Karel’s Legal Blog

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 v. Grenoble, Hoge Raad (Dutch Supreme Court) 19 March 1999, NJ 2000, 99.

Accordingly, Netherlands Antilles courts apply the law of the state where a corporation was incorporated as the lex societatis. The law of incorporation governs the corporation’s formation, its shares, the powers, duties and liabilities of shareholders (as such) and the (members of the) Board of Directors and Board of Supervisory Directors (as such), its dissolution, and determines questions of locus standi (i.e. whether or not the NV or BV has the right to bring proceedings) and legal personality.

Karel Frielink

(31 August 2010)

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Transfer of seat and cross-border conversion

Globalization has made it very common for people to migrate to other countries. This not only applies to natural persons however, but also to legal entities. I.e. it is also possible for companies incorporated under the laws of the Netherlands Antilles to migrate to other countries.

The possibilities are:

A Transfer of seat

In accordance with the statutory law of the Netherlands Antilles, a public limited liability company may transfer its seat to (1) another island or country within the Kingdom of the Netherlands or (2) a third country.

1. In short, in accordance with the Kingdom Act Voluntary Transfer of Seat (in Dutch: Rijkswet Vrijwillige Zetelverplaatsing), in the event of war or political disturbance the seat of any public limited liability company may be transferred to another island or country within the Kingdom of the Netherlands. As the likelihood of the Netherlands Antilles becoming involved in a war and/or a political revolution is currently very small, I will not further elaborate on this stipulation. 
2. In accordance with the Ordinance Transfer of Seat to Third Countries (in Dutch: Landsverordening Zetelverplaatsing Derde Landen) it is also possible to transfer the seat of a public limited liability company to a third country, as long as the articles of association of the company, effective on March 1, 2004, contained a so called ‘flight clause’ – this was the day on which Book 2 of the new Civil Code of the Netherlands Antilles became effective - and provided that the laws of that third country permit such transfer.

B Cross-border conversion  

In accordance with Book 2 of the Civil Code of the Netherlands Antilles a public or private limited liability company (NV or BV) may migrate to another jurisdiction by way of a ‘cross-border conversion’.

A public or private limited liability company may transform itself into a foreign legal entity provided that, according to the law governing such foreign legal person, the company will continue to exist subsequent to the conversion.

In order for a conversion to take place a resolution to that effect, unanimously proposed by the directors of the company, must be adopted by a meeting of the shareholders with due observance of at least the requirements for an amendment of the articles of association.

In addition to the above, a notarial instrument is required in which the resolution for conversion is established and to which the following documents are attached:

1. A document issued by a person who or an authority which under the law governing the foreign legal person, would have the right to execute an instrument of establishment of such legal person, which document contains the provisions or articles which shall govern the foreign legal person after its conversion. This document is usually issued by a civil-law notary;
2. A statement that states that once all formalities under the foreign law have been complied with, the consequence of the conversion shall be that the elected legal entity shall continue to exist in the chosen legal form. This statement may be given by the same person referred to under 1 or another expert in the field of law of the foreign legal person, this other expert is usually an attorney at law; and
3. A declaration given and signed by all the directors, at the time of the resolution for conversion, and all the shareholders entitled to vote who did not vote against the proposal for conversion, in which declaration all the signatories jointly and severally assume liability for all the debts of the public limited liability company existing at the point of time when the conversion becomes inviolable. Except in the case of bad faith, this liability shall end three months following such point of time and in any event one year after the commencement of the continued existence of the public limited liability company in the chosen foreign legal entity. This notarial instrument may contain a condition precedent (in Dutch: opschortende  voorwaarde) for the conversion to take effect.

The conversion shall be irreversible as soon as the deregistration of the public or private limited liability company from the register of the chamber of commerce has taken place.

