Karel’s Legal Blog

Symposium 26 februari 2010

Op vrijdag 26 februari 2010 vond het symposium ‘Overheid en aansprakelijkheid‘ plaats. Het symposium was georganiseerd door het Centrum voor Postacademisch Juridisch Onderwijs van de Radboud Universiteit Nijmegen in samenwerking met de Universiteit van de Nederlandse Antillen.

Ik heb daar een verhaal mogen houden. De andere sprekers waren prof. mr P. van Schilfgaarde (emeritus hoogleraar Ondernemingsrecht Universiteit Utrecht en Universiteit Groningen, advocaat Hoge Raad der Nederlanden), mr. B.M. Mezas (General Counsel van de Bank van de Nederlandse Antillen) en prof.mr. S.C.J.J. Kortmann (Rector magnificus, tevens hoogleraar Burgerlijk recht, Radboud Universiteit Nijmegen).

De dagvoorzitter was prof.mr. F.B.M. Kunneman (hoogleraar Burgerlijk recht, Universiteit van de Nederlandse Antillen, ondervoorzitter Raad van Advies van de Nederlandse Antillen en managing partner VanEps Kunneman VanDoorne, Curacao).

Mijn onderwerp was ‘Aansprakelijkheid van de overheid als aandeelhouder: Antilliaans perspectief‘. In deze voordracht komt de rol van de overheid als aandeelhouder aan de orde. Een van mijn stellingen is dat overheidsvennootschappen bestuurd en aangestuurd dienen te worden vanuit het perspectief van zakelijkheid, dus commercieel. Voor het bewaken van publieke belangen heeft de overheid immers het instrument van wet- en regelgeving, waarbij bovendien de nodige procedurele waarborgen zijn ingebouwd en openbaarheid een leidend beginsel is.

Karel Frielink

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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. An example: a parent company that has actual involvement in the management of the affairs of a subsidiary may be held liable if it allows the subsidiary to incur debts, knowing that the creditors of the subsidiary will remain unsatisfied.

A parent company may also be held liable towards the creditors of its subsidiary if it creates the reasonable expectation with the creditors that it guarantees or otherwise ensures performance by the subsidiary under its (contractual) obligations.

It should be noted, however, that piercing the corporate veil goes hand in hand with the concept of tort (wrongful act). The so-called “alter ego doctrine” has not been recognised by the Aruban courts nor by the Dutch Supreme Court as sufficient grounds for a liability claim. The mere fact that the parent company uses the same address, the same phone number, a similar name, has the same directors and acts in the same branch as its subsidiary, is not enough reason for holding the parent company liable for the debts of its subsidiary.

Karel Frielink
Attorney (Lawyer) / Partner

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Filed under: Corporate by Karel.Frielink
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Interlocutory or summary proceedings provide for immediate relief

Article 110 of the Netherlands Antilles and Aruba Code of Civil Procedure (‘the Code’) provides that all adversarial proceedings shall be initiated by means of a petition to the court of first instance. Proceedings so initiated are ordinary proceedings a.k.a. proceedings on the merits.

A petitioner may opt for preliminary relief proceedings (a.k.a. interlocutory proceedings; ‘kort geding’). Article 226 of the Code provides that in urgent cases which require an immediate decision, the plaintiff may request a provisionally enforceable judgment (‘beslissing bij voorraad’).

Article 229 of the Code provides that a provisional decision rendered pursuant to this special type of proceedings shall not impact the ‘principal case’, meaning that both parties are free to commence ordinary proceedings in respect of the same matter and that in such ordinary proceedings the court shall not be bound by the provisional decision. If the defendant does not voluntarily appear at the court hearing he will be summoned by the judge to appear (art. 226(2) NACCP).

With respect to both proceedings, a claim may be rejected (‘worden afgewezen’) by the court on the merits of the case, i.e., that the claim is considered to be unfounded. However, if a claim is denied for reasons other than the merits of the case, the plaintiff will be declared non-suited (‘niet-ontvankelijk’) in the original complaint, or in the appeal, if any. Or in exceptional cases: the initial petition or the appeal petition could be declared void.

Karel Frielink
Attorney (Lawyer) / Partner

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www.spigthoffcuracao.com

Today was the official launch of the new website for Spigthoff Attorneys at Law and Tax Advisers Curacao. Spigthoff Curacao is a well-established commercial and full service law firm.

