REGULATORY ASPECTS OF A FINCO AND GROUPFINCO UNDER THE LAWS OF THE NETHERLANDS ANTILLES
Several exemptions available
In the Netherlands Antilles National Decree of 1995 constituting general requirements pursuant to article 1 (3) of the National Ordinance on the supervision of banking and credit institutions 1994, Groupfinco’s (‘concernfinancieringsmaatschappijen’) have been exempted from the application of the Ordinance.
The Decree defines “Groupfinco’s” as Credit Institutions, which (i) form part of a “Group”, (ii) fund themselves from, and apply their funds in, foreign countries and (iii) have obtained a general foreign exchange exemption. A Credit Institution which meets said requirements (ii) and (iii), but which does not form part of a Group, is referred to as a “Finco”.
The Decree sets out a number of activities which Groupfinco’s and Finco’s can conduct without requiring a banking license from, and becoming subject to banking supervision by, the Netherlands Antilles Central Bank. Firstly, the Decree provides full exemptions for Groupfinco’s and Finco’s that fund themselves for at least 90% from:
(i) professional market parties (“PMP’s”); or
(ii) Group companies
If bearer securities are used for such exempt funding (“Exempt Funding”) with a denomination of less than Naf. 100.000,- then a selling restriction should be used to prevent issue or transfer thereof to others than Group companies or PMP’s. These Groupfinco’s and Finco’s are free to use the proceeds of the Exempt Funding whichever way they prefer insofar as the Ordinance is concerned, and they do not require a parent company guarantee or ‘keep well’ agreement for their funding activities. The exemption referred to in (i) above is capable of being used by ‘orphan’ Finco’s in securitization transactions.
Groupfinco’s and Finco’s funding themselves in any other way than as described (“Regulated Funding”) in principle qualify as Credit Institutions under the Ordinance. There is, however, one further exemption under the Decree, which prescribes a ‘mitigated’ regime for Groupfinco’s, meaning that the Groupfinco must comply with certain restrictions as to the utilization and parent company support of its funding. To qualify for this exemption a Groupfinco with Regulated Funding must:
- on-lend or invest exclusively within the Group; and
- have its ultimate parent company either grant a guarantee or counter-guarantee for the Groupfinco’s payment obligations on the funding side.
Karel Frielink
Attorney (Lawyer) / Partner
