FORCED SHARE-TRANSFER UNDER THE LAWS OF ARUBA
The articles of association may contain quality-requirements
According to the guidelines for the incorporation and for the amendment of articles of association of Aruban corporations, the articles of association of a limited liability company (‘NV’) may create an obligation to transfer stock in case certain specific circumstances occur – which circumstances have to be specified in the articles – such as bankruptcy, deprivation of the power to manage assets, or liquidation of a shareholder being a legal entity. The articles may also establish the requirements with which the shareholders have to comply, such as being a limited partner of a certain partnership, unless these requirements make the transfer of stock practically impossible.
The guidelines formulate some more strict provisions with respect to the quality-requirements which are mentioned below. However, first of all I address the more general conditions under which an obligation to transfer shares may be upheld.
The articles of association should stipulate – in case of an obligation to transfer shares – that the shareholder who has been obligated to transfer, will be entitled to retain all his shares in the event that the interested party (one or more other shareholders or the company) is not willing to take over the full quantity. It is not uncommon that the articles designate the company as the acquiring party, in which case they must stipulate that the company must compensate the transferor for the tax loss which he suffers by transferring the stock to the company instead of to another party.
It must be noted that the articles of association may state that the company is irrevocably authorized to transfer the shares that should be transferred due to the aforesaid obligation – provided all shares are transferred – if the shareholder, after a certain period has passed or after having been summoned, has not fulfilled his obligation to transfer.
The restrictions to the transfer of shares must provide the possibility for a shareholder to obtain a value for the stock in question evaluated by one or more independent experts. However, the articles of association may establish guiding principles for stock evaluation. Criteria which could lead to a clearly unreasonable evaluation are not acceptable.
The articles of association may stipulate that a shareholder who does not (respectively no longer) comply with the specified requirement is under obligation to offer his stock for transfer, provided he is able to obtain a value for the stock that has to be evaluated by independent experts. Not permitted is a statutory clause whereby a shareholder, who is obligated to transfer his shares because he no longer complies with the quality-requirements, is limited more heavily in his transfer-possibilities than in case of a voluntary transfer while still complying with the quality-requirements.
Quality-requirements may be the subject of an amendment of the articles of association, provided proper evidence is submitted to the Department of Justice showing that all the shareholders conform to the requirements, respectively that the amendment has also been approved by those among them who do not. The articles may stipulate that certain, individually designated parties are not under the obligation to comply with the quality-requirements.
Karel Frielink
Attorney (lawyer) / Partner
