Conflict of laws aspects
For Netherlands Antilles conflict of laws, the creation of security interests in shares has, like the transfer of shares, aspects of both the law of obligations and the law of property.
The contract establishing an obligation to create a security interest is governed by the EC Convention on the Law Applicable to Contractual Obligations. Consequently, in the absence of a choice of law, the law of the habitual residence or central administration of the contractual party who transfers his shares as security (or whose shares are encumbered with a right in rem) will apply.
The law of the place of incorporation of the company defines whether a security interest may be created in the shares. As to bearer shares, the method of creating the security interest is determined by the law of the country where the bearer shares are located at the time the security interest is created; for registered shares, the law of the place of incorporation must be followed. This law also stipulates the effects of the security interests for matters such as voting rights, dividend claims and registration in the shareholder’s register.
For foreign security interests in (registered or bearer) shares in a Netherlands Antilles company to be recognized and treated as if it were a Netherlands Antilles pledge, it must be similar to a Netherlands Antilles pledge. If it is not comparable with a Netherlands Antilles pledge, it will have no effect toward the company. All in all, with respect to this matter rules of private international law may play an important role depending on the international legal relationships ultimately created.
Karel Frielink
Curacao-based Attorney (lawyer) / Partner