Track Record: Director Suspended in Deadlocked Shareholder Dispute Within Family Company

Mr. Vincent Besters represented an entrepreneur in summary proceedings concerning the suspension of a director at a property company

In July 2023, the Central Netherlands District Court handed down a judgment in summary proceedings in which mr. V.M. Besters acted as counsel for the defendant: an entrepreneur who, together with his wife, was a 50% shareholder and director of a property company. The working relationship had become seriously disrupted, both personally and professionally, due to a divorce.

What was the case about?

The parties were married and jointly operated a real estate business involved in the purchase and sale, management and development of property, as well as the supply of energy to an apartment complex. Both were 50% shareholders and directors.

The divorce had completely broken down their relationship. A deadlock had arisen: no joint decisions could be made, no shareholders’ meeting could be held, and no agreement could be reached on engaging a lawyer to deal with an outstanding loan of € 1.5 million that was being called in.

The claimant sought the suspension of mr. Besters’ client as director. The client counterclaimed for the suspension of the claimant, or alternatively the appointment of an independent accountant or a third director.

What did the court decide?

The preliminary relief judge found that there was a serious deadlock that threatened the company’s continued existence. The companies were loss-making and under pressure from the call-in of the large loan.

The court ruled that one of the two directors had to be suspended to break the deadlock, and chose to suspend mr. Besters’ client — for a period of five months. The decisive factor was that the claimant had been managing the day-to-day operations and financial administration for years, and that the client had in practice already had limited access to the systems for some time. Suspending the client therefore changed little about the actual state of affairs.

The counterclaim — suspension of the claimant — was dismissed.

What does this mean for entrepreneurs?

This case illustrates how serious a shareholder dispute can become when relations have broken down completely, both personally and professionally. Key lessons:

• Keep business and personal matters separate. When business and personal interests become entangled — as with spouses who run a business together — a personal conflict can directly threaten the company’s survival.
• Whoever holds factual control has a stronger position. The court looks not only at formal positions but also at who actually manages day-to-day operations.
• A deadlock costs time and money. When directors can no longer decide together, the company suffers. Judicial intervention is a last resort, not an ideal solution.
• Prevent it through a shareholders’ agreement. A well-drafted shareholders’ agreement with a deadlock mechanism can prevent or manage these situations.

Case Reference

This post is based on ECLI:NL:RBMNE:2023:3932.

Mr. V.M. Besters acted as counsel for the defendant in this case.