Legal Blog

Tuesday, July 16, 2013

Declaring dividends in Curacao

Resolutions only marginally examined by the court

Directly connected to the approval of annual accounts, the general meeting of the NV (or BV, as the case may be) or any other body designated in the articles of incorporation, shall resolve the distribution or reservation of profits according to aforementioned annual accounts and the payment of any other distributions flowing from the equity capital as apparent from the annual accounts. The general meeting, or any other body designated in the articles, may resolve to pay interim distributions for the account of the current financial year or for the account of a closed financial year for which the annual accounts have not yet been approved.

However, distributions to shareholders, and other parties entitled to distributions, may not be made if the company’s equity capital is negative or would become negative due to said distribution. A resolution for any such distribution shall have no legal effect whatsoever (Section 2:118 subsection 5 Curaçao Civil Code; CCC).

Any minority shareholder may request that a decision by a corporate body be annulled (Section 2:21 subsection 3 CCC), for example, if the decision is in conflict with the principles of reasonableness and fairness (Section 2:7 CCC). It is possible that, without any real justification, the general meeting of shareholders adopts a resolution that is not in the interest of the minority shareholders.

For example, the general meeting of shareholders may decide not to pay dividend but to reserve the profits of the preceding financial year, without any further justification. Whether or not such a resolution is justified depends on the facts and circumstances of the particular case. For instance, a resolution to the effect that no dividend be paid in a particular year can be based on a sound business decision, e.g. that the company actually needs the money for necessary investment purposes. Basically, the court will review whether such a decision is reasonable and fair given the facts and circumstances. The decision by a majority of shareholders will only be marginally examined by the court.

Filed under: Corporate by Karel Frielink.



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