MANAGING A COMPANY WHICH BELONGS TO A FOREIGN OWNER
A contractual arrangement may limit the board’s powers
Shareholders of a Dutch Caribbean NV or BV may choose between the English/American one-board system and the traditional continental European two-tier system. In a two-tier system there is a management board (parallel to the inside directors on a one-tier board) and a separate supervisory board (parallel to the outside directors on a one-tier board). Although every company (NV or BV) has a management board, not every company has a supervisory board.
Article 2:14 of the Netherlands Antilles Corporate Code (a.k.a. Book 2 Civil Code) provides that each member of the board of directors, either one-tier or two-tier, is responsible to the company for the proper performance of the duties assigned to him. The board has a duty to use its powers properly and to act within their limits. Furthermore, the board must act in accordance with the other duties it has, based on, inter alia, the law and the articles of association.
It is generally accepted under Netherlands Antilles law that the board of directors is the central policymaker within the company. The board of directors has discretionary powers to manage the company. With respect to directors’ liability, amongst other things, it is also generally accepted that the board should be allowed a certain degree of discretion. If a court is called to review the board’s business judgments, such review is generally restricted to the rather vague concept of ‘reasonableness’. The line between a full and a limited review of the substance of the business judgment is rather thin however.
The board of directors may contractually agree to a limitation of its powers to manage the company. Such arrangements are typical for trust offices engaged by a foreign ultimate beneficiary to render services to ‘his’ company, i.e. the client of a trust office. In principle, any contract a board of directors enters into binds the board and thereby limits its power. However, notwithstanding such a contract, it is still the board of directors that is in charge of managing the affairs of the company. A distinction should be made, therefore, between making a decision, i.e. the formal process in accordance with the law and the articles of association, and initiating a decision or policy, i.e. the person or persons with the ultimate power to determine the policy of the group of companies. In other words: trust directors are not the actual policymakers within the company; they review whether the policy adopted by the beneficiary (or a group company) which the trust directors are supposed to carry out, does not conflict with the company’s articles or its general interest.
The fact that Netherlands Antilles trust offices are hired to (formally) run such companies is because they know how to comply with Netherlands Antilles law. They know how to manage such companies by all lawful means necessary within the scope stipulated in the articles of association, resolutions of shareholders’ meetings, and applicable Netherlands Antilles laws.
Karel Frielink
Attorney (Lawyer) / Partner
