Who stays, who leaves? Forced exit in shareholder dispute
A strong relationship between shareholders is the backbone of a company. But when tensions escalate to a breaking point, a forced exit may be inevitable. NOMA highlights the legal aspects of an exit in shareholder disputes, with a particular focus on the continuity of the company.
Shareholder exit plan: clear agreements make the difference
Business disagreements, differing strategic views or a stalled partnership: sometimes disagreement between shareholders is inevitable. In such situations, a clear exit arrangement, laid down in the articles of association or a shareholder agreement, not only provides guidance, but also prevents the conflict from turning into a legal impasse.
Such disputes can be resolved by a final exit, in which one of the shareholders involved leaves the company. The terms of such an exit, including the valuation of the shares, can be determined by the parties in advance. This not only provides clarity on how to handle future disputes, but also lets the shareholders retain control.
Legal dispute resolution under the Companies and Associations Code
When parties have not reached prior agreements, the Companies and Associations Code (CCC) provides a legal safety net for private and public limited companies: the statutory dispute resolution scheme. This scheme provides a solution in the event of shareholder disputes and has two possible outcomes:
- Exclusion: A shareholder can be forced to sell his shares to the other shareholder(s).
- Exit: A shareholder can force the other shareholder(s) to take over his shares.
The statutory dispute resolution can only be applied if there is a “legitimate reason” of such a nature that the survival or fundamental interests of the company are seriously threatened. This does not require that one of the shareholders be at fault.
A practical example makes this clear:
Suppose A and B, a married couple, establish a company together and both become shareholders. Ten years later, their marriage is on the rocks and they decide to divorce. The marital problems also cast a shadow over their professional relationship, preventing harmonious cooperation within the company. This happens without either of them having committed any obvious fault.
In this situation, depending on who wants to stay in the partnership, several scenarios are possible:
Counterclaim in shareholder disputes | Regardless of who initiates it, the other party will usually file a counterclaim. This may be because it has a different view on the exclusion or exit, or because it has a different valuation of the shares in mind.
Role of court in forced exit of a shareholder
Ultimately, based on the claims filed, it is the judge who decides who stays in the company. The judge examines which shareholder has good cause and then decides which party should be excluded or exit.
If good cause is established in the case of several shareholders, the court lets the corporate interest prevail: who offers the best guarantees for the survival of the company? This shareholder is then required to take over all the shares of the excluded or exiting party or parties, at a price determined by the court.
After this decision, there is no turning back. Therefore, the determination of the share price is fundamental.
You can read about how the court sets this price in this news article.
NOMA: legal compass in shareholder disputes and exit arrangements
Do you want to lay a solid foundation for your cooperation and are you looking for assistance in the preliminary elaboration of an exit arrangement? Or is there already a conflict situation and you need representation in an exclusion or exit procedure? NOMA guides you with expertise, insight and strategic precision. Our lawyers will assist you in word and deed, from negotiation to procedure. Get in touch.
Looking for dedicated lawyers?
NOMA's team is ready to assist you with expert advice and customized guidance in a confidential setting!
Feel free to contact us for a personal consultation at our offices in Brussels, Bruges or Kortrijk.
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