Karel’s Legal Blog

The Dutch Central Bank is the supervisor

The Dutch Act on the Supervision of Trust Offices (‘ASTO’) (‘Wet toezicht trustkantoren’) entered into force on the 1st of March 2004. According to the legislative history, the Explanatory Notes to the Act, the aim of the ASTO is to promote the integrity of the financial system by regulating the trust industry. The Explanatory Notes (Par.3.3) continue:

“The main subject of this bill is the integrity of the trust office and the relational integrity, the integrity of clients of the trust office, in the sense that the buyer (as the ultimate beneficial owner) of the services must be known to the trust office.”

The Dutch Central Bank (the ‘DCB’) shall be entitled to revoke a license granted to a trust office if, for instance, the DCB obtains information, which, had it had been known at the time of granting the license, would have meant that the license would not have been granted (Article 6 (f), ASTO). The DCB shall grant a license, unless, for instance, based on the intentions or antecedents of the persons mentioned hereafter, the DCB is of the opinion that the trustworthiness of any of (i) the managers or supervisory directors of the trust office; or (ii) those persons who determine or co-determine the policy of the trust office; or (iii) those persons who have a qualifying holding in the trust office, is not beyond doubt (Article 4 (a), ASTO).

If a change occurs in the aforementioned antecedents, the trust office shall notify the DCB immediately in writing (Article 5 (3), ASTO). If this provision is not met, the DCB shall be entitled to order a trust office or the competent bodies to follow a certain course of action with respect to the matters in question. The trust office or the competent bodies to which the instruction is given shall be obliged to follow those orders within a period to be stipulated by the DCB (Article 11 (1) of the ASTO).

If the expertise and trustworthiness of (a) the managers and supervisory directors of the trust office; (b) the persons who determine or co-determine the policy of the trust office; or (c) the persons who have a qualifying holding in the trust office, insofar as they determine or co-determine policy under a formal or actual control structure, are no longer beyond doubt, then the DCB shall be entitled to order that these persons shall no longer be allowed to determine or co-determine the trust office’s policy (Article 11 (2) ASTO). This means that it is not necessary to immediately revoke the license of the trust office. In certain circumstances, revoking the license could be excessive. This however, according to the Explanatory Notes, does not affect the ability to revoke the license without prior order, if the circumstances so dictate.

Karel Frielink
Attorney (Lawyer) / Partner

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was wrongly disqualified

On 20 August 2008, Churandy Martina won the silver medal in the 200 metres at the Olympics behind Usain Bolt in 19.82 seconds, the first time he had run sub-20s. He was the first medal winner for the Netherlands Antilles after Jan Boersma won silver in sailing at the 1988 Summer Olympics in Seoul.

But Churandy Martina later was disqualified after the U.S. team protest that he had run out of his lane. However, the Netherlands Antilles has appealed to the Court of Arbitration for Sport (CAS) to restore Churandy Martina as the second-place finisher in the men’s 200 meters after he was disqualified for stepping out of his lane, according to the Netherlands Antilles Olympic Committee website: “The rules state quite clearly that the written protest should have been entered within 30 minutes after the official result announcement. The alleged protest form quite clearly stated that it was entered after this timeframe. Other evidence even showed that in the past the IAAF quite clearly didn’t approve other similar cases.” CAS is expected to have a ruling by September 30.

Karel Frielink

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The legal effects doctrine: an exception to the lex loci delicti rule

Under Dutch Caribbean rules of private international law, a claim arising from an unlawful act is governed, in the absence of a choice of jurisdiction by the parties, by the law of the country were the unlawful act was committed (lex loci delicti). However, this rule may possibly not apply if the tortfeasor and the injured party are both residing in a country other than that where the unlawful act was committed and if the legal effects occur entirely in the other country. This is the so-called legal effects doctrine. In such cases the question of whether the act committed was unlawful, but also other elements such as the causal link between the act and the injury, (extent of the) damages, circle of liability etc. may possibly also be governed by the legal effects doctrine.

This is evidenced by judgments of the Dutch Supreme Court, e.g. Supreme Court dd November 19, 1993 (COVA case). In its decision the Supreme Court confirmed that the principal rule on conflicts in the field of international torts is that the applicable law is the law of the place where the wrongful act took place, the lex loci delicti. The place of the wrongful act may, however, be fortuitous or unascertainable. As a result, according to the Supreme Court, exceptions to the lex loci delicti rule such as the legal effects doctrine may, perhaps apply.

