The Curaçao Trust in practice - CIFA Curacao Trust in practice... · [This is an informal...

[This is an informal translation of the article De Curaçaose Trust in de praktijk as published in the Weekblad

voor Privaatrecht, Notariaat en Registratie (WPNR) number 6926 of 14 April 2012]

The Curaçao Trust in practice

Mrs. mr. M. Bergervoet (attorney at law and partner at a law and tax firm in

Curaçao ([email protected])

Ms. mr. D.S. Mansur (attorney at law at a law and tax firm in Curaçao

([email protected])

1. Introduction

Since 1 January 2012 it is possible to set up an Anglo-American Trust pursuant to

Curaçao law (the “Curaçao Trust”).1 For an overview of the legislative history and

explanation of the Curaçao Trust, we refer to the article of mr. J. de Boer elsewhere in

this issue.

For years now, Curaçao has a large international financial sector. This financial sector is

an important pillar of the economy of Curaçao.2 Because the financial world is dominated

by Anglo-American law where the trust plays a prominent role, the view exists for years

now that a trust would have to be introduced to create new possibilities for the financial

sector.3 The trust could also serve as an important tool for various local financial and

commercial transactions.4 According to the Explanatory Memorandum, the trust may be

used for many different purposes. Examples include estate and inheritance planning5, as

a company, pension fund or investment fund, finance and security structures, voting

structures and promoting cultural, academic and charitable objectives.6

1 The national ordinance of 15 December 2011 supplementing Book 3 of the Civil Code with provisions with

respect to trusts, National Gazette (P.B.) 2011, no 67, shall hereinafter be referred to as the “National Ordinance Trust” and the explanatory memorandum to the legislative proposal for the national ordinance of 15 December 2011 supplementing Book 3 of the Civil Code with provisions with respect to the trust, no. 3, as the “Explanatory Memorandum”. 2 In 2010 the share of the financial sector amounted to 14.5 per cent of the Gross Domestic Income of Curaçao.

Please see the Statistical Orientation Curaçao 2010-2011 of CBS Curaçao, to be found via www.cbs.cw, under General > Publications. 3 Explanatory Memorandum p. 1 and 2. If the trust is used in the international financial sector, the trustee

should be licensed by the Central Bank of Curaçao and Sint Maarten (section 2 of the National Ordinance supervision trust sector (Landsverordening toezicht trustwezen), as amended in section VI of the National Ordinance Trust). 4 For the necessity of a trust in the commercial practice please be referred to, amongst others, J.W.A.B.

Biemans, ‘Tijd voor de Trust’, NTBR 2011/71 and R.M. Wibier, ‘Can a Modern Legal System Do without the Trust?’ (TISCO Working Paper Series on Banking, Finance and Services No. 06/2010). 5 The use as a family trust is one of the oldest uses of the trust. A family trust is set up to manage and maintain

family assets (for example land or securities) and allocate income derived therefrom to family members, see Uniken Venema/Zwalve, Common Law & Civil Law, W.E.J. Tjeenk Willink, Deventer – 2000, p. 341 and 350-351. 6 Explanatory Memorandum p.7.

mailto:[email protected]

mailto:[email protected]

http://www.cbs.cw/



Hence, the introduction of the Curaçao Trust serves as an important instrument to

expand the product range. This article will elaborate upon some relevant commercial

uses of the Curaçao Trust. First we will address some general items.

2. General

It is currently being discussed in Curaçao whether the contribution (inbreng) of trust

assets would require a legal transfer (overdracht). In our opinion, a distinction should be

made between an express trust7 whereby the settlor is not also the trustee and the

express trust where the settlor is also the trustee. The latter situation is also referred to

as a declaration of trust. The National Ordinance Trust is silent on how trust assets are

contributed. The Explanatory Memorandum8 provides that the transfer of the trust assets

does not need to occur by means of the trust deed. The trust assets could be delivered