Jo-Anne de Wind
Lawyer – Spigthoff Curacao

(24 August 2010)

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Geert Wilders: “There is nothing wrong with Islam”

The Dutch congressman Geert Wilders (Freedom Party (Partij voor de Vrijheid)) will deliver a speech on September 11, 2010 in New York in opposition to the proposed building of a mosque close to Ground Zero. He will not only condemn the followers of Islam, but also Islam itself. He has already talked about a “dreadful mosque”. It is a great pity that he makes these sorts of statements. About 10 years ago Geert Wilders had very different opinions.

On September 24, 2001 Geert Wilders was a guest on the Dutch TV program “Barend en Van Dorp”. Wilders was interviewed about Islam, because had warned against the dangers of Muslim extremism. When asked what had prompted him to deliver the warning he answered:

“By taking a careful look at what is happening in the world. By playing it safe. I have visited countries in the Middle East and further afield, from America, Iran and Syria to Israel. I have spoken to many people on my trips who made good analyses, analyses that are unfortunately not common in the Netherlands.”

Wilders then said:

“The remark by Fortuyn (a Dutch politician who made headlines at the time – KF) that we should start a cold war against the Islam is reprehensible, because by doing so he tars all Muslims with the same brush. As I stated today at the outset: there is nothing wrong with the Islam, it is a respectable religion. It’s all about a little bit of Muslim extremism. (…) I don’t have anything against the Islam.”

Mind: this is Geert Wilders opinion. In other words Wilders states: don’t condemn Islam, because there is nothing wrong with Islam, it is even a respectable religion, but only condemn all those that abuse a religion for terrorist attacks, for example.

What happened to the ‘good analyses’ of those days that caused Geert Wilders to strike such a completely different cord today? Has he too become infected by extremism? Or is it just a case of political opportunism, targeting fear as a powerful mechanism for attracting votes?

Karel Frielink

(19 August 2010)

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A non-possessory pledge requires a deed

Security rights are an important issue, especially in financing transactions. A company may, for example, guarantee the obligations of another company under a certain loan facility. There are several alternatives, one of which will be discussed here.

Under the laws of Aruba there are several kinds of pledges, in particular, the possessory and the non-possessory pledge. In the case of a possessory pledge, the physical control of the assets concerned will be transferred from the owner/borrower to the bank/lender.

In the case of a non-possessory pledge, regarding for example registered shares, the pledge is created by means of a deed, either a notarial deed or a registered private deed. The parties have to agree whether the rights attached to the shares, including the voting rights, shall be vested in the bank/lender in whole or in part, and whether or not conditionally.

In general, the assets of a borrower serve as security for all his creditors. If the borrower goes bankrupt, his creditors will all be treated equally; no favorable treatment is allowed. There are, however, certain exceptions. A creditor that has a right of pledge finds himself in a better position than an ordinary creditor. He retains the right to foreclose on a validly vested right of pledge as if the borrower has not been declared bankrupt.

Karel Frielink
Attorney (Lawyer) / Partner

(17 August 2010)

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Electronic files will not be disregarded as evidence

A Netherlands Antilles or Aruban court may only base its decision on facts. An alleged fact that is not disputed by the parties is considered to be such a fact, even if it does not correspond with reality. For example, if both parties state that they were involved in a fight in Curacao, the court will assume the correctness thereof, although both parties know that the fight was actually in Bonaire. Furthermore, facts can be proven in the course of the proceedings, e.g., by showing the court an official extract of a notarial deed. The court may also base its decision on circumstances that are generally known and need no proof.

It is important to convince the court of the authenticity of all electronically retained records when presented as evidence. The Netherlands Antilles Ordinance on Electronic Agreements sets out that an electronic signature has the same validity as a signature on paper and can be substantiated by means of digital certificates. The explanatory memorandum suggests further measures to enhance credibility such as the use of Trusted Third Parties (TTP’s) who keep documents as an independent third party, encryption, and other digital means to establish the authenticity of the signature and thus the identity of the parties and the contents of the message.

With respect to electronic files a party should be able to provide the court with information on its archiving and storage policies: a court might be interested to know how a company made sure that the information was correctly reproduced. I feel that where a party is able to present a record of compliance with such archiving and storage policies, assuming that these policies are acceptable to the court, a court will not easily be inclined to disregard the microfilmed or scanned evidence.