The success of a law firm is not measured by its age or size, nor by just words. Spigthoff Curacao is not the oldest, nor the largest law firm of the Dutch Caribbean. Success, however, is measured by client satisfaction; and Spigthoff Curacao has a track record to prove it. Clients appreciate the personal, no-nonsense style of its attorneys and tax advisers.

“…and if size were to be used to measure success, then it should be measured, not by the size of the attorney in the fight, but by the size of the fight in the attorney.”

Based upon independent research in the Netherlands Antilles, PLC/Which Lawyer lists Spigthoff as a leading firm and individual lawyers of Spigthoff are listed in the highest ratings for each of the areas PLC researched, namely  ‘Corporate/M&A’, ‘Dispute Resolution’ and ‘Private Clients’.

Karel Frielink
Attorney (Lawyer) / Partner

(16 February 2010)

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FAQ

Question 1

In which cases and by whom may bankruptcy proceedings be initiated in accordance with Aruban bankruptcy law?

Filing for bankruptcy may be done either by the debtor itself or by one or more of its creditors. If the debtor is a company, generally speaking the managing directors do not have the authority to petition for bankruptcy of the company without authorization thereto from the general meeting.

The pre-requisites for making a bankruptcy order on application, regardless of whether the application is made by the debtor or by any of the other above mentioned persons, is, that the debtor must be in the situation whereby he has “ceased to pay”. This situation is deemed to exist if, apart from one due and payable debt there are one or more additional debts outstanding (in Dutch: steunvorderingen). Such a situation must moreover have existed for a certain period of time.

Question 2

What are, in general, the procedures for (i) voluntary and (ii) involuntary bankruptcy according to the laws of Aruba?

The Court will first check its competence to hear the application. The Court will then summarily check whether the debtor is in a situation of ‘having ceased to pay’, i.e. does one outstanding and payable debt remain unpaid, despite requests for payment and are there any additional outstanding debts. The bankruptcy decree itself does not mention any materials that are required to be filed in support of the application.

The application must be submitted in writing. If the debtor is a company, an excerpt from the trade register regarding the debtor should be filed with the application. If a debtor company files for its own bankruptcy, in addition to the excerpt it should also provide a copy of its articles of association, a copy of its shareholders register as well as a copy of the minutes from which it is apparent that the corporate body that is entitled to do so has resolved to file for the bankruptcy.

Question 3

If the claims of creditors are secured by a right of pledge or mortgage, will these claims be frozen in case of initiation of bankruptcy proceedings along with the claims of other creditors?

A creditor secured by a mortgage, that stipulates that the creditor may execute, as well as a creditor that is secured by a pledge, may exercise their rights as if there were no bankruptcy. The trustee of a bankrupt estate (in Dutch: curator) must recognize such right of mortgage or pledge, provided however that the trustee may determine a reasonable period within which the pledge must exercise its rights.

Karel Frielink
Attorney (Lawyer) / Partner

(13 February 2010)

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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, whether or not together with the managing directors.

Transactions with third parties that violate either the law or any limitations on the transactional powers of the board of directors of a company are not enforceable against the company if the limitations are properly disclosed at the trade register. Therefore, if one wants certainty as to whether a director of an NV, AVV or VBA acts within his authority, one should also inspect the trade register (and all documents filed by a company with the trade register) in order to determine whether any limitations apply to the management’s authority. All documents filed by a company with the trade register of the Aruba Chamber of Commerce are available for public inspection, including but not limited to, the articles of association.

Karel Frielink
Attorney (Lawyer) / Partner

(6 February 2010)

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Filed under: Corporate by Karel.Frielink
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Market Abuse Directive defines insider dealing objectively

The European Court of Justice, in its decision dated 23 December 2009 (Case C‑45/08; Spector Photo Group NV and Chris Van Raemdonck versus Commissie voor het Bank-, Financie- en Assurantiewezen (CBFA)), has clarified the elements of insider dealing following a request from the Court of Appeal of Brussels.

The European Court of Justice was to interpret the expression ‘use of inside information’ in Article 2(1) of EU Directive 2003/6 (the Market Abuse Directive or MAD). That provision provides that the Member States are to prohibit any person referred to in the second subparagraph thereof (a ‘primary insider’) who ‘possesses inside information from using that information by acquiring or disposing of, … for his own account or for the account of a third party, either directly or indirectly, the financial instruments to which that information relates’ or from trying to enter into such a transaction on the market. More precisely, the question is whether it is sufficient, for a transaction to be classed as prohibited insider dealing, that a primary insider in possession of inside information trades on the market in financial instruments to which that information relates or whether it is necessary, in addition, to establish that that person has ‘used’ that information ‘with full knowledge’.

