netherlands

Boudewijn Holding now seeks to prevent his claim from ultimately being awarded,  but Carl Holding claims not to be able to cooperate in the transfer, seeing that the shares are under administration. For this reason, Boudewijn Holding in an incidental question called on the administrator to appear as a third party in the proceedings. In short, Boudewijn Holding demanded via a lawyer that if its claim against Carl Holding were to be awarded, the administrator should at the same time be compelled to transfer the shares of Carl Holding to Boudewijn Holding.

Is an administrator authorised to transfer shares in the Netherlands?

In its ruling, the court addressed the role of the administrator and whether the claim could be upheld. The main question is whether an administrator has the authority to transfer shares that have temporarily been placed under his administration, to a third party. In answering this question, it should first and foremost be pointed out that the Enterprise Division did not formulate specific restrictions when appointing the administrator. It should therefore be assumed that the temporary administrator had a general mandate in the administration of the shares (pursuant to Section 2:336 of the Dutch Civil Code).

Shareholder retains rights of depository receipt holder

The administrator of shares appointed by the Enterprise Division is authorised to exercise the rights of the shareholder for the duration of his appointment. The original shareholder retains the rights of a depository receipt holder for the full term of the appointment, and with it the right to the revenue generated by the shares that were transferred to the administrator.

Duties and powers of an administrator in the Netherlands

The administrator has the powers vested in him by law and under the articles of association A document, drawn up when a Dutch company or legal person is set up, and which regulates the operations of the company and defines its purpose.
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Articles of Association
. It is up to the temporary administrator to judge within the limits of his duties and powers whether certain measures should be taken. If so, he must also implement them.

Administrator required to transfer shares

The procedural interest in summoning the administrator to these proceedings is obvious in view of the requested transfer of shares. The court concluded that it is also the administrator who, during his appointment, would be required to transfer the shares on the basis of compulsory divestment if the claim of Boudewijn Holding were to be awarded in counterclaim proceedings.

Voluntary transfer contrary to Dutch law

However, the administrator does require either permission from the original shareholder (Carl Holding) or a court order for the transfer. A voluntary transfer of shares by the administrator is deemed contrary to the temporary nature of the provision. In this case, the administrator had a court order, seeing that the claim (to also have the administrator transfer the shares if Carl Holding was ordered to do so) was upheld by the court.