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Corporate Governance and Inquiry Proceedings

Corporate governance is the system of rules and practices by which a company is directed and controlled. These days, it is not enough for a company to merely be profitable; it also needs to demonstrate good corporate citizenship through environmental awareness, ethical behavior and sound corporate governance practices. To this extent corporate governance codes were introduced. Following these rules and practices may be of growing importance, also in view of the right of inquiry, as provided for the in Corporate Code of Curaçao.

Pursuant to the Corporate Code, the power to request an investigation into the policy and affairs of a limited liability company is granted to, inter alia, shareholders who represent at least ten percent of the company’s equity / voting rights. It is noteworthy to mention that in a recent Dutch Caribbean case, the Supreme Court has ruled that under certain circumstances shareholders whose interest in a company diluted, because of an issuance of shares, were still entitled to initiate inquiry proceedings. Also authorized to file such a request are (a) the public prosecutor, in the general interest, or upon the request of an interested party, provided the request is based on urgent grounds; (b) the trustee in bankruptcy and (c) any person to whom this authority has been granted by the articles of corporation or in an agreement with the corporation.

The inquiry procedure (investigation proceedings) can result in an order of the Dutch Caribbean Joint Court of Justice for an investigation into the policy and affairs of a corporation. Such an inquiry into the affairs of the company can be ordered if there are justified reasons to question the correctness of the company’s policy. Examples of such “justified reasons” include allegations of violation of the law, financial reporting or accounting irregularities, insufficient provision of information to shareholders or other stakeholders, and conflicts of interest involving the company, its management and/or its shareholders. Presently, an inquiry is being performed into several government owned companies. The first phase of the inquiry procedure, the investigation by a court appointed investigator, is now concluded. It will be interesting to see how the Joint Court of Justice will deal with the findings of the investigator and with issues of (good) corporate governance.