The rights of minority shareholders in a public limited company ("S.A./N.V.") can be summarised as follows.
1. Quorum and majority requirements
Resolutions of shareholders' meetings are usually adopted by a simple majority of the votes cast, regardless of the number of shares present or represented.
However, for certain important decisions, quorum requirements (usually at least 50% of the company's capital) and majority requirements must be satisfied. The main majority requirements are as follows:
(i) 80%: for any amendment to the purpose clause, acquisition of own shares or acceptance in pledge of own shares;
(ii) 75%: for any other amendment to the Articles of Association, increase or decrease of capital, dissolution, issue of shares below par value, exclusion or limitation of the preferential subscription right, issue of convertible bonds or subscription rights (warrants), merger or split;
(iii) 25%: for the winding-up of the company when the net assets have decreased, as a result of losses, to less than one-quarter of the capital (Article 103 of the Coordinated Laws on Commercial Companies - "CLCC").
Consequently, minority shareholders may be in a position to block the approval of major resolutions and even to wind up the company.
2. Right to call a shareholders' meeting
Minority shareholders may at any time request the Board of Directors to call a shareholders' meeting, provided they own at least one-fifth of the company's capital (Article 73 CLCC).
3. Right to review share register
Each shareholder has the right to review the company's share register at the company's registered office (Article 42 CLCC).
4. Right to receive certain information
Each shareholder is entitled to receive certain information regarding the company's activities. Article 78 CLCC imposes on the Board of Directors the obligation to make certain information available to the shareholders at least 15 days before the date of the annual shareholders' meeting: the annual accounts, the list of participation in other companies, the Board of Directors' report, the auditor's report.
5. Right to ask questions
Each shareholder has the right to ask questions to the directors and the auditor on their report at the annual shareholders' meeting (Article 70ter CLCC).
6. Review of the financial situation of the company
In the event the shareholders' meeting neglects to appoint an auditor, any interested party, including a minority shareholder, may petition the President of the Commercial Court, in summary proceedings, to appoint an auditor until the shareholders' meeting has appointed his successor. If the company is under no legal obligation to appoint an auditor, every shareholder may exercise the investigation powers of the auditor (Article 64 CLCC).
7. Proportional representation on the Board of Directors
Directors are usually appointed by a simple majority of the votes cast at the shareholders' meeting. The majority shareholder (which holds 50.1% of the voting rights or more) may therefore appoint all directors. However, with a view to protecting minority shareholders, the Articles of Association may provide for a proportional representation of the shareholders on the Board of Directors through the creation of different classes of shares, each class being entitled to elect one or more directors.
8. Derivative suits
Directors are liable to the company for damages arising from wrongdoing in management decisions. In addition, they are jointly and severally liable to the company and third parties for damages resulting from a breach of the CLCC or the Articles of Association (Article 62 CLCC).
In the event the shareholders' meeting nevertheless grants the directors a release of liability, a minority shareholder may bring a derivative suit on behalf of the company against the directors if that shareholder (i) voted against the release of liability and (ii) owned shares representing either at least 1% of the votes of all outstanding shares or at least BEF 50,000,000 of the company's capital at the time of the meeting.
A shareholder may only bring an action in its own name against directors if he suffered a prejudice different from that of the company.
9. Abuse of majority
A minority shareholder has a right to restitution in kind or, if impossible, to damages, if the majority shareholder (i) intentionally takes a decision against the company's interest to harm the minority shareholders, or (ii) acts negligently and thereby causes preventable harm which is totally disproportionate to the gain obtained by the majority shareholder.
10. Nullity of decisions
In certain specific situations, any interested party, including a minority shareholder, may bring an action against the company to nullify a decision of the shareholders' meeting (Article 190bis CLCC).
The nullity may not be invoked by a party who (i) voted in favour of the decision, or (ii) explicitly or implicitly denied to invoke such nullity, unless the nullity results from a breach of a public policy rule.
The interested party may petition the Commercial Court to suspend the execution of the decision if extraordinary circumstances so require.
11. Right to request the winding-up of the company
Article 102 CLCC provides that the winding-up of the company may be requested for "serious reasons". Constant abuse by a majority shareholder of its majority position depriving minority shareholders in a very serious manner of their substantial rights can be considered such a "serious reason".
In the event the company's net assets drop below 25% of its capital, only 25% of the votes cast at the shareholders' meeting are required to wind up the company (Article 103 CLCC).
Finally, any interested party, including a minority shareholder, may petition the Court to wind up the company if its net assets have dropped below the minimum capital requirement of BEF 1,250,000 (Article 104 CLCC).
The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.
De Bandt, van Hecke & Lagae - Brussels. (32-2) 517.91.80.
ARTICLE
17 October 1995