Netherlands Court Cooks Up Healthy Solution to Chef Martin’s Problems
A recent court decision in the Netherlands under the so-called inquiry procedure may give food for thought to other countries and induce them to introduce a similar procedure. This is of great value to small/medium-sized companies that are at standstill.
In times of economic difficulty, tensions between joint venture parties had eventually reached boiling point. With a 50-50 division of shares, the situation led to a standoff which makes things rather complicated. In many countries it may result in years of legal procedures or bankruptcy of the company. This is not a pleasant perspective especially for small and midcap companies.
A recent court decision (of 21 March 2012) provides an interesting insight into a specific legal procedure that is available under Netherlands law; the so-called inquiry procedure. It allows shareholders to turn to the Enterprise Chamber with the argument that there are reasons to doubt whether the policies of the company in which they are shareholders can be considered sound. If the Enterprise Chamber agrees with this argument, it may order an independent investigation into the company’s course of affairs. Also, at the petitioners’ request, the court may order interim measures against the company for the duration of the investigation, but these may be other measures than those requested.
In this case, the company was a private limited company called Chef Martin Menu Services Haaglanden B.V. Its two shareholders were a private limited company called Marfo Food Group B.V. and a foundation called Stichting Florence. Marfo produced and sold prepared meals. Florence operated a number of health care institutions.
In 2008 Marfo and Florence set up Chef Martin together. Chef Martin would prepare meals by applying the expertise of Marfo and would sell these meals to Florence. Under an accompanying joint venture agreement Marfo was the sole supplier to Chef Martin and Florence would buy approximately 2,500 meals a day from Chef Martin at a pre-arranged price.
The project went pear-shaped. This led to tensions between Marfo and Florence. Marfo was cheesed off with Florence not living up to its obligation to purchase 2,500 meals a day from Chef Martin. On its part, Florence went nuts about the prices calculated by Marfo for its deliveries to Chef Martin. As Marfo and Florence were the executive directors of Chef Martin, the operations of the company were at a standstill.
In 2011 Marfo brought the case before the Enterprise Chamber and requested the court to appoint an investigator who would primarily look into the conduct of Florence. Florence argued that the investigation should primarily focus on Marfo’s conduct. The Enterprise Chamber ordered the investigation, adding that the investigator should look into the conduct of both parties.
But the Enterprise Chamber went further. As interim measures it also appointed both a temporary executive director (which could solely represent the company) and a temporary non-executive director of Chef Martin. The role of the latter was trying to mediate between Marfo and Florence and egging them on to bring an end to the conflict. It remains to be seen whether those instruments will eventually be the right ingredients to provide a solution. If it does, this is another example that the inquiry procedure may give food for thought to other countries, also, and maybe especially, for the benefit of small and medium-sized enterprises.