We are regularly asked to what extent the board of directors of a company is obliged to share certain information with the shareholders. This is often because an individual shareholder has approached the board of directors with a request to access certain information. The question then arises for the board of directors as to whether they should share the requested information with the shareholder or not.
The main rule in Dutch company law is that the board of directors is obliged to provide all the information requested by the general meeting of shareholders, unless a compelling interest of the company opposes it. This refers to a request made by a shareholder in (preparing for) the general meeting. This right of the general meeting is also referred to as the information right and is specified in article 2:107/217 paragraph 2 of the Dutch Civil Code. The information right is a right of the general meeting as an organ for the purpose of the board of directors rendering accounts and providing answers to the company. During the general meeting, every shareholder, regardless of their shareholding, may ask questions to the board of directors and request certain information. These questions can also be asked prior to the general meeting, so they can be dealt with in the general meeting.
The board of directors has a duty of care when sharing information with the shareholders. Information that may be harmful, for example, to the company’s competitive position if it is shared, does not have to be shared in principle. This interest can be regarded as a compelling interest of the company. The interest of the company should in this case take precedence over the interest of the shareholder(s). Furthermore, in assessing whether certain information should or should not be provided to the shareholders, the board of directors must take into account the limits of reasonableness and fairness. Only information regarding matters that truly concern the company can be requested by the shareholders.
Information Right outside the General Meeting
The individual shareholder cannot, in principle, request certain information from the board of directors outside a general meeting, or at least, the request can be made, but the board of directors is not obliged to comply with it in principle. However, in legal practice it has been accepted that an individual shareholder may be justified in requesting information under special circumstances.
This includes, for example, the case where the shareholder in question is the only shareholder who is not part of the board of directors. When all other shareholders are also members of the board of directors, they have an information advantage over the shareholder who is not a member of the board of directors. Under certain circumstances, this single shareholder can therefore also request insight into certain information outside a meeting, for example when the company is in a critical phase, or the shareholder has a valid reason for wanting to have the information in question. In such cases, the board of directors must weigh the competing interests, taking into account both the interests of the company and the interests of the individual shareholder.”
A shareholder’s option to request specific information is through the initiation of an “exhibition claim” in court, also known as an “article 843a Rv” claim, referring to article 843a of the Dutch Civil Code of Procedure. Four cumulative requirements must be met in order to grant of an exhibition claim: (i) the party from whom the documents are requested must be able to dispose of those documents, (ii) the claimant must have a legitimate interest in the documents, (iii) the documents must relate to a legal relationship that the claimant is involved in, and (iv) the documents must be sufficiently determined. Even if these requirements are met, the claim can be rejected if: (i) proper legal proceedings can be guaranteed without the provision of the requested data, or (ii) there are compelling reasons not to provide the requested information.
The Shareholders’ Agreement
Aside from the legal provisions, shareholders can make differing agreements regarding the individual right to information by including provisions in the shareholders’ agreement. A standard provision in the shareholders’ agreement is that shareholders can request specific information outside of general meetings. To make this manageable, it is advisable to be specific about what information can be requested. For this reason, the type of information is often specified in the shareholders’ agreement. The company must also be a party to the agreement to easily invoke these provisions against the company. If no differing provisions are included in an agreement, then the legal provisions apply.
A recent ruling of the Arnhem-Leeuwarden Court of Appeal concerned the question whether (the board of directors of) a company was obliged to provide certain information to one of its shareholders. The shareholder in question, with a 3.6% shareholding, asked the board of directors during a general meeting for insight in specific information regarding the financial statements and a planned merger. The board of directors failed to provide this information to the shareholder, or so the shareholder claims. In this case, the shareholder is claiming access to this information. The company, on the other hand, argues that the requested information has already been provided to the shareholder and that the shareholder has no interest in further insight. The board of directors asserts that even if the shareholder has a right to information outside of general meetings, a compelling interest of the company exists that opposes the further provision of information. The court agrees with the company’s defense and dismisses the shareholder’s information claim.
Alternatively, the shareholder instituted an exhibition claim pursuant to article 843a Rv. The court of appeal observed the requirements already set out above for allowing an exhibitor’s claim and considered that the shareholder had insufficiently substantiated that the board of directors had failed to exercise due care towards her. In addition, the court considers the interests of the company and the reasonableness to be expected from the shareholder when requesting information. Taking the above into account, the court of appeal also disallowed the claim based on article 843a Rv.
Should you have any questions about shareholder information rights or run into a specific issue in which a shareholder is requesting information, please contact one of our lawyers of our corporate law section.