The shareholders\u2019 agreement, alongside the articles of association, is the principal document governing the mutual relationships between shareholders. In private limited companies, such agreements typically include provisions designed to safeguard the private character of the company. However, these provisions can also become a source of dispute. Read on to learn more:<\/p>\n
What Are Permitted Transfer Clauses?<\/strong><\/p>\n Shareholders\u2019 agreements often impose strict rules on the transfer of shares. These restrictions aim to ensure the stability of the company and to prevent shares from being freely sold to third parties. Nonetheless, in some instances it may be desirable for a shareholder to transfer their shares freely\u2014such as to a wholly owned subsidiary\u2014without triggering obligations towards other shareholders. In such cases, a so-called \u201cpermitted transfer\u201d clause provides a solution.\nHowever, if such a clause is drafted too broadly or ambiguously, it can lead to conflict. A recent judgment of the District Court of The Hague illustrates the importance of careful drafting of such provisions.<\/p>\n The case in brief <\/strong><\/p>\n In June 2022, an investor acquired 30% of the shares in a company for an amount of EUR 1,000,000. The remaining 70% of the shares were held by the company\u2019s founder. At a certain point, a corporate restructuring took place within the investor\u2019s group. As a result, with the founder\u2019s consent, the investor transferred his shares to a wholly owned subsidiary. This consent was given on the condition that the investor would retain ultimate control over the shares. This agreement was recorded in a permitted transfer clause.<\/p>\n Subsequently, the investor\u2019s subsidiary transferred the shares to a cooperative established by the investor. This cooperative was managed by both the investor and a third party. The third party acquired a minority interest in the investor\u2019s company. When the subsidiary later merged with the cooperative, the founder claimed that this constituted a change of control. The founder therefore invoked the exception to the permitted transfer clause, arguing that a right of first refusal should have applied\u2014meaning the shares ought to have been offered to the founder prior to the transfer. On this basis, the founder initiated legal proceedings.<\/p>\n Judgment of the court <\/strong><\/p>\n The District Court of The Hague ruled that the transfer of shares to the cooperative fell within the scope of the agreed permitted transfer clause. A decisive factor in this determination was that the transfer occurred within the investor\u2019s group, and that the clause had been drafted in broad terms. Specifically, it stated that transfers to \u201cany entity\u201d within the shareholder\u2019s group were permitted and that such transfers would explicitly not trigger a right of first refusal.<\/p>\n The fact that a third party obtained a minority interest within the cooperative did not, according to the court, affect the application of the permitted transfer clause. The court found it determinative that control remained, in essence, with the original investor\u2014as had been contractually agreed and reflected in practice.<\/p>\n The court implicitly indicated that economic interest and actual control carried more weight than legal form or the involvement of a third party with a relatively minor shareholding.<\/p>\n