The beneficial owner of shares is not a shareholder

On March 1, 2004 the act on corporate law (Book 2 Netherlands Antilles Civil Code) became effective. The Act governs NVs (‘public limited liability company’) and BVs (‘private limited liability company’).

The main object of the legislator was to provide flexibility and maximum freedom for organization and presentation. Accordingly, the Act contains few mandatory provisions, such as provisions relating to the interests of creditors and minority shareholders.

Concepts like registered, subscribed and contributed capital do not appear in the Act. As a result no minimum capital is required unless such a requirement is included in the articles of association. There may be voting shares, non-voting shares and shares with restricted voting rights. Shares may have a par value. If shares have a par value, this may differ per category of shares. The par value may also be expressed in one or more foreign currencies.

A separation may be made between the legal ownership (including voting power) and the beneficial ownership (e.g. dividends). The legal owner is called the shareholder. In principle, the beneficial owner has no rights vis à vis the NV but only vis à vis the shareholder. Generally, dividends will be distributed by the NV to the shareholder (the legal owner of the shares) and the shareholder is under an obligation to transfer the same to the beneficial owner.

In many cases, such separation is called certification (‘certificering’) and the structure is as follows: A foundation (‘stichting administratiekantoor’) issues depository receipts, i.e. instruments representing certain shares in an NV of BV held by the foundation. The receipts refer to the sort and type of shares, but are not identical to the underlying shares. The rights conferred on receipt holders are determined by the provisions according to which the receipts are issued (‘administratievoorwaarden’).

In most cases, the trust conditions stipulate that distributions by the NV or BV to the foundation as shareholder flow to the receipt holder, and grant the foundation the exclusive voting rights on the shares held by it. In the absence of a foundation structure, a private person who holds shares in an NV or BV can issue depository receipts, and instead of using the more or less ‘formal’ trust conditions and depository receipts, the parties may lay down their understanding in an agreement.

Karel Frielink
Attorney (Lawyer) / Partner

9 January 2010

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