Is a shareholder bound by the company's interest?

The corporate interest does not start with the shareholder

In corporate law, the primary responsibility for the corporate interest lies with the board of directors, under the supervision of the supervisory board. That is not an accidental choice. It is precisely the board of directors that is responsible for determining policy and strategy, and must weigh the interests of the company and the company associated with it.

The general meeting has a different role. It's important, but it's essentially more reactive. Shareholders have rights to exert influence, hold the board accountable and give weight to the capital function within the company. This makes the shareholder relevant, but not yet the first appointed guardian of the corporate interest.

For startups and scale-ups, that distinction is essential. In practice, there is sometimes the idea that the largest investor also sets the course of their own accord. Legally, this is more nuanced. In principle, decisions that require a broad consideration of interests belong to the board. This is especially true when that consideration goes beyond just short-term returns.

There is also a practical logic behind this. The board is usually more intensively involved in the day-to-day business, knows the company better and bears collective responsibility for the chosen course. Shareholders, especially in more open or fragmented shareholder structures, often do not have that position. They may also have other incentives, for example a faster exit or a different risk profile than the company can bear at that time.

Is a shareholder then allowed to simply pursue his own interests?

As a starting point, a shareholder can serve his own interests. This starting point has deep roots in corporate law. But it is not a license to act solely from your own financial perspective, without regard to the company, co-shareholders or other stakeholders.

The border runs through fairness and fairness. This standard means that everyone who is institutionally involved in the company must behave properly towards each other. For shareholders, this means that their own interest can have weight, sometimes even a lot of weight, but not indefinitely and not apart from the context.

This has two important consequences.

First, the corporate interest can limit shareholders' rights. In every situation, a shareholder is therefore not entitled to maximum scope to exercise his rights as if only his own interest matters. Under circumstances, the company may have an important interest that means that certain rights are not fully honored.

Secondly, a shareholder can be expected to include other interests in his actions. Not because the shareholder becomes a director, but because he is part of a community of interest. Joining a company does not step into a legal vacuum. He ends up in a partnership where different interests coexist and where his actions can have consequences for the company as a whole.

This is an important point for venture-backed companies. Investors often step in with a clear economic agenda. That is legit. But as soon as their actions significantly influence the course, stability or decision-making within the company, the question also becomes relevant whether they still take sufficient account of the wider corporate framework.

The company's interests have become more important

A remarkable development is that the corporate interest is increasingly being expressed in the interests of the company and its continued success. As a result, the shareholders' interest is less naturally at the forefront than was often assumed in the past.

That does not mean that shareholders are suddenly unimportant. On the contrary. Their interest can contribute to the content of the corporate interest. But shareholder interest is just one more factor in a broader consideration. The company, its continuity, its strategy and the interests of other stakeholders explicitly count.

This is particularly relevant for startups and scale-ups. Especially in young growth companies, tension quickly occurs between different time horizons. Founders often want to build sustainable growth and product development. Logically, investors also look at returns, liquidity and exit times. Employees, customers and strategic partners have different interests. In that field of tension, the corporate interest does not simply equal the wishes of the loudest or largest shareholder.

This makes governance in growth companies more complex, but also more realistic. The corporate interest is not an extensible excuse for every management position, but neither is it a sum of shareholder wishes. It's about a consideration that should primarily serve the company's continued success.

When is more expected from a shareholder?

Not every shareholder is in the same position. This is of great legal and practical importance. A small, uninvolved shareholder can usually be expected to be less than a shareholder with a lot of influence, a lot of knowledge or a decisive voice in decision-making.

Shareholder responsibility essentially increases as three things are more present: influence, engagement and insight.

Those who hold a great interest, co-dominate decision-making or can actually influence the course through their position, are less likely to hide behind the idea that they are only acting for themselves. The same applies to shareholders who, through their close involvement, have a good view of the company and the consequences of their actions for other stakeholders.

In closed relationships, this is often even sharper. Think of a startup with a limited number of shareholders, a joint venture-like structure or a scale-up in which founders and one or two investors largely determine the relationships. In such situations, the shareholder is not just a remote provider of capital. He is close to the company, knows the relationships between them and can influence the course directly with his voice or means of pressure. Then it is also more obvious that he is expected to take further care.

The common thread is clear: the closer a shareholder moves towards the board's actual dominant or knowledge position, the stronger the expectation that he will take the corporate interest into account. Not because it makes him a director, but because his influence is greater and the consequences of his actions are more predictable.

The shareholder is therefore not free, but neither is the main guardian

This provides a nuanced picture. The shareholder is not completely free to follow his own interests alone, but he is also not the primary guardian of the company interest. In principle, that role remains with the board, with supervision by the supervisory board.

That balance is important. As soon as the board gets more autonomy to protect the corporate interest, shareholders' room for maneuver becomes smaller. And vice versa: when shareholders gain more influence, so does the pressure to take the company as a whole into account.

You can see that relationship as communicating vessels. A shareholder who cares little about the company's wider interests is more likely to justify a strong appeal by the board of directors to administrative autonomy. But a shareholder who has a great deal of knowledge, influence and commitment cannot believably maintain that he can only operate in his narrow interests.

