Dutch treat: Netherlands judiciary only goes halfway towards adopting Delaware trilogy in takeover context

Vanderbilt Journal of Transnational Law, Oct, 2008 by Danielle Quinn

The Enterprise Chamber also concluded that the Board's decision to change strategies from a "stand alone" approach to a merger plan meant that "the domain of issues that--within the framework of statutory law and corporate governance rules--[fell] within the competence of [management was] abandoned, and that the decision making about such a public takeover bid ... [fell] within the competence of the shareholders." (101) In addition, the Enterprise Chamber concluded its opinion with language that once the corporation was "up for sale" the board's role was to maximize shareholder profit. (102)

2. The Dutch Supreme Court Decision: Apparent Rejection of Delaware Trilogy

The Dutch Supreme Court's July 13, 2007 ruling rendered a landmark decision with regard to shareholder rights and corporate governance in takeovers in the Netherlands, and potentially the entire European Union. (103) The Supreme Court rejected the Enterprise Chamber's reliance on Dutch case law, and instead relied solely on Dutch written law and the articles of association of the company. (104) In interpreting the Dutch Civil Code provisions, the Supreme Court turned to the Dutch Corporate Governance Code for guidance. (106) Principle II.1 of the Corporate Governance Code relates to the role and procedure of the management board. (106) It states that the "role of the management board is to manage the company, which means, among other things, that it is responsible for achieving the company's aims, strategy and policy, and results." (107) When discharging this role, the management board "shall be guided by the interests of the company and its affiliated enterprise, taking into consideration the interests of the company's stakeholders." (108)

Principle II of the Corporate Governance Code adds substance to two pertinent sections of the Dutch Civil Code. (109) Section 2:8 of the Code requires managers and others involved with the company to act with "reasonableness and fairness" toward each other. (110) Section 2:9 states that every managing board member has, in essence, fiduciary duties to the company. (111) In particular, the requirements of both the Dutch Civil Code and the Corporate Governance Code do not require the managing board to ask, or even consult, the general meeting of shareholders for approval or opinion with regard to a transaction that falls within the authority of the managing board. (112) Accordingly, the Supreme Court overruled the Enterprise Chamber's decision to the contrary, concluding that the ABN AMRO board was not required to consult its shareholders. (113)

Principle IV of the Corporate Governance Code provides substance for Section 2:107(a) of the Dutch Civil Code. (114) Section 2:107(a) describes which decisions of the managing board (enumerated in Sections 2:8 and 2:9, supra) are subject to approval of the general meeting of shareholders. (115) During promulgation, the Dutch Parliament explicated the rule, stating that the general meeting of the shareholders does have a role to play in decisions that involve disposal of company assets, but only when "those decisions are so drastic that they change the nature of the shareholdership in the sense that the shareholder would, as it were, be providing capital to, and taking an interest in, a materially different enterprise." (116) Principle IV provides that "any decisions of the management board on a major change in the identity or character of the company or the enterprise shall be subject to the approval of the general meeting of shareholders." (117) The Supreme Court held that the mere sale of an asset, such as LaSalle, clearly is not "a significant change in the identity or the character of the company." (118) Thus, the ABN AMRO Board violated neither the Dutch Civil Code nor the Corporate Governance Code.