The purpose of the Market Abuse Directive is to protect the integrity of the financial markets and to enhance investor confidence, which is based, in particular, on the assurance that investors will be placed on an equal footing and protected from the misuse of inside information. According to the Court, the MAD defines insider dealing objectively without the intention behind such dealing being referred to explicitly in its definition.

The Court concluded that the prohibition on insider dealing applies where a primary insider who is in possession of inside information takes unfair advantage of the benefit gained from that information by entering into a market transaction in accordance with that information. It is not necessary also to establish that the insider has “used” the information “with full knowledge”.

Karel Frielink
Attorney (Lawyer) / Partner

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Filed under: Securities by Karel.Frielink
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Netherlands Antilles

According to PLC Cross Border (Which lawyer?), Spigthoff Attorneys & Tax Advisers is one of two firms dominating the Netherlands Antilles market for international work, both on- and offshore.

Spigthoff ranks high in corporate / M&A and dispute resolution.

Martijn Welten, who specializes in corporate law, mergers & acquisitions and corporate litigation, is (highly) recommended in the areas of dispute resolution and corporate/M&A.

Karel Frielink is considered a leading professional in the area of high net-worth private clients. Karel is highly recommended in the areas of corporate and M&A, and is ‘endorsed for his corporate and securities expertise which covers the transactional and contentious arenas‘. He specializes in banking, finance, securities and corporate law. Karel is the author of what is considered to be the leading legal text book on Netherlands Antilles and Aruba corporate law (‘Rechtspersonen en personenvennootschappen naar Nederlands Antilliaans en Arubaans recht’; 2nd edition 2006; 340 pages). He is also a lecturer on Corporate Law at the University of the Netherlands Antilles, President of the Curacao Bar Association and a member of the Board of Directors of the Curacao Chamber of Commerce.

The recommendations are based on independent research among corporate counsel and private practitioners.

(25 January 2010)

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The foreign law governed claim must be sufficiently identifiable

Many financing arrangements are of a cross-border nature. For instance, a loan agreement governed by English law with the loan secured by a right of pledge governed by the laws of Aruba. This raises all kinds of questions.

Any foreign right, for instance a claim, in which an Aruban pledge is created, must be sufficiently identifiable (‘met voldoende bepaaldheid omschreven’) within in the meaning of section 3:84(2) of the Civil Code of Aruba.

Also, if one wishes to create a right of pledge in a foreign right, such a right must be a registered claim (‘een tegen één of meer bepaalde personen uit te oefenen recht dat niet aan toonder of order luidt’).

The following serves as an explanation of the example given. As a pledge (governed by Aruban law) merely serves to secure a claim (governed by English law), the contents of the pledge is determined by the secured claim. A pledge may secure both existing and future claims, as long as such claims are sufficiently specific or determinable. Generally speaking, a claim is sufficiently determinable if the claim arises from a contract granting a credit facility and the amount of the claim is, for instance, not arbitrary.

Karel Frielink
Attorney (Lawyer) / Partner

(23 January 2010)

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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 Ordinance reads basically as follows: the articles of a VBA may provide that, in cases to be precisely described in the articles, the shareholder must offer and transfer his shares to interested parties according to the terms provided in the articles or, for instance, determined pursuant to the articles by independent experts. This provision in the Aruba Ordinance will be triggered if the articles of association provide for a drag-along right. However, this provision will not be triggered if an ordinary shareholders’ agreement provides for a drag-along provision.

However, a shareholders’ agreement may contain a drag-along provision. Suppose the articles of association make reference to a shareholders’ agreement. Would that trigger the statutory provision? No, although the mere fact that the shareholders’ agreement contains a drag-along provision, does not mean that such a provision is in conflict with Article 25(1) of the Ordinance. This is also in line with the general principle of “freedom”, which governs the Ordinance. The main object of the Aruban legislator was flexibility and maximum freedom of organization and presentation. Accordingly, the Ordinance contains few mandatory provisions, such as provisions relating to the interests of creditors and minority shareholders.

Karel Frielink
Attorney (Lawyer) / Partner

(16 January 2010)

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Filed under: Corporate by Karel.Frielink
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