In the practice of startups and scale-ups, this means that governance discussions are rarely black and white. Not every investor intervention is illicit. Not every appeal by the board of directors to the corporate interest is automatically decisive. It's always about the role, context and consequences.

In takeover time, the playing field shifts

In the event of a possible takeover, an activist intervention or a strategic conflict over sales, the discussion becomes even sharper. Especially then, the corporate interest is often put forward as an argument to keep shareholders at a distance from strategic decision-making.

In such situations, the board is traditionally given a lot of space. In principle, the strategy belongs to the domain of governance. Shareholders can express their views through the rights that law and statutes give them, but the board does not simply have to involve them in strategic decision-making.

This line gives the board a strong position against opportunistic pressure, especially when that pressure is mainly focused on rapid value creation or immediate sale. This fits within the Dutch stakeholder model, in which the corporate interest does not coincide with maximum shareholder value in the short term.

At the same time, there is a point of tension here. In a takeover situation, the board is not always the most neutral actor. An unwanted takeover affects not only the company, but also the board itself. Your own positions may come under pressure and the previously chosen strategy will actually be assessed. This makes it more difficult to pretend that the board operates completely impartially in such a situation.

That is precisely why the role of the Supervisory Board becomes more important during takeover time. Where the board is close to its strategy and its own position, the supervisory board can act as a more independent safety net. Then the focus will shift from normal supervision to more intensive monitoring of the careful consideration of interests. This is not a formality, but an essential part of the governance balance.

What is a shareholder still allowed to do during the takeover time?

The fact that shareholders are kept at a distance from the strategic core during takeover time does not mean that their rights become meaningless. They remain important actors in the company's accountability structure. Precisely for this reason, restraint is needed to further restrict fundamental shareholders' rights.

The corporate interest may justify the temporary resignation of a shareholder. For example, by giving the board space to respond when the strategy is being questioned. This also includes the fact that a shareholder is not enough with pressure or dissatisfaction, but comes up with a serious alternative if he wants a different course.

This is an important practical signal. Those who want to force the board to change their strategy must do more than show impatience. Just putting pressure without a developed alternative is not enough. At the same time, this threshold should not be so high that shareholders actually lose their essential rights.

That's exactly where the sensitivity lies. Shareholder rights are not only instruments of power, but also instruments for holding management and supervisory directors accountable. If you reduce those rights too far in the name of the corporate interest, you run the risk that the stakeholder model will come at the expense of the necessary checks and balances.

This is familiar to scale-ups. An investor who insists on selling can be too short of a curve. But a board that dismisses every critical voice by relying on long-term strategy can also hide too comfortably. Good corporate governance therefore does not require absolute dominance on the part of one actor, but a credible division of roles.

What does this mean in concrete terms for startups and scale-ups?

For founders and directors

For founders and directors, the most important lesson is that the corporate interest is not an empty concept that can cut off any discussion. Those who rely on this should actually make a broader assessment of interests and be able to explain why a certain course serves the company in a permanent way.

This is even more important in growth companies where investor pressure, market expectations and exit scenarios are increasing. Especially then, it should be clear that strategic choices are not made solely on the basis of the wishes of one shareholder, but also not on the basis of administrative instinct alone. The quality of the consideration counts.

For investors and major shareholders

For investors and major shareholders, influence comes responsibility. The greater the interest, the greater the actual impact on the company and the more difficult it becomes to completely separate one's own interest from the corporate interest.

That requires discipline. Not every strategic disagreement justifies escalation. Not every call for sale is by definition contrary to the corporate interest, but those who drive this should be aware that the company, continuity and other stakeholders also count. Especially in a private setting or in a dominant position, such care is not a luxury.

For Supervisory Boards

There is a clear task for supervisory boards as soon as tension rises. Especially in the case of takeover issues or hard conflicts about strategy, the council cannot suffice to watch from the sidelines. Then the board must critically assess whether the board carefully implements the corporate interest, precisely because the board itself can be less open-minded in such situations.

In the practice of startups and scale-ups, a formal supervisory board is not always present. But where such a body exists, or a similar supervisory structure exists, its importance increases as soon as governance comes under pressure.

The crux: more influence means more responsibility

The most useful conclusion for practice is perhaps this: the question whether a shareholder is bound by the corporate interest cannot be answered with a simple yes or no.

In principle, a shareholder may pursue his own interests. But that starting point is limited by fairness and fairness, by the company's position as a community of interest and by the influence that the shareholder actually exercises. As that influence increases, the expectation also grows that he takes into account the wider corporate interest.

At the same time, the primary responsibility for that interest remains, in principle, with the board of directors, under the supervision of the supervisory board. This division of roles becomes sharply visible, especially in takeover situations. Then the board gets a lot of space, the supervisory board comes forward more emphatically, and shareholder rights are approached with restraint. But even then, fundamental shareholders' rights should not be set aside too easily.

For startups and scale-ups, this is more than a theoretical lesson. In growth phases, during strategic reorientation and certainly around a possible exit, governance is often about exactly this tension. Anyone who only reads that game as a clash between board and shareholders is missing the point. Ultimately, it's about who, in which situation, bears what responsibility for the company's continued success.

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