Rights of pledge on shares in a Netherlands Antilles company vis a vis rights of shareholder

On 24 December 2009 the Court of First Instance in Curacao rendered a summary judgment, whereby the issue was the appointment of a new managing director of a Netherlands Antilles company (the "Company") by a bank (the "Bank") as pledgee with voting rights on the shares in that Company.

As security for the repayment of a loan facility, a right of first pledge on the shares held in the Company was agreed for the benefit of the Bank. The agreement stipulated that the pledge extended to all rights in any way - directly or indirectly - attached to the shares, including but certainly not limited to the right to dividends and the voting rights attached to the shares.

On the basis of this right of pledge, the Bank appointed a new managing director for the Company, as the borrowers were in default in complying with their (payment) obligations under the Loan Agreement. 

The shareholder of the Company objected to the appointment of the new managing director. The shareholder was of the opinion that it still had the voting rights attached to the shares; the shareholder in fact used those alleged voting rights to take a shareholder’s decision whereby the decisions made by the pledgee to appoint the new managing director, were redressed/nullified.

The court ruled that articles 2:113 and 3:247 of the Netherlands Antilles Civil Code stipulate that the exercise of voting rights attached to shares that have been pledged as security, continue to accrue to the pledgor, unless it has been agreed otherwise at the time of creating the right of pledge. In this matter - so ruled the Court - it had been agreed that such voting rights would unconditionally and fully accrue to the Bank as pledgee. Therefore, the court decided that the voting rights passed to the pledgee through the deed of pledge and therefore no longer accrued to the shareholder.

In view of the aforementioned, the court ruled that the Bank was entitled and authorized to appoint the new managing director. The court furthermore decided that the shareholder was not authorized to overrule any resolutions of the Bank by adopting its own resolutions to redress.

Dave Liqui-Lung and Randolph van Eps of the law firm VanEps Kunneman VanDoorne represented the Bank in these summary proceedings.

(Source: www.ekvandoorne.com)

15 January, 2010

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