Certification of shares is the construction in which shares are transferred to a foundation, a stichting administratiekantoor, which issues depositary receipts in return. The foundation exercises the voting rights; the receipt holders take the economic interest, meaning the dividend and any increase in value.
Legal basis
The construction rests on the foundation’s articles and on the administration conditions. Articles 2:197 and 2:88 of the Dutch Civil Code govern the meeting rights of receipt holders: receipts may be issued with or without meeting rights, and only holders with meeting rights have access to the general meeting and a right to information. Article 2:227(2) provides that meeting rights may be attached to receipts by the articles. The foundation’s board is bound by the administration conditions and by Article 2:8, which requires those involved to behave reasonably and fairly towards one another.
How it works in practice
Certification is used in family business succession, keeping control with the successor or an independent board while the value passes to several children. It is equally common in employee participation, because a group of small holders would otherwise slow down decision-making. The administration conditions set out when receipts may be transferred, how the price is determined and whether decertification is possible.
Where it goes wrong
The classic conflict arises where the foundation board keeps its distance from the receipt holders and takes decisions they do not support; without meeting rights they are then largely powerless. A second problem is a valuation clause producing an exit price far removed from real value. Third, certification is sometimes driven purely by tax considerations, with the corporate consequences surfacing only years later.
Related terms
Certification connects to the general meeting of shareholders, the articles of association and inquiry proceedings, which are open to receipt holders as well.
Considering certification, or facing difficulties as a receipt holder? Our corporate lawyers review the conditions.
