WHAT TO DO WITH UNDISTRIBUTED PROFITS OF A NETHERLANDS ANTILLES COMPANY?
Tax issues should be addressed
Suppose your company has formed a non-distributed profit reserve. You may choose to distribute it as regular dividend. Alternatively, your company could issue new, so-called ‘bonus’, shares to you, which would as it were be paid-up from the non-distributed reserve. Such conversion might qualify as a (deemed) distribution of dividend, as the reserve may be deemed to be paid out to you (the shareholder), which would in turn be deemed to pay up the shares.
Another possibility is ‘conversion’ of the reserve into share premium. This possibility provides for the distribution of the existing ‘non-distributed profit’ reserves to you by way of dividend, followed by repayment by you of said amounts as share premium on the existing shares.
From a legal point of view, share premium (‘agio’) forms part of the company’s free reserves, and does not qualify as share capital. Therefore, on the company’s balance sheet, the non-distributed profit reserve would be converted into a share premium reserve. If the company were to redeem (part of) the shares at some point in the future, then the shareholder (you) would be entitled to receive a redemption price equal to the value of those shares, also taking into account the share premium that was paid on such shares.
Assuming that the non-distributed reserves are converted into either bonus shares or a share premium reserve, and that at a later stage the bonus shares are to be redeemed or the share premium is to be repaid, the company’s financial condition should allow for the same at such time. In addition to this limitation, limitations protecting creditors’ rights generally, such as fraudulent preference (‘Actio Pauliana’), apply.
Many decisions are tax driven, including many shareholders’ decisions. I am not a tax adviser, but I do know that you should visit one prior to making any decision in this respect.
Karel Frielink
Attorney (Lawyer) / Partner