Karel Frielink
Attorney (Lawyer) / Partner

(10 August 2010)

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Professional for assurance engagements in the financial services sector

KPMG is a US $ 20 billion professional services organization with 135,000 people operating in over 140 countries, helping turn knowledge into value for its clients worldwide. Excellent career opportunities are available with the KPMG Dutch Caribbean practice for their office in Curacao. These opportunities are with the Assurance Services group to service its clients in the financial sector and the tourism industry.

(Senior) manager/director – audit

Your portfolio will comprise primarily of assurance engagements in the financial services sector. Clients will include international mutual funds, offshore finance companies and banks. Other possible clients will include the Hospitality and Leisure industry (e.g. hotels, resorts, and casinos) mining, telecommunications and others.

You should have:

• A CPA/CA/RA/equivalent qualification
• At least 7 to 9 years total experience in the profession of which the last few years should preferably be in the financial services sector.
• The ability to:
  - manage assignments independently and professionally;
  - give good guidance to subordinates;
  - be a good team player; and
  - maintain and develop excellent client relationships.

Your work will:

1. In addition to traditional audit assignments, also involve special assurance related assignments such as due diligence, financial projections, etc.
2. Require your involvement in internal/management tasks such as training, practice development, job progress control, collection of receivables etc.
3. Involve significant contact with the US and other KPMG offices worldwide

It will be my pleasure passing-on your resume to KPMG Curacao. You may contact me at Karel.Frielink@Spigthoffcuracao.com.

Kind regards,

Karel Frielink

(6 August 2010)

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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 members can influence the liability. A claim based on Article 2:14 NACC can be instituted by the NV itself only, or, in case the NV has been declared bankrupt, by a bankruptcy trustee (in Dutch: ‘curator’). When the claim is instituted by the bankruptcy trustee, a member of the Board of Directors may not claim that he was granted any form of discharge from the liability by the NV (Article 2:14 Section 5 NACC).

Based on established case law, the obligation of the members of the Board of Directors of an NV to properly carry out their duties, is interpreted in such a manner that liability based on this obligation requires serious blame to be attributed to such members. Therefore, a Director of an NV can only be held liable by the NV if serious negligence in the performance of his duties is attributable to him. See the case of Ontvanger v. Roelofsen, Hoge Raad (Dutch Supreme Court) 8 December 2006, JOR 2007, 38. A finding of serious negligence on the part of a Director depends on the circumstances of the case. Actions that conflict with specific statutory provisions or the articles of association may constitute improper management rising to a level of serious negligence.

This standard for internal liability (i.e. the liability of a Director towards the NV) also applies when an individual shareholder holds a Director of the NV liable for the manner in which the latter has carried out his management duties. See the case of Willemsen Beheer v. NOM, Hoge Raad (Dutch Supreme Court) 20 June 2008, JOR 2008, 260.

In the event of bankruptcy of an NV which is significantly caused by mismanagement, each member of the Board of Directors is liable towards the bankruptcy estate for the deficit (Article 2:16 Section 1 NACC). If the Board e.g. has not timely observed its obligation to keep accounts, there is a statutory presumption of clear mismanagement. Unless the members of the Board can prove that they cannot be blamed for not meeting such obligations, each member will be personally and severally liable for said deficit. A claim based on Article 2:16 NACC can be instituted by the bankruptcy trustee only. If a bankruptcy trustee refuses to bring suit, any creditor of the bankruptcy estate can request that the bankruptcy judge order the bankruptcy trustee to commence such proceedings.

Karel Frielink
Attorney (Lawyer) / Partner

(4 August 2010)

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Public transportation in the tourism industry

Curacao is an increasingly popular tourist destination. As in many other tourist destinations, travel agencies and hotels offer various transportation services for tourists. Also, supermarkets, restaurants, car rental agencies or hotels, have started to offer (complimentary) transportation services for tourists.

