Background
A mid-size European technology business held a minority stake in a Belgian joint venture established in 2017 to develop and distribute a specialist software platform across the Benelux market. The majority partner was a significantly larger corporate with its own legal team and substantially greater litigation resources.
Over a period of approximately three years, the minority shareholder alleged that the majority partner had taken a series of decisions through the joint venture's governance structure that systematically diluted the minority's economic position. These included approving related-party transactions between the joint venture and entities connected to the majority partner on terms that the minority alleged were not at arm's length, issuing new shares to the majority partner at a dilutive price without offering pre-emption rights as required under the joint venture agreement, and withholding distributions that the minority contended were due under the agreed dividend policy.
The minority's Belgian legal advisers assessed the claim as well-founded. Under the Belgian Code of Companies and Associations (BCCA), minority shareholders have specific rights of recourse against majority partners who have acted in breach of the governance arrangements or who have taken decisions constituting abuse of majority power.
The damages estimate, based on the difference between the actual economic position of the minority and the position it would have occupied had the majority partner acted in accordance with the joint venture agreement, was substantial relative to the minority's own resources.
The Cost Asymmetry Problem
Belgian commercial litigation is not inexpensive. Multi-day hearings before the Enterprise Court, extensive written pleadings, and the likelihood that the majority partner would deploy its full legal resources to defend the claim meant that costs would accumulate quickly. The minority shareholder's board had no appetite to commit an uncertain and open-ended legal budget against an opponent that could absorb those costs without difficulty.
Rook Radcliffe Partners' Assessment
Rook Radcliffe Partners was approached by the minority shareholder's Belgian counsel. The case summary set out the factual background, the contractual basis for each head of claim, and the supporting documentation.
The assessment focused on a few issues.
Legal Merits
The joint venture agreement's terms were clearly drafted and the alleged breaches were well-evidenced, including board minutes recording the relevant decisions and correspondence from the majority partner that the minority's counsel considered inconsistent with the arm's-length standard.
Quantum
The damages methodology relied on a discounted cash flow analysis of the distributions withheld and a valuation differential for the share dilution. Rook Radcliffe Partners' due diligence included an independent review of those figures by a specialist corporate finance adviser.
Defendant Capacity
The majority partner was a publicly listed entity with publicly filed accounts. Recovery risk was low.
Proceedings and Outcome
Proceedings were commenced before the Belgian Enterprise Court. The majority partner contested the claim in full. Over the course of approximately twenty months, the parties exchanged extensive written pleadings and appeared before the court at two substantive hearings.
The court found in favour of the minority shareholder on the principal heads of claim. The judgment addressed each of the alleged breaches and awarded damages on the basis of the minority's quantum evidence.
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