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Dutch Supreme Court sets aside ruling by Enterprise Section on DSM loyalty dividend
The Dutch Supreme Court recently set aside an earlier ruling by the Enterprise Section of the Amsterdam Court of Appeal (March 2007) in which it blocked chemicals company DSM from introducing a loyalty dividend.
When none of the parties appealed against this ruling, Advocate-General Vino Timmerman lodged a cassation appeal in the interest of the law.
According to the Enterprise Section, the loyalty dividend would have conflicted with the principle of equality among shareholders as defined in Section 2:92(1) of the Dutch Civil Code [Burgerlijk Wetboek, BW].
The Supreme Court has now indicated that Section 2:92(1) BW does not preclude a situation in which the articles of association provide for a financial payment (such as a supplementary dividend) being disbursed to registered shareholders under certain conditions, unless the provision violates the principle of equality laid down in Section 2:92(2) BW.
It also confirms that the Enterprise Section may grant an interim injunction before it rules on a request to institute an investigation.
However, it should exercise that authority only with great restraint at this stage of the proceedings.
In the case in question, the Supreme Court ruled that the need to grant an interim injunction was not demonstrated by the facts established by the Enterprise Section.
As the first loyalty dividend would only have been paid out in 2010, the Supreme Court did not see why it was not possible to await the vote of DSM’s General Meeting of Shareholders.
As the Enterprise Section’s ruling was set aside in a cassation appeal in the interest of the law, the rights of the parties involved will not be affected.
For more information, please contact Joost Kolkman, Corporate Practice Group.
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