PROPOSED REVIEW DUTCH CARIBBEAN LEGISLATION ON DIRECTORS’ LIABILITY IN BANKRUPTCY

Defects detected in the annual accounts drawn up may be relevant

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. Among other things, the provisions with regard to Managing Director’s liability have been improved.

In the event of the bankruptcy of the legal entity each Managing Director is jointly and severally liable to the estate for the deficit being the amount of the debts insofar as they cannot be settled by liquidation of the other assets if apparent improper management had been involved and it is plausible that this is a major cause of the bankruptcy (Article 2:16 paragraph 1 proposed bill). If the obligations of Article 2:15 Civil Code have not been complied with (i.e. the obligation to keep a record of the financial condition of the legal person) or the annual accounts have not been or will not be drawn up within due time, it is presumed that improper management was apparently also involved with regard to the rest and that this improper management is a major cause of the bankruptcy.

The same applies if the legal entity is a fully liable partner of a public partnership (at the time a general partnership (‘VOF’) or a limited partnership (‘CV’)) and the obligations in Article 3:15i of the proposed bill (at the time Article 3:15a Civil Code) had not been complied with. A minor defect is not taken into account. The mere fact that the annual accounts drawn up within due time do not comply with the legal requirements or those required under the Articles of Association is insufficient for constituting the said presumptions (Article 2:16 paragraph 2 proposed bill).

The obligation to draw up annual accounts does not entail that they must comply with the legal form and format requirements or those required under the Articles of Association. So, even when in this connection there is a ‘major’ defect, the presumptions of evidence of the second paragraph do not become operative. On the other hand the rule should not be interpreted such that any document titled ‘annual accounts’ drawn up by the Management Board can constitute annual accounts. The defects detected in the annual accounts drawn up may be relevant but it should be a document that considering the nature of the enterprise can reasonably be considered as seriously drawn up annual accounts.

Karel Frielink
Attorney (Lawyer) / Partner

(24 November 2010)

.

Leave a Reply

You must be logged in to post a comment.