Karel’s Legal Blog

It is not about size

In many cases and for many clients, the size of a law firm is not of much importance. What is important may differ from client to client, however the following more or less general concepts will undoubtedly play a role: the attitude of the professional, the quality of the services provided, timely response, personal attention, the ability to stand in the client’s shoes, creativity and pricing.

Law firm marketing should therefore focus on the clients and not on the firm itself. Many law firms put too much emphasis on their size, the number of offices and the huge building they occupy, their international networks and their success stories. I have not really done any research into this, but I would be surprised if there are any law firms who mention and discuss their failures or cases lost, on their website.

It also seems somewhat silly to call oneself ‘dedicated’, because isn’t that what being a professional is all about? And if a law firm claims that its lawyers are business-focused, whose business do they have in mind? Their own? And does dedication not come with the hourly rate, like being highly motivated and an expert?

Law is a people’s issue. Clients prefer people to buildings. They are seeking assistance from an expert they can trust. An expert who is able to listen and who adds value to their case. For law firms it is important to have a clear picture of the kind of clients they wish to serve and they should focus on fulfilling the needs of those clients instead of offering a broad range of services. Do you want to be part of a firm from the past or one of the future? Do you wish to sell hours or intellectual capacity?

It goes without saying that a law firm’s ability to focus on its clients instead of selling its expertise may be limited by factors like the small market it operates in. Nevertheless, it seems advisable to regularly question your goals and the image of your firm that you wish to propogate.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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A criminal offense

The Netherlands Antilles Ordinance on the Supervision of Stock Exchanges 1998 (‘Landsverordening toezicht effectenbeurzen 1988’) contains a prohibition on insider trading.

Any person who is in possession of inside information is prohibited from carrying out a transaction or being instrumental in a transaction in securities in a company listed on a Netherlands Antilles stock exchange or on any other foreign recognized stock exchange, or in any securities whose value is determined by such securities.

In general it is prohibited for anyone, including an issuer, once it is reasonable to assume that securities will be listed, to enter into or effectuate a transaction concerning such securities in or from the Netherlands Antilles when in possession of insider information about the issuing company or the trading of its securities.

Inside information is defined as specific information regarding a company or the trading of shares in a company that has not been made public, the disclosure of which can reasonably be expected to have an effect on the price of the securities concerned, irrespective of the direction of the price movement.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Securities by Karel.Frielink
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The Dutch Prime Minister Jan Peter Balkenende has reacted to the provocative film Fitna (’strife‘) that Member of Parliament Mr. Geert Wilders has released on the internet on 27 March.

Prime Minister Jan Peter Balkenende (click here for the Arabic version):

‘On behalf of the Dutch government, I would like to respond to the online film by Mr Wilders.

The film shows images of violent acts and holds Islam and the Koran responsible for them. The government condemns such acts and those who commit them.

The film equates Islam with violence. We reject this interpretation. The vast majority of Muslims reject extremism and violence. In fact, the victims are often also Muslims.

We therefore regret that Mr Wilders has released this film. We believe it serves no purpose other than to cause offence. But feeling offended must never be used as an excuse for aggression and threats. The government is heartened by the initial restrained reactions of Dutch Muslim organisations.

Muslims, Christians and people of other convictions can easily live together in peace. The problem is not religion, but misuse of religion to sow hatred and intolerance. That is why we are calling for respect for everyone’s deepest convictions.

We are aware of the concerns and the sentiments about this film in the international Muslim community. We have recently spoken with many people at home and abroad to promote mutual understanding. We will continue to follow this course.

The Dutch government stands for a society in which freedom and respect go hand in hand. Such a society demands dedication and commitment. We oppose extremism. Anyone who breaks the law is dealt with firmly. Let us solve problems by working together. Let us reach out to others and build confidence and trust. Let us conquer prejudice. We shall surely succeed.‘

Click here for my comments on Mr. Geert Wilders. Having seen the propaganda film now, I fully agree with the Prime Minister’s response. Others have condemned or critized the film as well (click here and here too). By the way, the film contains several factual errors, e.g., it shows a picture of the Dutch-Moroccan rapper Salah Edin, instead of the actual terrorist, Mohammed B. Mr. Wilders also faces a legal challenge.

