THE DUTY OF CARE OF BANKS
Banks are under the obligation to exercise due care
In the Dutch Caribbean, no separately defined body of law exists with regard to the relationship between a (commercial) bank and its customer. The standard general terms and conditions applied by banks in the Dutch Caribbean have an important function in the legal relationship between banks and their customers. They enter into effect once explicitly or implicitly accepted by the customer.
According to most general conditions “the bank shall exercise due care on rendering its services. In doing so the bank shall reckon to the best of its ability with the client’s interests, …
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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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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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AGENCY AND DISTRIBUTION AGREEMENTS IN THE NETHERLANDS CARIBBEAN (II)
Distribution agreement
So-called agency agreements frequently bear resemblance in actual practice, to (certain aspects of) distribution agreements. Hence, so-called ‘agency agreements’ are in actual fact not infrequently mixed type agreements, consisting of an agent and a distribution element.
In general, a distributor buys goods from a principal in his own name and for his own account and resells these goods to third parties in his own name and for his own account.
Distribution agreements are not defined in any Netherlands Antilles statute and are not subject to any specific Netherlands Antilles legislation. The distribution agreement is an agreement sui generis, …
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