(geleverd) in trust beforehand to the future trustee by a third party or the trustee itself

before the trust deed is executed.9 Hence, the Explanatory Memorandum proceeds from

the basic premise that a transfer (overdracht) is necessary for the contribution of assets

to a trust estate. This is also in line with the ‘closed system’ (numerous clausus principle)

of property law of our Curaçao Civil Code10. The requirements for a valid transfer are set

out in section 3:84 paragraph 1 BWC: the requirements for a transfer of property are

delivery (levering) by means of a valid title (geldige titel), by a person who is entitled to

dispose of the property. The title for the transfer depends on the purposes for setting up

the trust, but shall generally be a gift (schenking).11 In his article, mr. J. de Boer, sets

out that a plausible systematic interpretation can also be that the trustee appointed in

the (notarial) trust deed obtains the trust assets described in the trust deed by universal

title (onder algemene titel). Although this could be desired from a market perspective,

we cannot endorse this line of reasoning. The National Ordinance Trust is included in title

6 of Book 3 of the Curaçao Civil Code. Title 4 of the Curaçao Civil Code that contains

provisions on the ‘acquirement and forfeiture of property’ precedes title 6. Section 3:80

paragraph 1 BWC provides that one could acquire property either by universal title

(algemene titel) or by particular title (bijzondere titel). The main feature of acquisition by

universal title is that a part of or an entire estate (vermogen), hence assets as well as

liabilities, transfers. There is either succession in its entirety or in part. An asset that

does not transfer by universal title, transfers by particular title. The list in section 3:80

paragraph 2 BWC that sets out in which instances property transfers under universal title

is restrictive.12 With the implementation of the National Ordinance Trust this section 3:80

has only been amended to include: “as well as by succession (opvolging) or accession

(toetreding) as trustee”. In our opinion, accession (toetreding) denotes that another

7 For the distinction between an express trust and an implied trust please see the article of J. de Boer

elsewhere in this issue of the WPNR. 8 The Explanatory Memorandum does however mention in the explanation to section 3:127 (p. 5) that the

legislator has chosen to avoid the use of the word transfer (overdracht), to ensure that an economic transfer that furnishes the trustee with personal rights is not excluded. This is in alignment with section 2 of the Trust Convention of the Hague. 9 Explanatory Memorandum to section 130 (2.), p. 6.

10 The Curaçao Civil Code shall hereinafter be referred to as “BWC”, a reference to “BW” is a reference to the

Dutch Civil Code. 11

See Koppenol-Laforce, ‘Inbreng van Nederlandse goederen in een trust’, WPNR 97/6281, p. 547; also relevant with respect to remaining transfer requirements with respect to the contribution of assets to a trust estate. 12

See Pitlo/Reehuis, Heisterkamp, Goederenrecht, nr. 91.



trustee has already been appointed. The law uses the word ‘appoint’ (benoemen) when

referring to the initial appointment of the trustee.13 It also seems logical that the

legislator has chosen for transfer by universal title in the event of succession or accession

of a trustee. After all, in that case there is a situation of succession in title to the trust

estate. This is different than the contribution of assets to a trust. The settlor has the

option to bring certain assets into the trust. Hence, there is no succession in title with

respect to (part of) the estate (vermogen) of the settlor. Furthermore, succession by

universal title is characterized by one moment of succession. The transfer of trust assets

could occur at different points in time and does not necessarily need to occur upon the

settlement of the trust. A declaration of trust situation is more complicated. The person

with the power of disposal over the assets will become the holder of these same assets in

a different capacity, that is in its capacity of trustee, and as such the assets ‘move’ from

its personal estate (vermogen) to the trust estate (vermogen) it holds as trustee. Mr. J.

de Boer states in his article in this issue that at such time no delivery (levering) takes

place. This would be in line with how the Anglo-American trust works. The settlor

declares himself trustee for the benefit of certain beneficiaries without there being any

legal transfer of the trust assets.14 However, it is debatable whether this would also be

the case under Curaçao law, as the legal ownership transfers from the trustee’s personal

estate (vermogen) to the trust estate (vermogen) held in capacity. In this respect, one

could adhere to the requirements for the contribution of property to a partnership

(personenvennootschap) (in Curaçao) or a VOF partnership (vennootschap onder firma)

(in the Netherlands).15 Delivery requirements (leveringsvereisten) will have to be

complied with for ownership to transfer under property law to such a partnership.16

Accordingly, it would have been better to include a specific provision for the contribution

of assets to a trust estate in the National Ordinance Trust, whereby also the possibility of

the declaration of trust would have been addressed. This would have clarified whether a

transfer would be necessary to the trustee (in such capacity) or not.

