International Law

WHAT IF A LENDER BECOMES A SHAREHOLDER OF THE BORROWER IN THE DUTCH CARIBBEAN?

By Karel.Frielink

The obligation to repay still ranks pari passu

If a lender takes over the shares in a borrower, the ranking of the borrower?s obligation to repay the loan does not change. Such obligations will continue to rank pari passu with the other creditors.

Let me give you an example. In the event of dissolution of the borrower, assuming the borrower is a company, all creditors must be satisfied as far as possible. A shareholder is, however, not considered to be a creditor of the company.

Under Article 2:30(1) of the Netherlands Antilles Civil Code, the liquidator must realize the assets of the company and settle all liabilities of the company with its creditors. Any surplus after payment of the creditors shall be distributed to the shareholders or other parties who are entitled thereto pursuant to the provisions of the articles of association.

Again, if a shareholder is also a lender, than he is also a creditor. One should, however, make a clear distinction between those two capacities.

Karel Frielink
Attorney (Lawyer) / Partner

Full post as published by Karel's Legal Blog on October 07, 2008 (boomark / email).