Ignoring the legal personality of a company

A shareholder is not personally liable for acts performed in the name of the company and is not liable to contribute to losses of the company in excess of the amount which he must pay to the company as contribution for his shares. There is therefore a legal separation between the assets and liabilities of the company and those of the shareholder.

Piercing the corporate veil in its purest form means making a shareholder responsible for the actions of the company. In essence this means ignoring the separate legal identity of the company. An example: a parent company that has actual involvement in the management of the affairs of a subsidiary may be held liable if it allows the subsidiary to incur debts, knowing that the creditors of the subsidiary will remain unsatisfied.

A parent company may also be held liable towards the creditors of its subsidiary if it creates the reasonable expectation with the creditors that it guarantees or otherwise ensures performance by the subsidiary under its (contractual) obligations.

It should be noted, however, that piercing the corporate veil goes hand in hand with the concept of tort (wrongful act). The so-called “alter ego doctrine” has not been recognised by the Aruban courts nor by the Dutch Supreme Court as sufficient grounds for a liability claim. The mere fact that the parent company uses the same address, the same phone number, a similar name, has the same directors and acts in the same branch as its subsidiary, is not enough reason for holding the parent company liable for the debts of its subsidiary.

Karel Frielink
Attorney (Lawyer) / Partner

26 February 2010

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