According to the Island Decree on public transportation, it is required to have a permit for the public transportation of people or groups. The law prescribes that (arranging for) unauthorized public transportation is punishable by a penalty of Naf 2.500 or a 30-day imprisonment. The background of these regulations is basically to protect the government-owned public transportation system and the taxi-industry. Since the transportation services for tourists described above are of a public nature, it is in principle required to have a permit to perform these services.

A specific permit may be given for the transportation of a touristic nature by bus or touring car. Several travel or transport agencies operate under such a permit. The question is what “transportation of a touristic nature” means. Does this mean that it is allowed to transport tourists to and from the airport, restaurants or shops?

Some of these questions have been answered in case law. Concerning the airport pickups it has been held by the Courts that the “transportation of a touristic nature” means that the entity holding such permit will be allowed to transport persons from the airport to their hotel provided that this transport is part of a package deal. According to statutory laws a package deal means that the tourist must have a pre-arranged booking by an agency abroad which must include at least accommodation (or a 24 hour stay) and transportation or another touristic activity (such as an island tour).

The Courts have furthermore held that “The touristic nature (…) is apparent from the fact that upon arrival, the tourists are being transported in fairly large groups under supervision of a tour guide who is responsible for the tourists, so that the transport from the airport to the hotels can be considered a touristic activity.” And: “The nature of this kind of transportation clearly differs from the situation where tourists can decide individually upon arrival to take a taxi or to choose to be transported by touring car on the basis of a fee which is then payable on the spot”.

It has furthermore been decided in case law that a free shuttle service to and from a car rental agency is not allowed. Other forms of transportation of tourist have not yet been dealt with in case law.

In any event it is of course possible to obtain a specific exemption for the transportation of tourists. Some hotels for instance are allowed to transport guests to and from Willemstad downtown twice daily. It is possible that the government has decided or will decide to grant other exemptions in order to facilitate tourists and promote the tourism industry on the island.

Annemarijke Bach Kolling
Attorney / Partner - Spigthoff Curacao

(25 July 2010)

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A comparison of Dutch and Dutch Antillean law

The intention of article 39 of the Kingdom Charter is to harmonize several fields of law, one of which being the Code of Civil Procedures, in the three territories of the Kingdom. There are, however, a number of differences between Dutch and Dutch Antillean law. One of the differences concerns the  procedure of imposing a prejudgment attachment on assets of a debtor.

If a creditor is of the opinion that he has a legitimate claim on the assets of a debtor, he can request that the court orders a prejudgment attachment on such assets. As a result of such attachment, the debtor cannot alienate or dispose of the assets for the duration of the legal proceedings about the validity of the creditor’s claim. The creditor must then assert that he has a legitimate claim and, in some cases, fears embezzlement of the debtor’s assets. If the court, after a brief investigation, accepts the merits of the creditors claim, it will grant the attachment.

There is a difference between the Dutch and the Dutch Antillean law with respect to the attachment and hearing the debtor. The Dutch court will grant a seizure if convinced that the debt-claim is prima facie legitimate. Judges-practice used to allow a debtor or his attorney, who suspected possible seizure of his valuable assets, to delay the attachment until having been heard in advance (“zwart maken beslag”). Most courts in the Netherlands have however abolished this practice. The Dutch ‘attachment procedure’ prescribes that the court may determine if this practice is to be implemented or not. If it is not, the (unpleasant) result is that the attachment can only be lifted by means of a summary or interlocutory procedure. The attachment will then only be lifted if the prejudgment attachment is made without taking the formal requirements into account or if the creditor’s claim is prima facie without merit.

As for the Netherlands Antilles, the possibility of being heard by the Court is regulated. According to the Court of Justice’s new protocol, which was drafted on 26 February 2010, the debtor’s lawyer will be heard (in absence of his client) before a seizure is effectuated. The lawyer may not inform his client  regarding the attachment order served on his client.

