PROPOSED REVIEW CORPORATE CODE ON ULTRA VIRES
The rules with regard to ultra vires are fundamentally changed
Ultra vires means ‘beyond power or authority’. An ultra vires act is one beyond the purpose clause as laid down in the Articles of Association of a legal entity, for instance a foundation or a limited liability company (NV or BV).
Early in 2010, a draft bill was proposed to amend the Corporate Code (Book 2 Civil Code) of Curacao, St. Maarten, Bonaire, St. Eustatius and Saba (which formerly constituted the Netherlands Antilles). Among other things, the provisions with regard to ultra vires acts (transgression of the object) have been …
Read the rest »
A PUBLIC LIMITED LIABILITY COMPANY AND LEGAL PERSONALITY
Dutch Supreme Court, Decision of 18 January 1901
Suppose you and several of your friends decided to combine your financial resources to start a business. You subsequently agreed on the incorporation of a limited liability company (NV). You also agreed on the amount each of you would put into the NV and the number of shares each of you would receive in return for this capital contribution. You and your friends then visited the civil law notary and a notarial deed incorporating the NV was executed. The NV now exists.
However, although you and your friends paid their respective capital …
Read the rest »
PROPOSED REVIEW DUTCH CARIBBEAN CROSS BORDER MERGER LEGISLATION
Proposed bill introduces outbound mergers
Earlier in 2010, a draft bill was proposed to amend the Corporate Code (Book 2 Civil Code) of Curacao, St. Maarten, Bonaire, St. Eustatius and Saba (which formerly constituted the Netherlands Antilles). Hopefully, the Bill comes into force in 2011.
The possibility already currently exists that in connection with a merger, a foreign legal entity as the disappearing legal entity merges with a comparable legal form of Book 2 BW on the condition that the law governing that foreign legal entity is not incompatible with the merger and the manner in which it is brought …
Read the rest »
INQUIRY PROCEDURE TO BE INTRODUCED IN THE DUTCH CARIBBEAN
The Joint Court will become the forum of choice for corporate disputes
Earlier in 2010, a draft bill was proposed to amend the Corporate Code (Book 2 Civil Code) of Curacao, St. Maarten, Bonaire, St. Eustatius and Saba (which formerly constituted the Netherlands Antilles). The proposed legislation introduces a so-called inquiry procedure for, amongst others, limited liability companies. The inquiry procedure (a.k.a. investigation proceedings) can result in a court ordered investigation into the affairs of a corporation.
Shareholders of such a corporation (i.e. an NV or BV) may file a petition with the Joint Court of Justice of Aruba, Curacao …
Read the rest »
THE MANAGEMENT BOARD OF A DUTCH CARIBBEAN LEGAL ENTITY
The management board is responsible for the day-to-day affairs
The management board has the function of managing the legal entity, i.e., making policy and conducting the day-to-day management of such legal entity (NV, BV, Foundation or Association). The management board is responsible for the management of the entity and is authorized to represent it, except where restricted by the articles of incorporation.
The management board is the legal entity’s centre of gravity. The management board of a Curacao or St. Maarten company (NV or BV) combines the functions of executive directors and senior officers in a U.S. corporation, unless the …
Read the rest »
THE DUTCH CARIBBEAN INCORPORATION DOCTRINE
The courts apply the law of the state where the legal entity was incorporated
The Netherlands Antilles adheres to the Incorporation Doctrine (Netherlands Antilles State Ordinance of 9 September 1960, which entered into force on the 10th of September 1960, P.B. 1960, 166). According to this doctrine, the internal affairs of a corporation are governed solely by the laws of the state in which it was formally incorporated. This doctrine was confirmed in the cases of Natco Trust v. mr Thesseling q.q., Hoge Raad (Dutch Supreme Court) 20 April 1990, NJ 1991, 560; TAR-Justicia 1 (1991), p. 24-35, and IBC …
Read the rest »
PREJUDICED INTERESTS OF MINORITY SHAREHOLDERS IN THE NETHERLANDS ANTILLES
They may force the company to take-over their shares
Article 2:251(1) of the Netherlands Antilles Civil Code reads as follows: “A shareholder of registered shares, whose rights or interests are prejudiced to such an extent, by the conduct of the company or one or more co-shareholders, that a continuation of his shareholding cannot reasonably be required of him, may institute a claim against the company for withdrawal, demanding that his shares be acquired against payment in cash”.
This provision may only be successfully triggered in exceptional circumstances. This could be the case if the company or co-shareholders have a structural policy …
Read the rest »
PIERCING THE CORPORATE VEIL IN ARUBA
Ignoring the legal personality of a company
A shareholder is not personally liable for acts performed in the name of the company and is not liable to contribute to losses of the company in excess of the amount which he must pay to the company as contribution for his shares. There is therefore a legal separation between the assets and liabilities of the company and those of the shareholder.
Piercing the corporate veil in its purest form means making a shareholder responsible for the actions of the company. In essence this means ignoring the separate legal identity of the company. …
Read the rest »
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 …
Read the rest »
AMSTERDAM COURT OF APPEAL ON LIABILITY OF TRUST DIRECTORS
Trust directors not treated differently from regular directors
The board of directors of an NV or BV may contractually agree to a limitation of its powers to manage the company. Such arrangements are typical for trust offices engaged by a foreign ultimate beneficiary to render services to ‘his’ company, i.e. the client of a trust office. In principle, any contract a board of directors enters into binds the board and thereby limits its power. However, notwithstanding such a contract, it is still the board of directors that is in charge of managing the affairs of the company.
A distinction should …
Read the rest »
BEARER SHARES IN A NETHERLANDS CARIBBEAN COMPANY
Registered shares must be issued first
On 1 March 2004, the new Netherlands Antilles act on corporate law (Book 2 Civil Code) became effective. Since that date it is no longer possible to (directly) issue bearer shares.
A company with only bearer shares has no shareholders’ register. Only a public limited liability company (NV) may issue bearer shares, provided that registered shares be issued first and that they have been fully paid up. These may subsequently be converted into bearer shares. The issuance (of registered shares) requires a ‘deed of issuance’, which must be signed by both the company and …
Read the rest »
THE REPAYMENT OF SHARE PREMIUM IN THE NETHERLANDS CARIBBEAN
Net equity may not be or become negative
From the legal point of view in Netherlands Antilles, share premium (’agio’) forms part of the company’s free reserves, and does not qualify as share capital. If share premium is to be repaid, the company’s financial condition should at the time allow for it, i.e. the net equity of the company may not be or become negative as a result of such repayment. If the company has shares with a nominal value, the repayment may not result in the nominal capital exceeding the net equity of the company.
In addition to this …
Read the rest »