With respect to the debate whether or not a trust fits into the Dutch legal system, it is

often argued that section 3:84 paragraph 3 BW would form an obstacle. Section 3:84

paragraph 3 BW provides that a legal act (rechtshandeling) performed with the intention

of transferring property merely to provide security for a debt or performed without the

intention of bringing the property into the estate (vermogen) of the acquirer, is no valid

13

Section 3:130 paragraph 3 (a) BWC. 14

See Koppenol-Laforce, ‘Inbreng van Nederlandse goederen in een trust’, WPNR 97/6281, p. 549. Koppenol-Laforce states that the Supreme Court has recognized transfer of beneficial ownership. Pursuant to a declaration, the beneficial ownership transfers to a person other than the legal owner. In the event of a declaration of trust, not only does the beneficial ownership belong the beneficiaries, but the legal ownership transfers from the personal assets to the segregated assets he holds as trustee. According to Koppenol-Laforce this effect under foreign law is not a valid argument to reject the applicability of the declaration of trust to property located in the Netherlands, even if the settlor is in the Netherlands. In her article, Koppenol-Laforce’s article addresses which assets qualify as trust assets in the event a “Hague” trust is recognized in the Netherlands (i.e. whether the trust assets have been validly brought under the control of the trustee). 15

Although the legislative proposal personenvennootschap has been repealed by the government in the Netherlands in September 2011, the National Ordinance personenvennootschap has been implemented with effect as of 1 January 2012. 16

Asser/Maeijer & Van Olffen 7-VIII 2010/151-153.



legal basis for a transfer of that property. Please note that the Curaçao Civil Code does

not contain such a provision.17 18

3. Client accounts

In the commercial practice, there is a need for the possibility to transfer monies to in

trust to a third party without running the risk that such monies would become part of the

bankruptcy estate of such third party. For instance, monies that are held by a civil-law

notary with respect to real estate transactions, monies that are held by lawyers on behalf

of their clients (e.g. escrow accounts), collection agencies (incassobureaus) that collect

claims on behalf of third parties or an agent that is appointed to receive payments and

distribute these amongst the banks participating in a syndicated loan.19 Without a legal

exception to the principle of paritas creditorum20 these monies would become part of the

bankruptcy estate of the third party holding these monies in trust. The persons on behalf

of whom these monies are held will then only have a contractual claim that ranks pari

passu with the claims of other creditors of the bankruptcy estate.

In the Netherlands, there is a legal provision for civil-law notaries and bailiffs

(gerechtsdeurwaarders) that require them to have a client account (kwaliteitsrekening) in

place.21 The legal literature defines a client account (kwaliteitsrekening) or trust account

(derdenrekening) as an account held by a professional (beroepsbeoefenaar) in its own

name to receive payments from clients or third parties in its capacity as civil-law notary

or bailiff, as the case may be.22 With respect to civil-law notaries and the bailiffs, Dutch

law provides that the right to claim (vorderingsrecht) that arises from the special account

belongs to the joint beneficiaries (rechthebbenden). The interest of each beneficiary in

the account is determined “in proportion to the amount that has been deposited for its

benefit on the special account”.23 Hence, the civil-law notary/bailiff holds the monies in

trust for the account of the beneficiary. A similar provision does not exist for other

professions. In Curaçao such a provision does not exist for any profession. The Dutch

Supreme Court (Hoge Raad) has however held that the existing provisions of section 25

of the Notaries Act and section 19 of the Bailiffs Act are applicable by analogy to client

accounts of lawyers and accountants in the Netherlands. According to the Supreme

Court, these types of exceptions should be accepted only with the necessary

reservations, in light of the principle of legal certainty (rechtszekerheid) and the interests