Generally and unless a request to be heard is assigned, the debtor will not be heard before the actual attachment is a fact. Nonetheless, under certain circumstances the debtor may be heard prior to attachment being instituted. Here Dutch and the Dutch Antilles Civil procedures diverge again to some extent. This is the case with respect to prejudgment attachments on periodical payments such as salary, income support, unemployment benefits or pension. According to the Dutch legislator, a prejudgment attachment on such periodical payments, is a very extreme measure with such major impact on the debtor’s life that the debtor should be heard in advance. In addition, such attachment may only be instituted if the debtor’s income exceeds a certain limit, laid down by law. Furthermore, the court should take the “attachment free rate” into account, a limit which depends on the debtor’s personal circumstances (married, single parent, etc.).

Dutch Antillean law regulates such attachment differently. Attachments effectuated by an employer may not exceed a third of the employee’s monetary benefits, however, it is not regulated that the debtor will be heard before the court grants the attachment order.    

Martine Hofhuis
Lawyer – Spigthoff Curacao

(13 July 2010)

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Tax Information Exchange Agreements (TIEA) and the Netherlands Antilles

In today’s world the ‘exchange of information’ is considered an important topic worldwide, appearing in many different areas, in local and international political discussions, international agreements including the process of implementation of these agreements, and in amendments of local laws and existing treaties. (Mainly as a follow-up to the recommendations and designated directions of the OECD).

Against this backdrop, in 2000, the TIEA (Tax Information Exchange Agreement) was developed by the OECD Global Forum Working Group on the effective exchange of information to promote international co-operation on tax matters through exchange of information. The principles of transparency and effective information exchange for tax purposes are primarily reflected in the 2002 OECD’s Model Agreement on the Exchange of Information on Tax Matters (the OECD Model TIEA) and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and Capital (“the OECD Model Tax Convention”) and its commentary, as updated in 2004 (and approved by the OECD Council on 15 July 2005).

Why are TIEAs so important? In order to ensure the implementation and execution of individual countries’ tax laws, jurisdictions are entering into agreements (TIEAs) on the exchange of information for tax purposes. Without such TIEAs in place, it is often formally impossible for tax authorities to exchange or request information for tax purposes from other jurisdictions, without violating the formal obligation of secrecy of such jurisdictions. A TIEA consists of agreements made between two jurisdictions, and creates for both ‘treaty parties’ rights and obligations which must be, embraced, implemented, obeyed, and respected. In general, experience with regard to the implementation and the practical outcome of the rights and obligations, as agreed in a TIEA, depends completely on the cooperation, professionalism and integrity of the parties to the treaty.

 The Netherlands Antilles and TIEA’s

The first TIEA which was established and signed between the Netherlands Antilles and the United States of America on April 17, 2002, entered into force on March 22, 2007. The negotiation and signing of TIEA’s between the Netherlands Antilles and their treaty partners is a first step towards future agreements for the avoidance of double taxation. TIEA’s and double taxation agreements (the latter for the prevention of double taxation on income earned), are essential for creating an open and competitive economy. In general, the Netherlands Antilles strives to eliminate trade barriers and embraces entry into world markets.

The establishment of TIEA’s is one of the measures taken by the Netherlands Antilles towards its ambitions and goals of achieving a first class ranking in the international financial services center. The Kingdom of the Netherlands is involved in ongoing negotiations on behalf of the Netherlands Antilles with 20 countries, thus far, to conclude and ratify TIEA agreements. As of today the Netherlands Antilles has four TIEA agreements in place and is in the process of concluding TIEAs with  a further 16 jurisdictions. These agreements are already signed and are expected to enter in force within a reasonable period of time.

This has been instrumental in the Netherlands Antilles being removed from the list of ‘uncooperative tax havens’, the so called black list of the OECD. The Netherlands Antilles is therefore considered to have committed to the internationally agreed tax standard.

Needless to say the Netherlands Antilles has had an arrangement in place with the Netherlands and Aruba since 1964, covering both the exchange of information as well as the avoidance of double taxation.

Anne Marije Veenland
Tax Adviser – Spigthoff Curacao

(6 July 2010)

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