However, the Supreme Court also held that this exception should only be applied restrictively. The Supreme Court held that an exception to the lex loci delicti rule may only be made if all legal consequences of the wrongful act fall within the legal sphere of a country other than where the act took place. Furthermore, it held that this is only the case when both parties, the tortfeasor and the injured party, are domiciled in that country. It should also be noted, that the legal effects doctrine does not preclude account being taken of so-called mandatory or priority rules such as traffic and safety rules existing at the place of the unlawful act, or of other comparable rules intended to protect persons or things (i.e. property).

Finally, depending on the pertinent facts and circumstances of a particular case, other exceptions to the lex loci delicti may possibly be permitted. For instance, if the unlawful act is closely connected with another legal relationship, e.g. a contract, between the tortfeasor and the injured party, then it may possibly be argued that the law applying to that other legal relationship must also govern the obligation arising from the unlawful act.

Karel Frielink / Ursus van Bemmelen
Dutch Antilles Attorneys / Lawyers

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No obligation to file for bankruptcy

There is no statutory obligation in the Netherlands Antilles for managing directors of a company to file for the bankruptcy of the company. Managing directors are therefore not responsible to the creditors for damages sustained by them as a result of any ‘late’ filing for bankruptcy. There is no such obligation for shareholders of a company either. A liquidator of a company shall, however, file for bankruptcy if he finds that the liabilities are likely to exceed the assets, unless all known creditors agree in writing that the liquidation be continued on a voluntary basis (Article 2:29(3) Netherlands Antilles Civil Code).

However, creditors of the company may hold a director liable on the basis of tort if he entered into a transaction on behalf of the company while he knew, or should reasonably have known, that the company would not be able to fulfil the obligations arising from that transaction and the company would not have sufficient assets for the creditor to take recourse against. If the shareholder (or another person) is actually in control of the company and the managing director is more or less forced to carry out his instructions to enter into said transaction, the shareholder (or other person) could be held liable as the de facto managing director.

One may also be held liable for fraudulently disposing of the company’s assets or disguising profits or losses prior to or during bankruptcy proceedings. If the bankruptcy trustee proves that improper management (during the three years prior to the commencement of bankruptcy) was a major cause of the bankruptcy of the company, the managing directors (and in addition the policy makers) can be held jointly and severally liable for the total remaining debt, i.e. the debt after the liquidation of all other assets.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Corporate by Karel.Frielink
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Liability for thin-capitalization?

In terms of ‘piercing the corporate veil’, thin or inadequate capitalization usually means capitalization that is not in proportion to the nature of the risks the business of the corporation necessarily entails; in other words it is based on likely economic needs rather than legal requirements.

Shareholders of a company in the Netherlands Antilles are under an obligation to pay to the company what is due with respect to the shares, i.e. the shareholder’s capital contribution, and such contribution may not be withdrawn without due process. This is the only financial obligation of a shareholder towards the company, unless the shareholder agreed to a particular arrangement for capitalization. Thin capitalization as such gives no rise for shareholder liability. The shareholder is not under a statutory duty to provide the company with any additional funds it may need. If, on the other hand, the shareholder misleads a third person regarding the financial status of the corporation so that the third person believes that the corporation has more capital than it actually has, then the shareholder could be held personally liable for his own behavior.

Shareholders can be held liable if inadequate capitalization is related to pervasive fraud, the abuse of corporate personality, or any other form of tort. Inadequate capitalization by itself does not lead to shareholders being liable for the debts of the company. Generally speaking, a shareholder’s sole liability is to pay the share capital.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Corporate by Karel.Frielink
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Policy maker can be held liable

As a general rule a corporation in the Netherlands Antilles is a legal entity distinct from its shareholders. In terms of liability for mismanagement the law focuses on the managing directors as well as other persons who actually “act as managers” (a.k.a. policy makers or de facto managing directors).

Most legal commentators take the view that instructions from a parent company to a subsidiary do not, as such, constitute “management” in the above sense. However, statutory language is ambiguous and there is no Netherlands Antilles case law on this issue. Those who “act as managers” run (part of) the company as if they are the managers. They are, so to speak, in direct control, mainly through instructions given to the managing directors and more or less enforcing the execution thereof. In these cases one could say that the managing directors act as puppets, manipulated by the controlling shareholder.