17

This provision does not prevent a foreign trust within the meaning of the Hague Trust Convention from being recognized in the Netherlands, see also section 10:126 of the Dutch BW which provides that a legal act performed with the intention of transferring property pursuant to Dutch law to a trustee of a foreign law governed trust is not an invalid title on the mere grounds that the legal act have been performed with the intention of transferring property merely to provide security for a debt or performed without the intention of bringing the property into the estate (vermogen) of the acquirer. 18

See also, amongst others, Koppenol-Laforce, ‘Inbreng van Nederlandse goederen in een trust’, WPNR 97/6281 and R.M. Wibier, ‘Can a Modern Legal System Do without the Trust?’ (TISCO Working Paper Series on Banking, Finance and Services No. 06/2010). 19

See also R.M. Wibier, ‘Can a Modern Legal System Do without the Trust?’ (TISCO Working Paper Series on Banking, Finance and Services No. 06/2010). 20

Section 3:277 paragraph 1 BW and BWC and Supreme Court ruling of 13 June 2003, NJ 2004, 196. 21

Section 25 of the Notaries Act and section 19 of the Bailiffs Act. 22

Asser-Mijnssen-De Haan-Van Dam 3-I 2006/478. 23

Asser-Mijnssen-De Haan-Van Dam 3-I 2006/479.



of the financial market.24 The current legal provision with respect to client accounts gives

rise to many questions, in part because the beneficiaries (rechthebbenden) of the

balance of the client account have a joint claim vis-à-vis the bank where the account is

held.25 It is argued that the most obvious solution would be to treat the claim of the third

party (that holds the monies on trust) vis-à-vis the bank arising from the client account

as being a claim that is segregated from the remaining assets of such third party, i.e. as

a separate estate (afgescheiden vermogen).26

In the commercial practice, the foundations for the fiduciary management of trust

accounts (stichtingen beheer derdengelden) are often used as an alternative to the client

account.27 The objects of the foundation shall be the management and distribution of

monies held in trust to the beneficiaries. An advantage of the use of a foundation is that

the structure can be used by anyone. The disadvantage of using a foundation for the

objects mentioned above is that there are certain practical objections. For instance, the

process of setting up a foundation including the incorporation documents and

accompanying agreements and the requirement of drawing up annual accounts. The use

of a foundation seems to be unnecessarily cumbersome especially now that the Curaçao

Trust has been introduced.

The Curaçao Trust allows for the segregation of assets, as has been argued for in the

legal literature. As a result, the monies held in the trust account won’t become part of

the bankruptcy estate of the trustee. Creditors are afforded protection by means of the

fraudulent conveyance rule known as actio Pauliana.28 Unlike the statutorily regulated

client accounts referred to above, the use of the trust is not limited to certain

professionals only and can therefore be widely used (e.g. by collection agencies and trust

service providers). What is more, the use of the trust is not limited to the fiduciary

management of bank accounts only, but it could also be used for the fiduciary

management of security accounts or other assets. If the Curaçao Trust is used, the

assets will become part of the trustee’s estate. The trustee shall hold these assets for the

account of the beneficiaries. The beneficiaries will have to be appointed in the trust

deed.29 In our opinion, these could also be beneficiaries that are not yet determined at

the time the trust is set up, provided that the beneficiaries are sufficiently identifiable

(voldoende bepaalbaar).30

24

HR 13 June 2003, NJ 2004, 196 (ProCall verdict). 25

For an detailed description please see J.J. van Hees, ‘De balans van de kwaliteitsrekening’ in N.E.D. Faber et al. (ed.), Fiduciaire verhoudingen (Libellus Amicorum prof. Mr. S.C.J.J. Kortmann), Deventer: Kluwer 2004, p. 124. 26

J.J. van Hees, ‘De balans van de kwaliteitsrekening’ in N.E.D. Faber et al. (ed.), Fiduciaire verhoudingen (Libellus Amicorum prof. Mr. S.C.J.J. Kortmann), Deventer: Kluwer 2004, p. 81 and D.W. Aertsen, De Trust: Analysis on the introduction of a trust in Dutch law, Deventer: Kluwer 2004, p. 123. 27

