Infrastructure landscapes our world. We are all familiar with constructions such as buildings, roads and the power and communication networks, we see them every day. The infrastructure of a company, on the other hand, is a less visible ‘landscape’. It concerns the basic organizational structure needed to run an effective operation. Therefore, it consists of many elements like people, procedures and policies. This article aims to offer a quick peek into the infrastructure of an Aruban company. More specifically, we will look at ways to structure the management and supervision of an Aruban company effectively.
Legal Forms
Before we look at the internal workings of an Aruban company, it is important to note that Aruban companies can be structured in different ways. The most common legal forms to structure an Aruban company are:
1. the limited liability company (vennootschap met beperkte aansprakelijkheid or VBA)
2. the public limited liability company (naamloze vennootschap or NV)
3. the Aruba exempt company (Aruba exempt company or AVV) (originally created for off shore purposes)
Management and Supervision
In order to run a company effectively, it is crucial to distinguish between management and supervision. Managing a company consists mainly of determining the direction and taking care of the daily tasks and obligations of the company, like hiring personnel, paying bills and the undertaking of business activities. Supervising a company means checking whether the management is functioning well and offering advice when necessary. Logically, in start-ups and smaller companies there is less need for formal supervision. In a healthy company, however, there is always some sort of check on the management, especially to prevent problems.
One-tier or two-tier board
Part of choosing a legal form is to consider how to structure the management and supervision. Each legal entity has a set of different options. A VBA, for example, can choose for a one-tier or two-tier board model. The one-tier board model consists of a managing board in which some directors have a management function and other directors have a supervisory function. The two-tier board model consists of two boards: a board of managing directors who manage the company and a board of supervisory directors who supervise and counsel the managing board. The VBA cannot adopt a one-tier and a two-tier board model at the same time. A one-tier board is impossible for NV’s and AVV’s. Both legal forms only allow a managing board with managing directors. Although these entities are entitled to a supervisory board, to add supervisory directors to the managing board within a VBA is not an option. However, the informal distribution of managing and supervising tasks won’t be a problem of course.
Foundation of the company: the Articles
The document that provides the foundation for the functionality of the company and its operations is called “the Articles of Incorporation” or “the Articles of Association”, in short “the Articles” (statuten). The choice for either a one-tier board or a two-tier board must be included in the articles of the VBA. If the NV’s and AVV’s wish to install a supervisory board, they also need to record that in the articles. The articles can be amended on a later date.
Management
An Aruban company is managed by one or more managing directors.
At the incorporation of the company the managing directors are appointed for the first time in the articles. These managing directors can be natural persons or legal entities. With regard to legal entities it is important to note that AVV’s require a legal entity to meet some extra demands before it can act as a managing director and for VBA’s additional conditions can apply in some cases as well. After the incorporation, the shareholders of the company are authorized to appoint and dismiss managing directors in the general meeting of shareholders, unless the articles provide differently. A VBA,
for example, can chose to descirbe in the articles that another entity than the shareholders can appoint and dismiss managing directors.All managing directors on their turn are authorized to represent an Aruban company by themselves, unless the articles state differently. For example, the articles can provide that for some actions either the signature of at least two managing directors is required or the written approval of the supervisory board. If these kind of arrangements or restrictions are properly registered at the Chamber of Commerce, they can be invoked against third parties.One of the board of managing direc-tors’ most important legal obligations is to make the annual accounts and publish the annual report.
Supervision
Supervisory directors have the right to receive all information necessary to perform their supervisory tasks. The benefit of a one-tier board is that supervisory directors in the one-tier board will receive such information faster, because they are members of the same board. This also means that they can act the moment they see that the company is heading in the wrong direction. The supervisory directors in a one-tier board are also expected to perform the supervision quicker, because they are equally responsible and liable for the actions of their fellow one-tier board members. It remains to be seen if this is truly the case. Because of the close proximity and direct connections between the managing and supervisory board directors, it might be harder to criticize decisions. Moreover, the liability of managing directors for their mismanagement of the company towards third parties in a two-tier board model often leads to the liability of the supervisory directors as well. Therefore, supervisory directors in a two-tier board model have the same incentive to provide good supervision.
Legal Representative
Besides having one or more managing directors, the AVV and VBA (in some cases) must be represented by a legal representative (wettelijke vertegenwoordiger). This legal representative is not a managing director, but he is authorized to represent the Aruban company to a large extent. For example, he has the authority to report, to register and file at the commercial register of the Chamber of Commerce, to submit tax returns, to request a business license and maintain contacts with Aruban authorities. The legal representative must be an Aruban trust office.
Licenses
To be permitted to operate an Aruban company it is necessary to obtain the necessary business and directors’ licenses from the Department of Economic Affairs.
More Information
For more information regarding the incorporation a
nd functioning of Aruban companies, check our
online Guide to Doing Business in Aruba
(http://www.doingbusinessdutchcaribbean.com/aruba).