MAY THE BOARD OF A DUTCH CARIBBEAN COMPANY SELL ITS BUSINESS?

The management board faces limitations

The management board has the function of managing the corporation, i.e., making policy and conducting the day-to-day management of the corporation. Except for restrictions in the articles of association, the management board is responsible for the management of the BV or NV (private or public limited liability company) and is authorized to represent it. Are there any other restrictions? The answer is yes.

On 3 May 2007, the Amsterdam Enterprise Court (‘Ondernemingskamer Hof Amsterdam‘) ruled that ABN AMRO Bank must freeze its $21 billion sale of U.S. unit LaSalle to Bank of America, because in the Court’s opinion the deal requires prior shareholders’ consent. The Court ruled it was “unacceptable” for ABN AMRO Bank to sell the Chicago-based LaSalle unit without shareholder approval, not as such, but because this transaction is connected with Barclays’ plan for a friendly public offer as well as the counter-offer by three other banks with respect to the shares of ABN AMRO Bank itself. This might create a huge problem for ABN AMRO Bank if the buyer takes the position that it has entered into an unconditional agreement to buy LaSalle and subsequently initiates proceedings to enforce the same.

A sale of all or a substantial portion of the company’s assets may preclude the company from continuing the business it has been operating. There is no statutory provision in the Netherlands or the Dutch Caribbean covering this specific event, but it is held by legal commentators (like myself) for many years already that it should be considered a matter outside of the realm of powers of the management board and that this is an action equivalent to dissolution of the company, which requires a shareholders’ resolution.

In general, a good faith buyer will be protected if the deal is concluded or carried out prior to any shareholder initiating legal action, but a buyer who is (or should have been) aware of this legal issue cannot enjoy such protection.

Karel Frielink
Curacao-based Attorney (lawyer) / Partner

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