Hedge Funds and Private Equity Funds under Scrutiny in the Netherlands

Abstract

Last year the Dutch Enterprise Chamber (Ondernemingskamer) of the Amsterdam Court of Appeal (DEC) ruled in several inquiry procedures (enquêteprocedures) with regard to companies wherein a private equity fund and a hedge fund participated. In these procedures the strategy as set out and followed by the management board was questioned. The rulings emphasize the importance the DEC attaches to the management board as a gatekeeper of the corporate interest (vennootschappelijk belang) which includes, among others, the interests of the employees. These rulings further confirm existing case law with respect to the corporate interest. This may have implications for active shareholders – among others private funds and hedge funds – investing in Dutch companies.

Private equity funds and hedge funds are subject to public debate with respect to their role and strategies. The industry has responded to this by way of self-imposed best practices. Recently, the European Commission has proposed the directive on Alternative Investment Fund Management, which lays down specific information requirements with respect to hedge funds and private equity.

This article describes the recent rulings of the DEC. It also addresses the best-practices as well as the proposed AIFM directive. It will be assessed that both from case law and the proposed directive, the fund industry should be aware of the role they fulfil in the companies under their management.