Karel Frielink
Attorney (Lawyer) / Partner

P.S. (2 April 2008)

On 1 April 2008, Mr. Geert Wilders accused two ministers, including the Minister of Justice, of lying when they claimed he told them and the Dutch Anti-Terrorism Authority the film would include pages being torn out of the Koran and burnt. The Ministers claim they were informed about this by the Anti-Terrorism Authority first and then by Mr. Wilders back in November 2007: a kind of pre-announcement with respect to the film to be made. This warning by Mr. Wilders has led the Dutch Government to take several precautionary measures to protect its people and interests both domestically and abroad (CNN reports on international protests). 

However, in the film as broadcasted only a page of a phone book is torn out. Yesterday, Mr. Wilders accused the Dutch Government of over-reacting to the film prior to having seen the same and asked the Prime Minister for a public apology. According to the Government, it acted on the basis of their conversation with Mr. Wilders in 2007. Mr. Wilders is now denying that he gave any insight into the film at the time. However, during the debate, the Government provided Parliament with notes of two meetings with Mr. Wilders, one of which was attended by two Dutch Government ministers. According to those notes, Mr. Wilders told the Government that he was planning to end his film with him tearing out several verses from the Koran and burning them on an open fire. The question now is: who is lying? The Government or Mr. Wilders? The answer does not include the Government… Mr. Wilders showed up for what he is.

Filed under: Uncategorized by Karel.Frielink
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Disclosing or investigating?

Under Dutch Caribbean law, during negotiations parties enter into a contractual relationship governed by good faith. This means that each party should take into account the justified interests of the other party. Each party should also take reasonable steps to avoid the other party reaching an agreement based on false assumptions.

When should a party investigate or disclose? The extent to which a party, e.g. a buyer, has a duty to investigate depends on the factual circumstances of the particular transaction, including its nature and complexity. The other party, the seller, has a duty to disclose certain information, the extent of which also depends on said circumstances. There are no hard and fast rules regarding this.

As a general rule each party may rely on the statements of the other party and it is therefore essential that the parties do not deliberately mislead each other during negotiations.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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Transfer of business or legal split-off

A split-off can take place by transferring part of the business of a company to its shareholders by way of a dividend in kind. In the event the split-off concerns a subsidiary, the payment in kind would be in the form of shares in such subsidiary. Instead of a dividend in kind, the transfer could take place upon a capital reduction or repurchase of shares. The consideration for the reduction or repurchase would then be satisfied in kind.

In the event of a legal demerger or division (a.k.a. legal splitting or legal split-off) a company either ceases to exist and will be acquired by two or more other companies (absolute division) or it will not cease to exist, but its business or part thereof will be acquired by one or more other companies (partial division). In the event of a partial division, either the company to be divided must establish a new company, or, at least one of the acquiring companies must issue shares to the shareholders of the company to be divided (Article 2:335 par. 2 Netherlands Antilles Civil Code).

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: Corporate by Karel.Frielink
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Review without the benefit of hindsight

The basic rule regarding the duty of a managing director is set forth in article 2:14 Netherlands Antilles Civil Code, which provides that each managing director has an obligation towards the company to properly perform the duties assigned to him. It follows from case law and legal doctrine that a managing director can only be held liable if serious negligence in the performance of his duties is attributable to him. Although a director could contractually limit his liability under article 2:14 of the Civil Code, it should be noted that the conduct not covered by the indemnity, i.e. gross negligence and willful misconduct, is approximately the same as the conduct required by article 2:14 Civil Code to determine a director’s liability.

A finding of serious negligence on the part of a managing director depends on both the scope of a director’s responsibilities and the circumstances of the case. The individual facts are crucial. Actions that conflict with specific statutory provisions or with the articles of association, may constitute anything from improper management up to serious negligence.

However, improper management can only be said to have occurred if no reasonable managing director would have made or take the given decision, action or omitted to act. The Court must therefore examine the procedures, preparations and reasons behind such decisions, actions or omissions to act. These must be reviewed in light of the circumstances at the time they were made or taken, without the benefit of hindsight. On the basis of case law, internal liability is also influenced and determined by the contractual principal of “good faith”.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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Markets in Financial Instruments Directive

MiFID is an EU directive which provides a harmonized regulatory regime for investment services for all members of the European Economic Area and which became effective on 1 November 2007. MiFID’s objectives are to increase competition – and thus to make the price of corporate finance deals more competitive – and to increase consumer protection in investment services. MiFID removes barriers between stock exchanges and creates a single European financial market, a level playing field.