The Supreme Court has confirmed that payments to a foundation for the fiduciary management of third party monies (stichting beheer derdengelden) become part of the estate of the foundation and not the estate of the professional who has set of the foundation (HR 15 November 2002, NJ 2003, 373 (De Kroon / Peters). The use of such foundations is mandatory for lawyers pursuant to section 3 of the Accounting Regulations 1998 (Boekhoudverordening 1998). 28

The Bankruptcy Decree 1931 (Faillisementsbesluit 1931) has been amended with the introduction of the trust, P.B. 2011 no. 59. As a result of the amendment of section 39 of the Bankruptcy Decree 1931, the contribution of assets to a trust may be fraudulent. 29

Section 3:130 paragraph 3 (a) BWC. 30

Section 3:153 paragraph 1 BWC.



4. Depositary receipts of shares and the business trust31

A well-known form of fiduciary transfer (overdracht ten titel van beheer) in the

Netherlands and Curaçao is the issue of depositary receipts for shares (certificeren van

aandelen).32 When depositary receipts of shares are issued, the shares are transferred to

the trust office (administratiekantoor) to be held in trust. The trust office issues

depositary receipts to the holders of the same. The trust office is legally entitled to the

shares and holds these for the account of the holder(s) of depositary receipts.33

Depositary receipts are often issued to concentrate (economic) control.34 Depositary

receipts are also used with respect to family businesses to promote the stability in the

decision making process of the general meeting of shareholders and the continuity of the

business.35

The trust office could have the legal form of an NV, BV or a foundation. The foundation is

the form most widely used.36 As a general remark, please note that the use of a

foundation as part of fiduciary transfers has disadvantages. To avoid risks related to the

use of a foundation as much as possible, the purpose clause (doelomschrijving) should

be worded as restricted as possible. For instance, that the purpose of the foundation is

solely to manage assets and/or have these in custody for the account of the

beneficiaries. A restricted purpose clause also restricts the representation authority of

the directors, whom have to act within the boundaries set by the purposes clause. In the

Netherlands, directors are unconditionally and unrestrictedly authorized to represent the

foundation within such boundaries.37 One could also use two foundations whereby one

functions as the custodian and the other one as manager. The most important

disadvantage of using a foundation remains the prohibition on making distributions

(uitkeringsverbod) pursuant to which distributions to incorporators and directors are not

possible. In this respect, one could use the private foundation (stichting particulier fonds)

in Curaçao. The private foundation (stichting particulier fonds) may however not engage

in business activities.38

31

For a detailed explanation of the business trust and the distinction from the voting trust see Uniken Venema/Zwalve, Common Law & Civil Law, Deventer: W.E.J. Tjeenk Willink, 2000, p. 354-355. 32

See e.g. Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/230, Asser-Mijnssen-De Haan-Van Dam 3-I 2006/474 and further and J.W.M. Thesseling, ‘De Antiliaanse trust’, WPNR 1999/6356, p. 340. The fiduciary transfer (eigendom ten titel van beheer) is the most common appearance of trust-like figures under Dutch and Curaçao law. For more details and the imperfections of the eigendom ten titel van beheer please be referred to D.W. Aertsen, De Trust: Analysis on the introduction of a trust in Dutch law, Deventer: Kluwer 2004, p. 110-118. 33

Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/658. 34

E.g. foundations that hold priority shares of an NV or a BV or preferred shares of a listed company (beschermingsstichting or continuity foundations). See Asser/Rensen 2-III 2012/308. 35

Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/659, where the following examples are mentioned: the father-incorporator of a (sole proprietorship) company that envisages one child as his successor and wishes to avoid distribution according to the statutory inheritance laws and the situation in which a family wishes to ensure inheritance within the family by using depositary receipts to concentrate voting rights in a trust office that represents the family members jointly during the general meeting. 36

Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/661 and van Schilfgaarde/Winter, Van de BV en de NV, Deventer: Kluwer 2009, p. 220. 37

D.W. Aertsen, De Trust: Analysis on the introduction of a trust in Dutch law, Deventer: Kluwer 2004, p. 114 and further for disadvantages to the use of a foundation. 38




