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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NETHERLANDS CARIBBEAN BANKS AND REGULATORY ISSUES
A bank has less freedom than an ordinary legal entity
What would be the requirements, from a regulatory point of view, if a Netherlands Antilles bank wished to sell its entire business or a substantial part thereof? Would it require approval from the Netherlands Antilles Central Bank (de ‘Bank van de Nederlandse Antillen’)?
Generally, if the activity at a bank is characterized as some form of financial reorganization, for example, the prior approval of the Central Bank is required. The bank is also obliged to immediately inform the Central Bank in writing of any resolution for complete or partial liquidation or …
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THE DUTCH CARIBBEAN AND ITS CIVIL LAW SYSTEM
Abstract rules are the starting point
The Netherlands Antilles are an autonomous part of the Kingdom of the Netherlands. The Kingdom of the Netherlands is composed of three parts: the Kingdom in Europe (popularly known as Holland, north of Belgium and west of Germany), the Netherlands Antilles (in the Caribbean Sea, north of Venezuela), and Aruba (also in the Caribbean Sea, north of Venezuela). Within the Kingdom of the Netherlands, the Netherlands Antilles are autonomous except for matters of defense and foreign affairs. Curacao is the largest of five islands that form the Netherlands Antilles. The other islands are Saba, St …
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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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THE ARTICLES OF ASSOCIATION OF A DUTCH CARIBBEAN LEGAL ENTITY (II)
Limitations on the applicability of provisions
As a general matter of Netherlands Antilles law, the interpretation of terms contained in legal documents, such as the articles of association and the by-laws, however only to a certain extent, inter alia subject to the intention of the parties, and the enforcement thereof, is subject to the overriding principle of “fairness and reasonableness” (in Dutch: “redelijkheid en billijkheid”) meaning that under certain circumstances a term of the articles of association or by-laws may not be applicable in so far as this term would in such circumstances be contrary to this principle.
According to …
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THE ARTICLES OF ASSOCIATION OF A DUTCH CARIBBEAN LEGAL ENTITY (I)
Ranging from basic to extremely complex
Under the laws of the Netherlands Antilles, public and private limited liability companies (NVs or BVs), foundations, co-operatives, mutual insurance societies and associations are considered legal entities.
The articles of incorporation (a.k.a. articles of association) provide the regulatory framework by which these legal entities in the Netherlands Antilles are governed and by which they must abide. Additionally regulations (‘reglementen’) are sometimes also used as a sort of ‘by-laws’.
The articles of association are more or less comparable with the constitution of a country. Regulations can for instance be adopted by a managing board, a …
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THE MANAGEMENT OF A DUTCH ANTILLES FOUNDATION
Management must act in the best interests of the foundation
The members of the management board of a Netherlands Antilles foundation have collective powers and responsibilities. The management board shall be in charge of the management of the foundation.
Although not explicitly provided for in Book 2 of the Netherlands Antilles Civil Code, it is considered a general rule of corporate law that the management board must act in the best interests of the foundation in the performance of its duties, even when acting upon instructions from others (e.g. a supervisory or advisory body).
The minimum standard of care is …
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