The Directive requires, inter alia, that investors be categorized as professional or retail clients to ensure the right level of protection. However, it is not that easy to categorize clients and to assess their suitability for each type of investment product.

MiFID also requires a ‘best execution’ practice: all reasonable steps should be taken to obtain the best possible result in the execution of an order for a client. It is not always clear what this principle is, which opens the way to future litigation. A ‘best execution’ practice means that the firms must have systems in place to record and store this information - such as price, venue, cost and speed – to be able to prove that they are providing the best execution.

One of the concerns is that as a result of MiFiD the costs of compliance and investment costs may well outweigh the benefits. On the other hand, although the immediate costs per player may be as high as EURO 100 million, in the long-term the benefits may outweigh such costs: in a single market regulations converge and thus future costs will be lower.

The Netherlands Antilles is not part of the European Economic Area and is therefore not directly affected by MiFID. However, several European players have a branch or subsidiary in the Netherlands Antilles. Some players focus on a wider compliance framework also encompassing their non-EU branches and subsidiaries. Furthermore, as far as clients in the Netherlands Antilles are concerned, categorizing them could be done here instead of in Europe provided such systems are in place. Finally, many non-European countries/players may adapt their business conduct rules in view of MiFID. The impact of MiFID in the Netherlands Antilles might therefore be much greater than initially thought.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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High versus lower ranking debt

A corporate take-over can be financed with debt and/or equity. For example, the current management of a company (the target) could incorporate a corporate vehicle (Newco) to acquire the shares of the target, while Newco is financed by banks or other lending institutions.

Banks are typically senior debt holders, meaning that their debt is secured and/or has a higher priority than other debt, i.e. junior debt. Junior debt is a.k.a. subordinated debt.

Senior debt may be provided by one bank or a consortium of banks. In case of a syndication a bank ’sells’ a portion of its debt to other banks, i.e. a syndicate of lenders. It thus reduces its own exposure.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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No specific law about advertising

In the Netherlands Antilles there is no specific law relating to advertising or promoting on-line gambling/gaming; subsequently there are no restrictions on advertising and promoting these games to Netherlands Antilles citizens or citizens of other nations.

Please note that the “Ordinance on agreements concluded electronically” (’Landsverordening overeenkomsten langs elektronische weg’), which became effective on 1 January 2001, requires an offeror of ‘commercial communication’, e.g. through the Internet, to mention, inter alia, and if applicable, the name, place of establishment and address of the offeror; effective contact details of the offeror; registration details relating to the offeror; the steps that need to be taken to conclude an electronic agreement; a specification of the product or service, the price, commission and other costs and indemnifications and the way of payment and delivery etcetera.

The Ordinance intends to remove as many uncertainties as possible and to facilitate electronic traffic as well as guaranteeing a number of fundamental values and standards in an electronic environment.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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A remedy against extraordinary events

Upon the occurrence of certain extraordinary events, such as war, or immediate danger of war, or a revolution, a transfer of seat of a company is possible to other parts of the Kingdom, i.e., the Netherlands and Aruba (Act on Voluntary Transfer of Seat; ‘Rijkswet vrijwillige zetelverplaatsing van rechtspersonen’). The transfer of seat has the legal effect that the Netherlands Antilles company, an NV or BV, becomes a Dutch company, again an NV or BV, or an Aruban company.

The procedure for this transfer of seat basically involves an amendment to the articles. In the event of a Netherlands Antilles-based company, a transfer of seat requires the approval of the Minister of Justice in the Netherlands Antilles. The approval is required prior to the execution of the transfer of seat deed, but may be granted conditionally, i.e. subject to the occurrence of an event.

The alternative to the approval procedure is a confirmation by the Minister of Justice of the Netherlands or Aruba, as the case may be, that an extraordinary event has occurred. This judgment as to whether or not approval should be given lies within the discretionary power of such Minister of Justice.

Karel Frielink
Attorney (Lawyer) / Partner

Filed under: legal by Karel.Frielink
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