Corporate shareholders can, generally speaking, be held liable for subsidiary obligations, e.g., when the subsidiary is being operated in an unfair manner (profits accumulate in the parent and losses in the subsidiary), or when the subsidiary is consistently represented as being part of the parent, or when the parent and the subsidiary are essentially operating the same integrated business, and the subsidiary is undercapitalized. In other words: a corporate shareholder can be held liable if it uses a subsidiary such that rights of third parties are abused. The examples given show that only in case of wrongdoing (tort) can the shareholders be held personally liable.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Corporate by Karel.Frielink
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Prevent a shareholder from dilution

According to article 2:106 of the Netherlands Antilles Civil Code shareholders have a pre-emption right on the issue of new shares, being the right to be offered any new issue in each class, pro rata to the number of shares of such class held by them. The pre-emption right is intended to protect the interests of shareholders and to prevent their stake from being diluted.

According to the Civil Code there are three ways to limit the pre-emption rights of the shareholders:

1. A limitation may provided for in the articles of the company (art. 2:106(1) Civil Code).
2. The articles may provide that a corporate body designated in the articles shall decide on all or specific issues as to whether or not a pre-emption rights exist and as to the various terms thereof (art. 2:106(1) Civil Code).
3. The shareholders may regulate their mutual relationships and their relationship to the company, including the manner in which they exercise their rights as shareholders in a shareholders agreement (art. 2:127(2) Civil Code)

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Corporate by Karel.Frielink
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Spigthoff represented plaintiff

According to a recent court ruling in the Netherlands Antilles (Court of First Instance, 17 July 2008), a same-sex couple that was married in the Netherlands and subsequently moved to the Netherlands Antilles (Curacao), has the same rights under Netherlands Antilles law (or Aruban law as the case may be) as Netherlands Antilles opposite-married couples as far as health insurance is concerned. Dr. Douwe Boersema of Spigthoff Attorneys & Tax Advisers on Curacao represented the couple.

Same-sex couples have been able to marry in the Netherlands for the last seven years. However, Aruba and the Netherlands Antilles have not changed their legislation which still does not allow such marriages. Moreover, the government of the Netherlands Antilles, and that of Aruba, refuse to treat same-sex couples who married in the Netherlands equally with opposite-married couples. However, according to the law, Dutch same-sex couples are entitled to all lawful rights in the Netherlands Antilles or Aruba pertaining to their marital status.

The Supreme Court of the Netherlands, the Netherlands Antilles and Aruba ruled on 13 April 2007 that Aruba must recognize same-sex marriages registered in the Netherlands. Although same-sex marriages cannot be performed in Aruba or the Netherlands Antilles, both countries are forced to at least recognize same-sex marriages performed in the Netherlands. The rulings of the Supreme Court in The Hague and of the Court of First Instance on Curacao are based on the Charter of the Kingdom of the Netherlands (’Statuut‘): legal provisions in force in one part of the Kingdom have the same legal force in the other two parts of the Kingdom. The matter that the Netherlands Antilles and Aruba do not have a same-sex marriage law or that it goes against Netherlands Antilles’ or Aruba’s ‘way of life’, is irrelevant to the issue.

Generally speaking, in my opinion, and as a matter of principle, governments should not interfere with their citizens’ private lives unless it is necessary to do so to protect their basic rights and freedom of choice. People should be as free as possible to make their own choices.

Karel Frielink
Attorney (lawyer) / Partner

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Management’s responsibility

According to Netherlands Antilles law, annually, within eight months after the company’s financial year has ended, (unless this term has been extended by the general meeting) annual statements must be drawn up by the management board and submitted to the general meeting of shareholders. The annual statements, comprising the balance sheet, profit and loss account and an explanatory statement, should be signed by all the directors.

The annual statements should be approved by the general meeting of shareholders. Said meeting can and, when this is prescribed by the articles of association, shall appoint an expert to regularly supervise the bookkeeping and to report to the meeting on the balance sheet and profit and loss account with explanatory statement as drafted by the management board.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Corporate by Karel.Frielink
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Quality of health care is regulated

Secondary health care in the Netherlands Antilles is provided in hospitals. There are seven hospitals on Curaçao, with a total of 1,187 beds, 46% of them in the Sint Elizabeth Hospital (Sehos) and 16.9% in various specialized institutes for the disabled and drug addicts.

The Netherlands Antilles National Ordinance on Health Institutions (NOHI) provides rules for governing institutions providing healthcare in the Netherlands Antilles. The definition of health care institutions in the NOHI is very broad.

The NOHI regulates, amongst others, (i) the establishment of healthcare providers in the Netherlands Antilles; (ii) buying of medical devices by such institutions, and (iii) regulating the quality of the healthcare provided by such institutions.

The NOHI distinguishes between institutions providing health care in general and hospital institutions. Hospital institutions are institutions providing health care that have been appointed by a National Decree as being hospital institutions.

Karel Frielink
Attorney (Lawyer) / Partner

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