The Netherlands Antilles have a civil law system that originates directly from Dutch law and, consequently, has its roots in the French Civil Code and, more remote, Roman law. Also the judicial system of the Netherlands Antilles originates from the Dutch system. The Dutch Supreme Court ("Hoge Raad" or, abbreviated, 'HR') is also the highest court of appeals for the Netherlands Antilles and Netherlands judges frequently serve for three year periods as judge in the Netherlands Antilles.

An important feature of the new legislation is the flexibility that is given when drawing up the articles of incorporation of a Netherlands Antilles legal entity.

Other important features of the new legislation are:

• the articles of association no longer necessarily have to be drawn up in Dutch (the original deed may be drawn up in English);
  
  
• the terms “authorized, issued and paid up capital” no longer exist (there is only mention of one or more registered - or (in respect of N.V.’s only) bearer - shares). In Book 2 the new term “nominal capital” is introduced which means the sum of the par value of all issued shares;
  
  
• shares may or may not have voting rights, and voting rights are no longer connected to possible par value (shares may or may not have par value). If shares have a par value, such par value per class or series of shares may be expressed in different currencies;
  
  
• the possibility to claim that a transaction was beyond the scope of the purpose of the company (ultra vires) may be excluded in the articles of incorporation and if it is not excluded only the company may invoke nullity on that basis and any such claim must be filed within six months of the transaction concerned;
  
  
• for issuance of shares, in addition to a resolution to issue, a deed between the company and the shareholder is required (only registered shares can be issued);
  
  
• no longer 20 % of the authorized capital needs to remain outstanding (as long as (i) one share with full voting rights participating in the profits or (ii) one share with full voting rights and another shares participating in the profits is outstanding);
  
  
• the procedure for capital reduction has been changed and there no longer is a two months waiting period;
  
  
• holders of registered shares are entitled by law to receive a share certificate (this entitlement cannot be deviated from in the articles of incorporation);
  
  
• in respect of the N.V. there is a preemptive right for existing shareholders when shares are issued, unless the articles of incorporation provide differently;
  
  
• for a transfer of shares a deed of transfer is required (the mere acknowledgement by the company of the meeting of the mind between the parties in relation to the transfer no longer is sufficient);
  
  
• in principle there is an unlimited possibility to block share transfers (with the exception of a sell out);
  
  
• the law provides for detailed requirements on the information to be mentioned in the shareholders register;
  
  
• shareholders agreements to which all shareholders and the company are a party have corporate effect;
  
  
• the minimum term for convening a general meeting is twelve days (under the old law this was five days);
  
  
• unless it concerns a so-called large company, the extended term within which the financial statements must be presented to the general meeting, if this is not done within eight months (or for large companies within six months) after the end of the preceding financial year, is limited to six months (this was unlimited);
  
  
• the general meeting no longer necessarily has to take place in the Netherlands Antilles, unless it concerns the general meeting of a large company;
  
  
• the board structure can provide either for executive and non-executive managing directors conform the UK/US model, or (but not at the same time) provide for supervision by a board of supervisory directors;
  
  
• managing directors or supervisory directors can be appointed by the general meeting of shareholders but the articles may also provide otherwise. It is therefore possible to have certain directors appointed by certain shareholders or even to have the board appoint managing directors;
  
  
• specific functions or duties can be assigned to specific managing directors allowing for example for a limited task of the local managing director. A limited function may assist managing directors when rebutting allegations of mismanagement;
  
  
• limitations of managing directors in the power to manage the company will equally limit the power to represent the company by such managing directors;
  
  
• the power to represent the company in the event of a conflicting interest has been enlarged in the sense that unless the articles of incorporation provide differently, only in relation to transactions with or legal proceedings against a managing director, the company is represented by the board of supervisory directors or another person appointed for that purpose by the general meeting;
  
  
• the law provides for the possibility of an independent board of supervisory directors for the N.V., in which only persons can take place that do not participate in the company or have other rights in relation thereto; to this independent board specific provisions are applicable;
  
  
• a distinction is made between a normal N.V. and a large N.V. whereby for the latter N.V. additional provisions apply in relation to holding of general meetings, financial statements, auditors control, etc.;
  
  
• the law provides for a closely held limited liability company in the form of a shareholder managed company where the tasks of the managing board are performed by the shareholder;
  
  
• for all legal entities, the liquidation procedure has been simplified.
  

Repair legislation and evaluation
Effective 1 January 2005 some of the provisions of Book 2 Civil Code, the Introduction Ordinance and the Ordinance regulating Transitory law have been amended pursuant to the National Ordinance of 24 December 2004 holding such amendments in order to address certain concerns that had arisen in the legal practice (P.B. 2004, no. 98).
In addition to this so-called repair legislation an evaluation of Book 2 is being carried out by a committee formed for that purpose by Decree, which evaluation is expected to lead to further amendments.

Seat transfer
Since Book 2 Civil Code is in effect, the Ordinance on Seat Transfer Third Countries ceased to be effective. The legislator under the repair legislation has provided that the provisions of the Ordinance on Seat Transfer Third Countries will remain in force for limited liability companies of which the articles of association on 1 March 2004 allowed for a transfer the statutory seat of the company pursuant to the provisions of the Ordinance on Seat Transfer Third Countries. An alternative under the new law for a seat transfer is the conversion.

Need to amend articles of association
Even though the flexibility aimed at by the legislator should make it possible to also under the new law draw up articles of incorporation that look like any currently used articles, the introduction of Book 2 Civil Code will require an amendment of the articles of incorporation of most Netherlands Antilles legal entities. In respect of N.V.’s more in particular provisions relating to issue, transfer and repurchase of shares, holding of general meetings, references to articles of the old Commercial Code and provisions on seat transfer will need to be changed.

In addition, it can in respect of Netherlands Antilles entities be assessed whether the flexibility granted under the new Corporate Code would allow changes or new provisions in the articles of incorporation that may benefit its participants. One of the advantages of the new law, is that the original governing text of the articles can now be written in English so you do not have to work from an English translation of a governing Dutch text. Also specific provisions on share capital, blocking clauses, appointment of directors, general meetings or even inclusion of references to shareholders agreements or management regulations in the articles that you may wish included in the articles most likely are now permitted.

In short, there are a number of good reasons to amend the articles of Netherlands Antilles legal entities. to conform them to the new law.
As to timing we generally recommend public companies to amend the articles at the first coming annual general meeting of shareholders. In respect of closely held companies we generally advise to amend the articles at the first possible appropriate occasion.