Holders of depository receipts are afforded protection pursuant to property laws by

means of a joint39 statutory right of pledge. Pursuant to section 3:259 paragraph 2 of the

Curaçao as well as Dutch Civil Code, which provision is not mandatory40, holders of

depositary receipts have a right of pledge by operation of law, as security for the

distribution of the proceeds the shares give entitlement to, provided that the depositary

receipts are issued with the company’s concurrence. The contractual right of the pledgee

is thus strengthened by means of this provision. Book 2 of the Civil Code also affords the

holders of depositary receipts certain rights, provided that the depositary receipts are

issued with the company’s concurrence.41

The Curaçao Trust can now be used to set up a structure as is envisaged by the issue of

depositary receipts by means of a business trust. The assets of the business trust will be

segregated (afgescheiden) by operation of law and the bankruptcy of the trustee shall

not affect the trust assets the beneficiaries are entitled to.42 The role of the trust office

(administratiekantoor) is also compared to that of a trustee in the legal literature.43

Because the Curaçao Trust is specifically aimed at these kinds of arrangements, there is

no need for (too) complicated structures any longer. If the Curaçao Trust is used, there

are for example no restrictions with respect to the purpose clause and there is also no

prohibition on distributions. What is more, it is explicitly provided that the proceeds

resulting from the trust assets accrue to the beneficiary, unless the trust deed provides

otherwise.44 Similarly to the situation above, business costs specifically related to the

(management of) trust assets will have to be deducted.45

If the Curaçao Trust is used as a business trust instead of issuing depositary receipts, the

trustee shall have the role of the trust office (administratiekantoor) and the holders of

depository receipts shall be the beneficiaries. The shares and voting rights pertaining

thereto shall be transferred to the trustee of the Curaçao Trust. Depending on the

specific situation and the interests that need to be protected, either the shareholders or

the company could be the settlor of the Curaçao Trust. The power of disposition of the

trustee over the trust assets could be restricted in the trust deed.46 This restriction has

third-party property law effect (goederenrechtelijke derdenwerking) vis-à-vis the acquirer

if he was aware of the restriction.47

5. Securitization

39

Within the meaning of title 7 of Book 3 BW (joint ownership (gemeenschap)). 40

Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/667. 41

For an overview of these rights please see Asser/Maeijer, Van Solinge & Nieuwe Weme 2-II* 2009/669. 42

Section 3:127(2)(a), 3:155(1) BWC and Explanatory Memorandum p. 3. 43

Van Schilfgaarde/Winter, Van de BV en de NV, Deventer: Kluwer 2009, p. 220. 44

Section 3:154 paragraph 1 BWC. 45

See section 3:136 paragraph 3, second sentence BWC and mr. J. de Boer elsewhere in this issue. If a third party is informed that the trustee is acting in such capacity and there is no breach of trust, then the trustee shall only be liable in capacity and the third party will only have recourse against the trust assets. 46





In addition to the issue of depositary receipts for shares, there is also a practical need for

the segregation of receivables. For instance, the transfer of receivables within the context

of a securitization.48

The phenomenon and word ‘securitization’ have a negative undertone as a result of the

subprime mortgage crisis that is cited as the core of 2007 credit crisis.49 However, a

securitization transaction could (if given that name or not) also be used to convert future

receivables other than subprime mortgages into cash in advance, provided the

transaction is well structured.50 These receivables include, for example, loan receivables

(mortgage loans, car loans or consumer credit), credit card receivables and utility

receivables (water, electricity and cable television).

One of the essential features of a securitization transaction is that the receivables that a

company (the originator) has vis-à-vis its customers (the securitization portfolio) need to

be transferred to a special purpose vehicle (the “SPV”). Delivery (levering) shall be

effectuated by means of assignment (cessie) in accordance with section 3:94 BW(C). The

SPV then issues bonds to acquire capital to fulfill the purchase price of the securitization

portfolio. The SPV has to be bankruptcy remote. This means that an eventual bankruptcy

of the originator should have no or as little as possible effect on the securitization

portfolio. The securitization portfolio should be segregated from the remainder of the

estate of the originator. Similar to the situation of the trust office (administratiekantoor)

in the Netherlands, usually a legal entity is incorporated of which the activities are limited

to the custody of the securitization portfolio pursuant to its corporate objects

(doelomschrijving) to serve as the SPV.51 When the bonds are issued, the SPV usually

grants a security interest over the securitization portfolio to the investors to protect their

interests even further.52 Often times this security interest is created in the name of a

security trustee for the benefit of the bond holders. With respect to the security trustee

please see paragraph 8 below.

