CORPORATE GOVERNANCE IN CURACAO
Lessons for the government
1. Why is good corporate governance necessary?
Basically, corporate governance is about the structures and processes for the direction and control of a company.
Corporate governance is intended to increase the accountability of a company and to avoid massive disasters before they occur. It is held that good corporate governance helps companies operate more efficiently, improve access to capital, mitigate risk and safeguard against mismanagement.
According to the International Finance Corporation of the World Bank Group:
It makes companies more accountable and transparent to investors and gives them the tools to respond to legitimate stakeholder concerns …
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THE ARUBA PUBLIC LIMITED LIABILITY COMPANY
Managing and supervisory directors’ liability
I will refer only to the Aruba NV type of company, otherwise known as the public limited liability company, governed by the Commercial Code of Aruba. Furthermore, I will discuss only the basic concept of managing and supervisory directors’ liability.
Duties
Section 106(1) of the Aruba Commercial Code (ACC) provides that, in performing their duties, each member of the management board should focus on the interests of the NV. In accordance with the “stakeholder model”, a.k.a. “stakeholder orientation”, the board must take into account various interests, not only those of the company, its business and …
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SUPERVISORY DIRECTORS ARE A TYPE OF BAYWATCHERS
When you dress a lizard in a suit you will have trouble with his tail!
A seminar on Financial Institutions and their Supervisor was held in Aruba on Wednesday April 20, 2016. The seminar was organized by the Aruba Bankers’ Association & Insurance Association of Aruba. I was one of the keynote speakers and delivered my presentation in the English language (click here for the presentation).
I have addressed several issues. Here follow a few quotes:
What makes financial institutions like banks and insurance companies special is that the scope of duties of managing and supervisory directors …
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DIRECTORS’ LIABILITY IN THE DUTCH CARIBBEAN
Personal and several liability
The members of the Board of Directors are personally and severally liable towards the NV (or BV, as the case may be) for any loss caused by the improper performance of duties. Each member of the Board who proves that he cannot be blamed for such improper performance and that the activities concerned fall outside the scope of activities addressed to him, and that he has not been negligent in taking steps to avert the related consequences, is not liable (Article 2:14 Section 4 Netherlands Antilles Civil Code; NACC). Therefore, a division of tasks among such …
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ARUBAN LAW REGARDING CORPORATE AUTHORITY
The Aruba Trade Register should be checked
The laws of Aruba provide that, subject to restrictions laid down by any statutory provision or a corporation’s articles of association, the board of directors of a company shall be competent to represent the company, i.e. a limited liability company (NV, AVV or VBA). In the event of the company having several managing directors, any managing director shall be competent, insofar as not otherwise provided by the articles of association (or sometimes bylaws). The articles of association may also grant other officers, to be designated by or pursuant to the articles, representative authority, …
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DRAG-ALONG RIGHTS UNDER THE LAWS OF ARUBA
Drag-along rights may be validly created
On January 1, 2009 the new Aruba Ordinance on companies with limited liability (vennootschap met beperkte aansprakelijkheid; VBA) became effective.
A drag-along right is a right that enables a majority shareholder to force a minority shareholder to join in the sale of his shares in a company (VBA). Generally, the majority shareholder doing the dragging must give the minority shareholder the same price, terms, and conditions that apply to him. The question with regards to Aruban law is whether the articles of association of a VBA may contain drag-along provisions.
Article 25(1) of the …
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SEPARATION BETWEEN LEGAL AND BENEFICIAL OWNERSHIP OF SHARES IN THE DUTCH CARIBBEAN
The beneficial owner of shares is not a shareholder
On March 1, 2004 the act on corporate law (Book 2 Netherlands Antilles Civil Code) became effective. The Act governs NVs (‘public limited liability company’) and BVs (‘private limited liability company’). The main object of the legislator was to provide flexibility and maximum freedom for organization and presentation. Accordingly, the Act contains few mandatory provisions, such as provisions relating to the interests of creditors and minority shareholders.
Concepts like registered, subscribed and contributed capital do not appear in the Act. As a result no minimum capital is required unless such a requirement …
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THE SELLING OF SHARES BY A DUTCH CARIBBEAN COMPANY
Answers to foreign counsel queries
A Netherlands Antilles company (NV or BV) may have assets, both local and foreign. Not seldom such a company wants to sell all or a portion of its assets. If foreign assets or a foreign buyer is involved, foreign counsel always asks questions about the laws of the Netherlands Antilles. Several of those questions will be dealt with here. Let’s assume that a Netherlands Antilles company wants to sell its shares in a Dutch BV.
The Netherlands Antilles NV or BV may sell some or all of its shares in the Dutch BV. It is customary …
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A COMPARISON OF THE DUTCH BV AND THE DUTCH ANTILLEAN BV
There are similarities and differences
There are certain similarities between the Dutch and the Antillean BV, in fact they are fundamentally the same type of entity. The main object of the Antillean legislator was, however, flexibility and maximum freedom of organization and presentation. Accordingly, the Antillean Act contains few mandatory provisions, such as provisions relating to the interests of creditors and minority shareholders.
An Antillean BV may be established in a form that resembles what a foreign shareholder encounters in his own legal system: the BV can, for example, be organized like a Dutch BV or NV, a Delaware corporation, …
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THE INCORPORATION OF A NETHERLANDS CARIBBEAN LIMITED LIABILITY COMPANY
Incorporating an NV or BV is not a hassle
The act on corporate law (Book 2 Netherlands Antilles Civil Code) governs the NV (‘public limited liability company’) and BV (‘private limited liability company’). These companies can be used for group finance or holding activities, (international) joint-ventures, funds, structured finance and “plain-vanilla” (local) activities.
A notarial deed is required for the formation of an NV or BV and for any amendment to articles of association (a.k.a. articles of incorporation). Formation can however, be very quick (within one or two days if necessary) and doesn’t require many other formalities. The founders of …
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THE CUSTODY OF SECURITIES IN THE NETHERLANDS CARIBBEAN
Separate legal entity
Generally, securities that must be held by a Netherlands Antilles bank on behalf of its clients will be held by a custodian. In most cases the custodian is either a foundation (‘stichting’) or a wholly owned subsidiary (NV or BV) of the bank.
The scope of the activities of the custodian will be limited to holding shares, bonds, notes, certificates and other securities. The insolvency risk of the custodian is therefore minimized. Alternatively, these securities can also be held in the name of the custodian by independent custody companies abroad, including brokers, agents and sub-custodians. In both …
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THE ARTICLES OF ASSOCIATION OF A DUTCH CARIBBEAN LEGAL ENTITY (III)
Case law the principle of good faith
A legal entity and all involved in its organization have a legal duty to behave towards each in accordance with the principles of reasonableness and fairness, i.e. (objective) good faith. A provision or requirement contained in a legal entity’s articles of association or by-laws, may be set aside by the Courts if, in any given circumstances, it is in breach of the principles of reasonableness and fairness. Good faith may, in a certain cases, extinguish rules prevailing between the parties or exclude their application.
I will discuss two Dutch court cases below. It …
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