Shareholder inspection rights in Belgium: unpopular or unnecessary?

Abstract

The first Belgian Companies Act of 1873 already contained provisions on shareholder inspection rights, but even after an amendment of the rules in 1991 to make their exercise easier, such inspection rights are rarely used in Belgium: between 1873 and 2021 fewer than 70 reported cases can be traced. Inspection rights allow shareholders to have experts appointed to inspect all company documents and to have a report drafted on certain corporate transactions, but the procedure is only open to shareholders owning at least 1 % of the company who can convince a court that there are indications that the interest of the company are seriously jeopardized. Plaintiffs have to pre-finance the costs of the procedure and will have to bear the final costs of court proceedings if their request is rejected. In small companies, that have not appointed a statutory auditor, the statutory procedure is superfluous, because in such a company every single shareholder has the right to inspect the company’s books (meaning de facto virtually all corporate documents) without resorting to a court, and if need be with the help of an accountant. Also, if shareholder lists are what a shareholder is after, in every company every shareholder has the right to consult the full share register, enabling him, in non-listed companies (where shares are not held through intermediaries), to find out the identity and number of shares held by every holder of registered shares. At the time of writing, important litigation concerning shareholder inspection rights in a listed company is ongoing (the Nyrstar case) which could determine the attractiveness of this tool for many years to come. This contribution criticizes the opinion, also expressed in one judgement in the Nyrstar case, that shareholders should only be allowed to bring an inspection rights case if they can show that they have standing to bring a subsequent derivative claim against the company’s directors, or another substantive claim. While it is true that the Belgian legislator introduced inspection rights with a view to facilitating derivative actions, and that in practice they are usually used by minority shareholders who are preparing for a (judicial) fight against other (majority) shareholders, it should be recognized that he exercise of inspection rights is a valuable, independent tool to hold a company’s management to account.