RIGHTS OF MINORITY SHAREHOLDERS IN THE NETHERLANDS L. Timmerman and A doorman IIA 3 Introductory remarks LI Position of shareholders under Dutch company law Historically, the position of shareholders in Dutch companies has been rather weak, especa ly when compared with that of the board of directors. As far as we know,no serious investigation has ever been conducted into the question of why the board of directors of a Dutch company has such a strong position. a parallel may exist with other phenomena in Dutch society, most notably the trust Dutch citizens have always put in their govemment and the acceptance of a very indirect form of democracy Whatever the reasons may be, the wea kness of the position of shareholders has made It unnecessary to direct special attention to the position of minority shareholders 1.2 Shift in powerin favourof shareholders ecently, we have witnessed a strengthening of the position of the shareholderat the expense of the power of the board of directors and the supervisory board. This shift in power in favour of shareholders may result in increasing attention for the position of minority shareholders in the com ing years The shift n power n favour of the shareho lder has many reasons, inchuding a recent nfluential advice from the Social and Economic Council t the Dutch gowernment and parliament the pressure exercised by institutonal nves tors on the Dutch govemmentand companies to lmit the use of anti-take-over devies, the expand ing shareholder base n the Netherlands and the increasing number of foreign profess ional nvestors n Dutch companes. This strengthened position of shareholders has also resulted n increased attention for the position of minority shareholders n the Netherlands. A god illustration of this is the legislative proposal for a new section 2: 1 18a that will give shareholders who hold I percent of the ssued capital the right to place an item on the agenda of ne general meeting of sharcholders. 1.3 Why minority protection? Before elaborating on the protection of minority shareholders in the Netherlands, it will be useful to make some short remarks on why minority shareholders should receive protection and what the ultimate goal of this protection should be. At least three different reasons justify ing minority protection come to mind. First, if the Dutch legal system does not provide adequate protection of minority shareholders compared with foreign legal systems, foreign investors will not invest in Dutch companies and Dutch investors will increase their investments in foreign companies Second, and related to the first point, weak protection of minority shareholders University of Groningen. functioning and thefuture of the rules applicable to statutory hwo-tierenmtities), 5 January 2001RIGHTS OF MINORITY SHAREHOLDERS IN THE NETHERLANDS L. Timmerman and A. Doorman* III A 3 1 Introductory remarks 1.1 Position of shareholders under Dutch company law Historically, the position of shareholders in Dutch companies has been rather weak, especially when compared with that of the board of directors. As far as we know, no serious investigation has ever been conducted into the question of why the board of directors of a Dutch company has such a strong position. A parallel may exist with other phenomena in Dutch society, most notably the trust Dutch citizens have always put in their government and the acceptance of a very indirect form of democracy. Whatever the reasons may be, the weakness of the position of shareholders has made it unnecessary to direct special attention to the position of minority shareholders. 1.2 Shift in power in favour of shareholders Recently, we have witnessed a strengthening of the position of the shareholder at the expense of the power of the board of directors and the supervisory board. This shift in power in favour of shareholders may result in increasing attention for the position of minority shareholders in the coming years. The shift in power in favour of the shareholder has many reasons, including a recent influential advice from the Social and Economic Council to the Dutch government and parliament, 1 the pressure exercised by institutional investors on the Dutch government and companies to limit the use of anti-take-over devices, the expanding shareholder base in the Netherlands and the increasing number of foreign professional investors in Dutch companies. This strengthened position of shareholders has also resulted in increased attention for the position of minority shareholders in the Netherlands. A good illustration of this is the legislative proposal for a new section 2:118a that will give shareholders who hold 1 percent of the issued capital the right to place an item on the agenda of the general meeting of shareholders. 1.3 Why minority protection? Before elaborating on the protection of minority shareholders in the Netherlands, it will be useful to make some short remarks on why minority shareholders should receive protection and what the ultimate goal of this protection should be. At least three different reasons justifying minority protection come to mind. First, if the Dutch legal system does not provide adequate protection of minority shareholders compared with foreign legal systems, foreign investors will not invest in Dutch companies and Dutch investors will increase their investments in foreign companies. Second, and related to the first point, weak protection of minority shareholders * University of Groningen. 1. Entitled Advies over het functioneren en de toekomst van de structuurregeling (Advice on the functioning and the future of the rules applicable to statutory two-tier entities), 5 January 2001