NETHERLANDS Law and Practice Contributed by: Maarten de Boorder, Samuel Garcia Nelen, Jelmer Kalisvaart and Bas Vletter, Greenberg Traurig, LLP
ment board to focus on the interests of the company and its business and, while doing so, to ensure that the interests of stakeholders are not unreasonably or disproportionately harmed. This also means that, depending on the circumstanc - es, the boards will have the right and, in some cases, may even have the obligation, to actively defend those interests. This will require compliance with the defence test (see 9.2 Directors’ Use of Defensive Measures ). 9.5 Directors’ Ability to “Just Say No” The target company’s boards may reasonably come to the decision not to support an unsolicited takeover offer. In that case, directors can also “just say no” to a hostile takeover bid. Even though a bidder can still decide to pursue their bid anyway, it will definitely complicate the takeover process if they do not have the support of the target company’s boards. Litigation in connection with private M&A deals is not uncommon in the Netherlands. The reasons for such litigation vary and can be initiated at different stages of the deal (see 10.2 Stage of a Deal ). In case of pre-signing situations, litigation can, for example, be initiated in relation to pre-contractual lia - bility, which finds its legal basis in the Dutch principles of good faith and reasonableness and fairness. Parties who enter into negotiations have to act towards each other in accordance with the principles of reasonable - ness and fairness. In principle, parties who are nego - tiating a deal are free to break off such negotiations. This could, depending on the circumstances, be dif - ferent if the other party had the justified expectation that a contract would be concluded from these nego - tiations. Dutch case law confirms that, even though parties are in principle free to break off negotiations, certain circumstances can lead to liability for the neg - ative contractual value (eg, costs) or, in certain (more exceptional) circumstances, for the positive contrac - tual value (eg, loss of profits). In practice, however, the positive contractual value is almost never awarded, save for exceptional cases. In its ruling of 14 June 10. Litigation 10.1 Frequency of Litigation
2024, the Supreme Court has added to these circum - stances that if a party breaks off the negotiations but is unjustly enriched by work performed by the other party, the party that breaks off the negotiations can be held to compensate for the work performed. In some circumstances, the principles of reasonableness and fairness could even lead to a duty to continue good faith negotiations. Post-contractual disputes mainly concern warranty breaches, earn-outs, liability limitations, price mecha - nisms and, in general, the interpretation of clauses. Litigation in public M&A deals is not uncommon. Gen - erally, such litigation is initiated by shareholders at the Enterprise Chamber, for example because they feel that a takeover supported by the boards does not reflect a fair value for the target company, or because they believe that there are conflicts of interest (see 3.1 Significant Court Decisions or Legal Developments ). These are often events of activism (see 11 Activism ). 10.2 Stage of Deal Litigation in M&A disputes can arise at various stages throughout the deal process: from pre-contractual liability claims during negotiations to the post-closing earn-out, purchase price mechanism and warranty claims. In public M&A deals, litigation is more often brought in the early stages of the bidding process, rather than post-transaction. 10.3 “Broken-Deal” Disputes Since early 2020, there has been heightened atten - tion in case law regarding “Material Adverse Change” clauses and pre-completion covenants in M&A con - tracts. This focus has shifted to earn-out clauses that are being included in M&A contracts to address certain and uncertain parameters of the transaction. The interpretation and calculation of such earn-out arrangements have become a frequent subject of post-M&A (interpretation) disputes in the past years. The same applies to interpretation disputes regarding warranties, the purchase price, conditions precedent in the period between signing and closing and limita - tion of liability clauses.
913 CHAMBERS.COM
Powered by FlippingBook