International Law

CORPORATE CONFLICTS OF INTERESTS UNDER THE LAWS OF THE DUTCH CARIBBEAN

By Karel.Frielink

A particular provision may help to prevent disputes

The board of directors has the function of managing, i.e., making policy and conducting the day-to-day management of the corporation. Except for restrictions in the articles of association, the board of directors is responsible for the management of the BV or NV (private or public limited liability company) and is authorized to represent it.

A conflict of interests is not in itself improper. The manner in which one deals with it determines the propriety of a transaction or one?s conduct. According to Article 2:11 par. 3 of the Netherlands Antilles Civil Code, the general meeting of shareholders of a company has the power to designate one or more persons as special representative of the company with respect to conflicts of interests. This power is irrespective of the provisions in the articles of association dealing with conflicts of interests.

In its judgment of 21 March 2008 [Nieuwe Steen Investments versus Sami Uoti; No. R07/012HR], the Dutch Supreme Court ruled that the board of directors is obligated to inform the general meeting about a conflict of interests in order to enable the general meeting to exercise its power. However, the general meeting is under no obligation to exercise its power to designate a special representative. According to the Supreme Court, if the general meeting does not exercise said power, those persons, who, according to the articles of association are authorized to represent the company in the event of a conflict of interests, continue to do so. Although this decision concerns the laws of the Netherlands, it is also applicable with respect to the laws of the Netherlands Antilles.

It is not uncommon that articles of association of a Netherlands Antilles BV or NV contain a provision to the effect that even when there is a conflict of interests, e.g. between the company and a board member or supervisory director, the power to represent the company remains with the managing directors (Article 2:11 par. 2 Civil Code). In many cases it is advisable to add such a provision to the company?s articles of association to prevent disputes. One should not forget, however, to inform the general meeting in good time about any conflicts of interests.

In the first instance and during the appeal proceedings, Nieuwe Steen Investments, who won the case, was represented by Spigthoff?s lawyers Charles Langereis and Frank Peters. Spigthoff?s adviser, professor Alexander Mohr, provided the court with an expert opinion.

Karel Frielink
Attorney (Lawyer) / Partner

Full post as published by Karel's Legal Blog on April 05, 2008 (boomark / email).