Abstract:
The Corporate Court of the Amsterdam Court of Appeal rejected the investigation request submitted by the Dutch Investors Association VEB and a number of investors on October 10, believing that there was no sufficient reason to launch an investigation into Philips' corporate governance in the respiratory equipment recall incident. The court did not rule on investor liability for damages.
The court found that there was a lack of sufficient basis to initiate an investigation
Shareholders questioned Philips' internal controls and supervision of its subsidiary Respironics, believing that management should have discovered equipment problems earlier, taken intervention measures, and disclosed risks to investors in a timely manner.
After reviewing a large number of case files and internal documents, the court concluded that the group’s internal system was established in accordance with international standards, regularly audited and continuously strengthened. It was not until early 2021 that there was sufficiently reliable research data indicating a health risk from the PE-PUR foam used in the equipment; there is no indication of a delay in receiving relevant information from management or the supervisory board.
The court also found no sufficient reasons to conclude that Philips should have intervened earlier, that the supervision of the supervisory board was insufficient, or that the company's disclosures were delayed, wrong or misleading. This ruling examines the basis for initiating a corporate governance investigation and does not determine whether the equipment manufacturer was at fault.
Shareholder claims involve multiple judicial procedures
Corporate governance investigations can involve court-appointed investigators to independently review corporate operations and management, and their reports may provide evidence for securities claims. A ruling by the U.S. Federal District Court for the Western District of Texas on October 2 showed that a shareholder damages lawsuit in the Netherlands is pending for a decision by the Corporate Court on whether to initiate an investigation.
Another group of institutional investors plans to file a securities lawsuit in the Netherlands and apply in the United States to obtain documents and testimony from Respironics' former patient safety medical director. In the above-mentioned ruling, the Texas court revoked the previously approved discovery order and quashed the relevant subpoena.
Philips disclosed that Dutch investors filed two civil compensation lawsuits in 2024 and 2025, and filed a corporate governance investigation application from the end of 2025 to early 2026. There are also securities class action lawsuits in the United States, and some claims were previously allowed to continue hearing.
Recall rectification and compensation arrangements are still independent matters
Respironics initiated a recall of some sleep and respiratory care equipment on June 14, 2021, involving continuous positive airway pressure equipment, bilevel positive airway pressure equipment and ventilators. PE-PUR foam used to reduce noise and vibration can degrade, producing particles or chemicals that can be inhaled or swallowed by users.
The consent order approved by the U.S. Federal Court in April 2024 requires the company to implement a recall remediation plan to help affected patients by replacing, repairing equipment, or providing partial refunds for some equipment; restricting the production and sales of new related equipment at some of its U.S. factories until specified conditions are met, and requiring independent experts to participate in testing and compliance assessments.
Philips' U.S. personal injury and medical monitoring settlements total $1.1 billion. Among them, the personal injury settlement amount is US$1.075 billion and the medical monitoring fund is US$25 million. The company disclosed that the personal injury settlement became final in early 2025 after the participation rate of eligible claimants exceeded 95%, and payments were made in the first half of 2025.
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