CO-DEBTORS AND THE LAWS OF ARUBA AND THE NETHERLANDS ANTILLES
Is a deed of joint and several liability compatible with the company’s purpose?
A deed of joint and several liability generally achieves the goal of creating a second, jointly and severally liable debtor. Banks for example may require such a deed as part of their financing arrangement.
Although a joint and several liability is not technically the same as a suretyship (“borgstelling”), courts might apply the statutory provisions applicable to suretyship to a deed of joint and several liability if such deed in fact serves the same purpose as a suretyship. Therefore, it is recommendable to specifically state that the deed should not be construed as a suretyship and to specifically exclude the special protection the Civil Code grants to sureties.
In certain cases, the courts have held that a guarantor shall be released from its obligations in the event that the bank did not exercise due care in informing the guarantor of the risks involved in the joint and several liability accepted.
An important question is whether executing such a deed by a company is compatible with its purpose (“statutair doel”). Do its articles of associa?tion allow the company to accept liability for the debts of a third party? Under Dutch, Aruban and Netherlands Antilles’ law, accepting such liability is generally considered permitted, provided that such liability is in the broad interest of the party accepting liability. For example: a subsidiary may accept liability for loans granted to its parent company, provided the parent advances certain monies to its subsidiaries. However, the question whether an act is a transgression of a company’s purpose is always subject to the laws of incorporation of that company, even if the act itself is subject to Netherlands Antilles law. Therefore, if the company accepting joint and several liability is not Dutch, Aruban or Netherlands Antilles’, separate advise might be required.
Karel Frielink
Attorney (Lawyer) / Partner
