The Central Bank Charter

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14 September 2017

In a legal sense, almost all companies have the form of a legal entity (also called legal person). This is also true for the Central Bank of Curaçao and St. Maarten (CBCS). Most legal entities have articles of association. The CBCS doesn’t. Why is that?

Articles of association form the framework for corporate governance within a legal entity. The articles of association set out the company’s objectives, how many directors there are and how they are appointed and dismissed, whether there is a supervisory board and what powers it has, and so on. The law stipulates that a legal entity must have articles of association. Some legal entities don’t have articles of association, though. These are the so-called legal entities ‘sui generis’. This literally means that they are ‘one of a kind’. For their creation a separate, custom-made law is developed that defines the framework for corporate governance within these entities. Examples include the University of Curaçao, the SVB, and also the CBCS. In these cases, the government has chosen to establish the relevant entity through an act and not as a ‘regular’ legal entity with articles of association. The act then includes the provisions that are usually contained in the articles of association. In this regard, two questions are of interest. The first one is: why would you establish a legal entity such as the CBCS through an act and not in the normal way with articles of association? The second question is: do legal provisions that apply to all other legal entities, such as Book 2 of the Dutch Civil Code, also apply to a legal entity that was established through an act?

“Why would you establish a legal entity such as the CBCS through an act and not in the normal way with articles of association?”

As for the first question, we can say the following. The government has a partially historical and partially legal (constitutional) responsibility to perform certain tasks in the general interest, ranging from police services and customs activities to the inspection of food and monitoring of the quality of healthcare. The government has outsourced some of these tasks to private legal entities. Examples include the production and distribution of water and electricity. These tasks are suitable for outsourcing to a regular legal entity. In those cases the governments powers with regard to the execution of these activities are restricted to the rights of a (normal) shareholder. These rights are determined and limited by law and by the articles of association of that company. In other cases it is undesirable to outsource certain tasks. An example is the jurisdiction by the Joint Court of Justice, and the same applies to the supervisory task of the CBCS. Each country wants its central bank to have a certain degree of independence from politics in exercising its supervision. It is also desirable that this supervision is carried out in a manner that is embedded in law. From the perspective of corporate governance, regular shareholding in a public limited company is therefore not a suitable form for the role of the government. On the other hand, a foundation would be too independent. In such a case, a legal entity established through an act is the obvious solution.

“Do legal provisions that apply to all other legal entities, such as Book 2 of the Dutch Civil Code, also apply to a legal entity that was established through an act?”

With regard to the second question: it is not always clear if and to what extent the provisions in Book 2 of the Dutch Civil Code also apply to a legal entity that was established through an act. Strictly speaking, Book 2 of the Dutch Civil Code only applies to the legal entities that are mentioned in that book. This makes it difficult to determine which rules apply if, for example, legal measures must be taken. It is therefore of the utmost importance that the act that establishes a legal entity sui generis is drawn up and thought out very carefully. After all, there are no articles of association. In case of problems, that act is all you have. The CBCS was established upon the dismantling of the Netherlands Antilles. In the past year it has become clear that the corresponding act was drawn up rather carelessly. By taking greater care at its establishment a lot of uncertainty and problems could have been prevented.

This blogpost is also available in Papiamentu. Click here to download a pdf version.

Do you have a question about corporate governance yourself? Please e-mail it to governance@ekvandoorne.com and perhaps your question will be discussed in the next blogpost.