International Law

THE REPAYMENT OF SHARE PREMIUM IN THE NETHERLANDS CARIBBEAN

By Karel.Frielink

Net equity may not be or become negative

From the legal point of view in Netherlands Antilles, share premium (?agio?) forms part of the company?s free reserves, and does not qualify as share capital. If share premium is to be repaid, the company?s financial condition should at the time allow for it, i.e. the net equity of the company may not be or become negative as a result of such repayment. If the company has shares with a nominal value, the repayment may not result in the nominal capital exceeding the net equity of the company.

In addition to this limitation, limitations protecting creditors? rights generally, such as fraudulent preference (?Actio Pauliana?), also apply.

The repayment should be agreed upon jointly by the managing board of the company and the shareholder(s) concerned.

Insofar as the law or the articles of incorporation do not provide otherwise, equal rights and obligations shall attach to all the shares (Art. 2:103 par. 1 Civil Code). Therefore share premium must, in principle, be repaid to all shareholders at a percentage equal to their original contribution, unless the articles provide otherwise (e.g. when a special class of shares may be issued).

Karel Frielink
Attorney (Lawyer) / Partner

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Full post as published by Karel's Legal Blog on August 22, 2009 (boomark / email).