CROSS BORDER CONVERSION AND MERGER (part 3)

Within the Kingdom

Under the Transfer of Seat Ordinance it is for instance impossible to transfer to Aruba or St. Maarten. Article 38 paragraph 4 of the Charter of the Kingdom of the Netherlands provides that the subject of transfer of seat of legal entities must be regulated in a Kingdom Act. Agreement between the governments of the countries is required for this provision. For as long as that subject has not been regulated in a Kingdom Act, a transfer of seat within the Kingdom is not possible; because cross-border conversion can be materially equated with it, it is assumed that that should also first be regulated in a Kingdom Act before it can take place within the Kingdom.

The question is how a cross-border merger between the countries in the Caribbean part of the Kingdom must be considered; the Netherlands has not yet any legal provisions for this in place. Curacao and Aruba (VBA) have both the outbound as well as the inbound merger; at the moment Sint Maarten and Bonaire only have the inbound merger. For instance can a Curacao public limited company as a disappearing company merge with a public limited company in Sint Maarten as the acquiring company? This merger differs materially from the doctrine of transfer of seat and conversion so that it is defensible that Article 38 paragraph 4 of the Charter does not interfere with such a merger.

Within the Kingdom a transfer of seat can only take place pursuant to the Act of the Kingdom on the Voluntary Transfer of Seat (Rijkswet vrijwillige zetelverplaatsing van rechtspersonen) and moreover only in the event of (the threat of) war or extraordinary (political) circumstances (revolution). In order to make use of this possibility it is not required that a provision in this respect is included in the articles of association of the legal entity. I will not discuss the contents of this Kingdom Act any further.

Until 10-10-10 you could transfer the registered seat of an Antillean public limited company (NV) or a private company limited by shares (BV) from for instance Curacao to Sint Maarten by means of a simple amendment to the articles of association: you just filled in another island as the registered place of business according to the articles of association (a domestic transfer of seat). Since 10-10-10 this is no longer possible. You may even wonder whether it was indeed possible before that date since Article 38 paragraph 4 of the Charter, but it was done in just the same way as a transfer of seat within the Netherlands (for instance from Amsterdam to Rotterdam), and nobody worried about it. (To be continued)

Karel Frielink
Attorney (Lawyer) / Partner

(22 February 2013)

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