Court Decides Takeover Battle For Privatised Hospital

Introduction

The Netherlands still has relatively little experience with hospitals that are entirely in the hands of an investor; the Slotervaart hospital in Amsterdam was the first in 2006. A conflict has since arisen between shareholder and chief executive officer (CEO) Aysel Erbudak and her three children on one side, and the heirs of deceased investor Jan Schram - Erbudak's former business partner - on the other. Because the conflict threatened the stability of medical care, the Amsterdam Court of Appeal intervened. In such cases, the Netherlands' legal system allows for recourse to the Enterprise Chamber - a special section of the Court of Appeal that has far-reaching powers. This is a unique opportunity for (foreign) investors to obtain swift and practical emergency measures in takeover battles and shareholder conflicts.

Facts

Schram rescued the Slotervaart hospital from insolvency in 2006. He invested in the Slotervaart hospital through a €26 million loan. The hospital was converted into a private limited company, a new management board was appointed with Erbudak as its CEO and a supervisory board was added.

Schram died on December 28 2012. Schram's brother, Lex, was appointed executor. Lex's sons, Pim and Rob, were part of the group of heirs. Schram's death triggered a requirement under the articles of association to offer the shares he held to Erbudak and her children. They knew this and indicated their interest in acquiring these shares, but Schram's heirs refused to offer their shares.

The supervisory board suspended Erbudak as CEO.

In the ensuing unrest, principal banker ING froze all current lines of credit. The bank held discussions with all parties concerned and concluded that Erbudak's suspension had created a power struggle between the ultimate beneficiary owners. The bank wanted the parties to find a solution and wanted to have the €26 million loan subordinated before it would remove its restrictions.

The heirs diluted the company through which Erbudak and her children could acquire the late Schram's shares. In doing so, they acquired 99.64% of the subscribed share capital and voting rights. Only then did Schram's heirs offer the shares they held, which no longer reflected any control because of the dilution.

Soon thereafter, Erbudak was removed as CEO.

Erbudak and her children filed an application with the Enterprise Chamber of the Court of Appeal.

Decision

The Enterprise Chamber ruled that the course of events...