FRAUDULENT CONVEYANCE UNDER THE LAWS OF ARUBA
The Actio Pauliana is centuries old
The so-named ‘actio Pauliana‘ enables both third parties and the trustee in bankruptcy to nullify legal acts that would prejudice their ability to find assets against which to take recourse. The requirements are the following:
(a) a legal act performed by the debtor;
(b) the debtor was not obliged to perform the act;
(c) the legal act prejudices one ore more creditors in their ability to find assets against which to take recourse;
(d) the debtor knew or should have known of such prejudice, and
(e) if the legal act was for consideration the addressee should have known or had reason to know of such prejudice.
Prior to bankruptcy, the nullification can be invoked by any creditor who is prejudiced in his ability to find assets against which to take recourse, whether or not his claim arose before or after the relevant legal act. In practice, it may be difficult to prove the requirements under (d) and (e) above.
The Bankruptcy Ordinance of Aruba contains provisions relating to the creditors fraud in the context of bankruptcy. In this case, however, the right to claim nullification is vested in the trustee in bankruptcy. A bankruptcy order is being intended to protect all property of the company (or a private person) being declared bankrupt. In certain circumstances assets that were transferred out of the estate of the company, may nevertheless fall in the bankruptcy as a result of creditors fraud provisions (articles 38 through 48 Bankruptcy Ordinance).
Under these provisions, the bankruptcy trustee can invoke the nullity of all actions of the company performed without any obligation to perform, if they have prejudiced creditors and if it can be proven that when performing such action the debtor and its counterparty knew that the action would prejudice creditors. If the action took place less than 40 days prior to the bankruptcy becoming effective, such knowledge is assumed, meaning that the burden of proof is on the company and its counterpart, if, under the action concerned, the consideration of the company exceeds the consideration of its counterparty.
Nullity of payments by the company of payable debts may only be invoked if it is established by the bankruptcy trustee that either he who received payment knew that a bankruptcy request was pending or such payment was the result of discussions between the company and the creditor aiming at giving the creditor a better position as a result of the payment as compared to other creditors. Nullity is not automatic but must be invoked by the bankruptcy trustee who must prove that the requirements are met.
Case law is known in which the trustee (on behalf of the creditors of the bankrupt company) successfully held the shareholders liable on basis of a tortious action for the deficit of the company in a situation where a company went bankrupt pursuant to a dividend distribution to the shareholders as a result of which all reserves of the company were emptied (the NIMOX-case).
Karel Frielink
Attorney (Lawyer) / Partner
