# A shareholder is diluted by an issue they cannot fund with bank financing already in place
A shareholder who cannot fund a new issue faces a fork: challenge the issue if it was not properly authorised, or accept the dilution and use the existing bank facility, covenants permitting, to protect what is left. A request for an inquiry into the company's conduct sits behind both routes. The choice turns on whether the procedure was followed and whether your financing documents leave you room to act at all.
What happens if you do nothing
If you take no step, the issue proceeds and your percentage of the shares, and with it your voting weight and profit entitlement, falls in proportion to the new shares issued. Any statutory pre-emption right you held but did not exercise lapses with the notice period. Where your existing shareholding is pledged to a bank as security, the lender may treat the fall in value as a covenant event and reassess headroom under the facility, independently of anything the company does.
This is a question of corporate law and governance: the answer depends on how the issue was resolved, not on how unwelcome the outcome is to you.
The routes open to you
| Route | What it takes | Time | Cost driver | What it gives you |
|---|---|---|---|---|
| Challenge the issue resolution | A procedural defect or a breach of reasonableness and fairness in how the resolution was taken | Weeks to months, depending on the court's calendar | Court fees and the work of assembling the corporate file | Possible suspension or annulment of the resolution before completion |
| Fund your participation through the existing facility | Lender consent under the facility agreement, or headroom within the current covenants | Days to weeks, set by the bank's own process | The lender's own charges and any covenant renegotiation | Funds to exercise the pre-emption right within the notice period |
| Accept the dilution and request an inquiry | Reasonable doubt about the correctness of the company's policy, not the issue alone | Months | Court fees, register searches and advisers' hours | An Ondernemingskamer (Enterprise Chamber) investigation into conduct and possible remedial orders |
None of the three routes reverses a completed issue on the ground of unfairness alone. The forum for a defect in the resolution is the ordinary Dutch court that has jurisdiction over the company; the forum for a pattern of conduct is the Enterprise Chamber.
What decides between them
Four facts decide the fork. First, whether the resolution itself carries a procedural flaw, such as a missing notice or a defective vote, which is a matter you can check against the minutes. Second, whether your bank facility permits a further draw or a covenant waiver in the time the notice period allows: if it does not, the funding route closes regardless of the merits. Third, how much time is actually left before the pre-emption window runs. Fourth, whether the dilution is an isolated event or part of a wider pattern that would support an inquiry request rather than a single challenge.
If the diluting company sits under a foreign holding structure, the same review often has to answer a separate question, addressed in a holding company asked to prove it is not a conduit, and the two enquiries should not be run as one.
The deadline that runs
Two clocks run at once, and only one of them is set by the company. The pre-emption exercise period is fixed by the offer notice itself and runs from the date stated in that notice, not from when you read it. Under the applicable Dutch rules, a shareholder resolution can be challenged only within a short period after it is taken or after the shareholder becomes aware of it; this has been the subject of recent attention, and you should check the current position before relying on any specific number of days. Missing either clock does not just weaken your position, it closes the route outright.
Evidence to secure now
Before either route can be assessed, you need five documents in hand: the offer notice itself, the clause in the articles of association governing pre-emption, the minutes authorising the issue, your bank facility agreement together with its covenant schedule, and a current extract from the trade register held by the Chamber of Commerce showing the shareholding as registered. Where the facility is secured against the shares, the security document itself is part of the file, because it fixes what the bank is entitled to do if the collateral value moves.
Cost drivers
The cost of the challenge route is driven by court fees and by the volume of documentary work needed to show a defect in the resolution, not by the size of the shareholding diluted. The cost of the funding route sits with the bank, not with the court, and depends on whether a covenant amendment is needed or only a straightforward draw. The cost of an inquiry request is the heaviest of the three, because it turns on assembling a pattern of conduct rather than a single event. Where representation before a Dutch court is required on any of the three routes, this is conducted with Dutch-qualified counsel of record.
What we would do in the first week
Within the first week, the priority is to fix the two deadlines exactly, not approximately, against the offer notice and the articles. In parallel, the bank facility is checked for consent and covenant headroom before any request is made to the lender, so that the request is not itself the thing that triggers a review. The corporate file, minutes, register extract and facility documents are assembled in that order, because the funding route and the challenge route draw on different parts of the same file. Only once those three steps are done does it become clear which fork actually applies to your case.
What this does not cover
- It does not cover a contractual anti-dilution or ratchet clause specific to your shareholders' agreement; that is a matter of the document you signed, not of Dutch company law generally.
- It does not cover the tax treatment of a dilution or of any compensation received for it.
- It does not cover the bank's own remedies under the facility once a covenant event occurs; that sits between you and the lender.
- It does not cover valuation disputes over the price at which the new shares were issued, which is a separate and evidentiary question.
- It does not cover service of proceedings on parties outside the Netherlands.
Questions
Can I block a share issue simply because I cannot afford to take part in it?
No. Inability to fund your participation does not by itself make the issue defective. You need a procedural flaw in the resolution or a breach of reasonableness and fairness to have a route before a Dutch court.
Does having bank financing already in place help or hinder a challenge?
It does neither on the merits of the resolution, but it decides whether you can raise funds to exercise a pre-emption right in time, and existing covenants may restrict what you are free to do without lender consent.
What happens to security the bank holds over my diluted shareholding?
That depends on the wording of the facility and the security document, not on general Dutch company law. Check whether the fall in your percentage triggers a review clause or a top-up requirement before assuming either way.
Eva Kuipers is responsible for governance and Enterprise Chamber matters at this firm. She works on shareholder disputes, board conduct and requests for inquiry proceedings in Dutch companies.
If you need to move on either fork, the first useful output is usually a route note that fixes the two deadlines against your own documents and states which route is still open. The closing block below sets out what else supports that step.
Above the closing step, the relevant service page is Enterprise Chamber proceedings, and a structure report sets out the shareholding, the security granted over it and the financing arrangements across the group as they stand in the register, which is the starting document for either route.
Related reading: a shareholder seeking an inquiry into how the company is run, beneficial ownership under a Spanish structure report, and, on the director's side of a comparable deadline problem, a director held liable for the deficit in the estate after a deadline passed.
Last legal review: 2026-10-05