The Joint Court will become the forum of choice for corporate disputes

Earlier in 2010, a draft bill was proposed to amend the Corporate Code (Book 2 Civil Code) of Curacao, St. Maarten, Bonaire, St. Eustatius and Saba (which formerly constituted the Netherlands Antilles).

The proposed legislation introduces a so-called inquiry procedure for, amongst others, limited liability companies. The inquiry procedure (a.k.a. investigation proceedings) can result in a court ordered investigation into the affairs of a corporation.

Shareholders of such a corporation (i.e. an NV or BV) may file a petition with the Joint Court of Justice of Aruba, Curacao and St. Maarten, and of Bonaire, St. Eustatius and Saba (the ‘Joint Court’). Pursuant to Article 2:272 of the proposed bill, the authority to initiate an investigation into the policy and affairs of a limited liability company is held (amongst others) by one or more shareholders who represent at least ten percent of the company’s equity, or who may cast at least ten percent of the votes with respect to all matters. Also authorized to file such a petition are (a) the public prosecutor, in the general interest of, or upon the request of, an interested party, provided the request is based on urgent grounds; (b) the trustee in bankruptcy and (c) any person to whom this authority has been granted by the articles of corporation or in an agreement with the corporation. It is not apparent from the Explanatory Memorandum whether it has been considered, as I would like to advocate, to grant this authority to any interested person with regard to government owned companies.

The Joint Court can order an investigation into the affairs of the corporation (‘enquête’) if there are justified reasons to doubt the soundness or correctness of the corporation’s policies, and may take provisional measures as well, for example, the temporary transfer of (certain) shares to a nominee or the suspension of board members. Examples of justified reasons include allegations of violations of law, irregularities, conflicts of interest, deadlocks at board or shareholder level, disputes between board members and/or shareholders, and insufficient provision of information to shareholders.

If the Joint Court grants the request it will appoint one or more investigators who are authorized to access the corporation’s administration, books and premises. Current and former managing and supervisory directors as well as shareholders and employees are legally required to co-operate fully with the investigation (Article 2:277 of the proposed bill). The court appointed investigators will present their findings in a report submitted to the Joint Court.

If the Joint Court, upon request and based on the report, establishes a case of corporate misuse, it can, once again if so requested, order measures (most of them of a permanent nature), such as nullifying (board or shareholder) resolutions, suspending or dismissing board members, or the dissolution or division (either a split-up or a split-off) of the corporation (Articles 2:282 and 2:283 of the proposed bill).

In the future, hopefully already in 2011, the Joint Court will deal with many corporate governance issues and will play an important role in the resolution of various disputes concerning corporations. The Joint Court will become the forum of choice for litigating shareholders’ disputes, mismanagement matters, disputes between (managing and supervisory) directors and contests for corporate control.

Karel Frielink
Attorney (Lawyer) / Partner

27 October 2010

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