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Interpretation of articles of association and shareholders’ agreements

Russell Advocaten B.V.
Amsterdam, Netherlands

For the interpretation of articles of association the court uses other rules than for shareholders’ agreements. What are these rules? What consequences does this difference have for what you have to include in the articles of association and the shareholders’ agreement?

Articles of association are explained objectively. It is irrelevant what the parties’ intentions were regarding the provisions they included therein. This, however, is precisely what is important in the case of interpreting a shareholders’ agreement.

Objective explanation

The Dutch advocate general has recently reviewed the various rules. The reason for this was a dispute about an offer scheme for shares in the articles of association of a pharmacy. One of the two shareholders transferred his shares to a trust office foundation (Stak). The other shareholder claimed that this was not allowed pursuant to the articles of association: The shares should have been offered to him first. He then called a shareholders’ meeting at which the first shareholder was dismissed as a director.

The question before the court was whether or not the obligation to offer shares was applicable in the event of such a “hanging” of shares elsewhere. The first shareholder thought of course that this was not the case. After all, he continued to hold the shares, be it in a trust office foundation.

As the offer scheme was included in the articles of association, the objective interpretation does apply according to the court. The scheme required that the shares must first be offered to the other shareholder if one shareholder wished to transfer them to different legal entity. And a trust office is a different legal entity than the shareholder himself.

This could have been different if the parties had included the offer scheme in a shareholders’ agreement. Then, it would have been necessary to assess whether or not the parties had intended to designate a trust foundation as a different legal entity. And then the first shareholder would still have had a chance.

Explanation of articles of association: objective

The explanation of articles of association is objective, carved in stone. The articles of association are also known to third parties, who must be able to rely on the fact that the legal person acts in accordance with those articles of association. In an objective explanation, the parties’ intentions may therefore expressly not be taken into account.

However, the judge is allowed to not just interpret the provisions purely linguistically. The interpretation may also take into account the entire articles of association, the prevailing public opinions, and reasonableness and fairness.

Explanation of shareholders agreements: Haviltex

A shareholders’ agreement only regulates the internal relations between the shareholders. This is why the Haviltex-standard applies. The Haviltex-standard is the general rule for the interpretation of contracts, where the judge has lot of room to take into account the intentions of the parties to an agreement and its provisions.

Relationship between articles of association and shareholders’ agreement

What happens if articles of association are in conflict with the shareholders’ agreement? In the event of a dispute involving a non-shareholder, the articles of association do apply. In a dispute between shareholders – as in this case – the shareholders’ agreement, which is known to both parties, must also be taken into account. This also allows for more room for the interpretation of the articles of association. In this line, it may even be possible for the court to decide that the articles of association must be amended on the basis of the shareholders’ agreement.

More information

Do you want to know more about the interpretation of articles of association and shareholders’ agreements? Would you like us to review your articles of association and shareholders’ agreements. Or would you like us to draw up a shareholders’ agreement for you? Or do you have any other question about corporate law? Please contact Guus van Lieshout (guus.vanlieshout@russell.nl or +31 20 301 55 55).


The general information contained herein is intended for informational purposes only. It is not intended to be, and should not be construed as, legal advice or legal opinion on any specific facts or circumstances.

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