Inquiry proceedings

The inquiry proceedings is a uniquely Dutch procedure, in which the Enterprise Division can investigate the (strategic) policy of a Dutch legal entity. This procedure is often frowned upon in foreign countries, as an inquiry procedure can intervene and change the corporate structure in exceptional ways -e.g. sidelining or putting pressure on troublesome directors or shareholders. The corporate lawyers at Heron Legal will explain below.

Requirements for an inquiry procedure
The inquiry proceedings start by filing a petition with the Enterprise Division. Inquiry proceedings cannot be initiated by just anyone. Sections 2:346 and 2:347 of the Dutch Civil Code contain a number of conditions as to who is authorised to start an inquiry procedure:

1. shareholders or holders of depositary receipts who (alone or jointly) hold 10% of the shares;
2. shareholders or depositary receipt holders holding 1% of the shares if the issued capital exceeds EUR 22.5 million;
3. the company itself;
4. the public prosecutor's office;
5. the works council;
6. other persons or entities granted the power by way of an agreement.
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It is also important here that, prior to inquiry proceedings, the applicant has sent out a 'letter of objections'. This letter of objection should set out the doubts and concerns about the conducted policy. The underlying idea is that (the board of) a company should not be caught unawares by inquiry proceedings.

Course of the inquiry procedure
The first stage starts with the petition and a verbal hearing by the Enterprise Division. At that time, it is assessed whether intervention in the company's policy is justified, for instance in case of disagreement between shareholders or communication problems between directors. The Enterprise Division can then take measures, e.g. suspending directors, sidelining shareholders, amending articles of association, or appointing independent directors. An appointed investigator will investigate the policy in more detail.

In the second stage, the Enterprise Division determines whether any mismanagement has occurred, based on its investigation. Mismanagement may apply if fundamental principles of corporate responsibility are violated. During both stages, stakeholders can apply for preliminary relief. Once mismanagement has been established, the Enterprise Division can award definitive measures, such as dismissing or suspending directors, nullifying resolutions, or even dissolving the company.

These high-impact actions make inquiry proceedings at Heron Legal an effective tool for substantial alterations. For expert advice and assistance, contact our corporate law attorneys.