Unilever violated corporate governance rules when it said in 2004 it would convert some preference shares into common shares, Dutch shareholder activist group VEB has concluded from an investigation commissioned by the enterprise chamber of the Amsterdam court.

Holders of the cumulative preference shares are now entitled to compensation from Unilever, VEB-Chairman Peter Paul de Vries told Dutch daily Het Financieele Dagblad on Saturday. If not, I will go to court to get a mismanagement (ruling), he was quoted as saying. De Vries could not immediately be reached.

Unilever's information to shareholders was inadequate and in violation with good corporate governance, the investigators concluded, according to VEB in a statement.

The report means an important victory for holders of preference shares and means an important support to a claim. Total damage for holders amounts 422 million euros ($537 million), excluding interest and costs, VEB said in the statement.

Unilever said it was too early for a reaction. We will response to the report at an appropriate moment, but at the moment it is too early. a spokesman told Reuters.

Unilever announced on March 24, 2004 its intention to convert its 1999 preference shares into common shares on the basis of 11.2 preference shares against one ordinary Unilever share.

Preference share price fell 20 percent from 6.07 euros to 4.85 euros after the announcement as Unilever had always given the impression that it would repurchase the preferential shares at a price of EUR 6.58 per share, VEB said.

In December 2004 the enterprise chamber granted a request of a group of shareholders for an inquiry. The group included CommonWealth Investments, Effectenbank Stroeve and VEB, representing about a quarter of the preference shareholders.