A SPV is thus necessary and as of now a Curaçao Trust could be used for such purposes

instead of a BV or NV. If a Curaçao Trust is used, the trustee will fulfill the role of the SPV

in accordance with the trust provisions. The bondholders will have the status of

beneficiary and an additional right of pledge could be vested on the securitization

48

For the avoidance of doubt, the statutory right of pledge of section 3:259 BW(C) set out above is also applicable to debt instruments. However, in the Dutch legal literature it is presumed that this is not a practicable alternative to the use of a special purpose vehicle in a securitization transaction, because notification to or cooperation from, as the case may be, the underlying debtors cannot be delayed until after the bankruptcy of the originator within a securitization transaction. See F.G.B. Graaf, ‘Effectisering van vorderingen (Securitisation)’ in J.R. Schaafsma et al., ‘Ontwikkelingen in het effectenverkeersrecht: voordrachten en discussieverslag van het gelijknamige congres op vrijdag 10 en zaterdag 11 november 1995 te Njmegen’, Deventer: Kluwer 1996, p. 106. 49

This has been discussed extensively in the media and literature. See for instance Reinout Wibier, ‘The Credit Crisis and Securitisation’, European Journal of Commercial Contract Law 2011-3/4, p. 83-88. 50

Asser-Mijnssen-De Haan-Van Dam 3-I 2009/292a. This could be desirable if there is the need for off-balance sheet financing or additional liquidity. 51

The corporate objects should be restricted because commercial risks should be avoided to ensure that the best possible credit rating is afforded to the transaction. This makes it attractive for investors. The description above only gives a simplified overview of a securitization. 52

For a more detailed explanation of securitization structure please see W. Ruys, M.H. van Raay, ‘Securitisation: mogelijke structruren’, O&F 2005-67, p. 12-17 and J. den Otter, M. de Bruin and R.P. Raas, ‘De securitisatie van KFN’, O&F 2006-72, p. 44-52.



portfolio as the beneficiary has the disposal (is beschikkingsbbevoegd) over its rights

(rechten) and powers (bevoegdheden) in the trust, unless the trust deed provides

otherwise.53

There are logistical and financial objections to notifying debtors when selling a large

number of receivables. Accordingly, section 3:94 paragraph 3 BWC has been replaced by

a new paragraph 3 with the effect that notification is no longer necessary for an

assignment.54 The second sentence of the new paragraph 3 provides that a delivery

(levering) cannot be invoked vis-à-vis the persons against whom these claims are to be

exercised until after these persons have been notified of the transfer by the transferor or

the transferee. Notification is thus no longer a constitutive requirement for the perfection

of the transfer of a receivable.55

If a Curaçao Trust is used, it is no longer necessary to have two separate entities as SPV

and the security trustee. One Curaçao Trust could on the one hand be the trustee of the

securitization portfolio (the trust assets) and on the second hand be the trustee of the

security interests (separate assets belonging to a different trust). It is not necessary to

have two separate trust deeds.

6. Investment trust

The term investment trust is used to denote investment institutions that are structured

by means of a trust.56 The National Ordinance for the Supervision of investment

institutions and administrators (Landsverordening toezicht beleggingsinstellingen en

administrateurs; “Ltba”) contains a license requirement in section 3 for those who raise

or obtain pecuniary means or other property for purposes of participating in an

investment institution and those who offer participation interests in such investment

institutions in or from Curaçao. An exemption to this license requirement may be granted

under certain conditions. Exempted investment institutions are not subject to the

provisions of the Ltba, but are in practice structured similarly to regulated investment

institutions.57

The Ltba distinguishes between an investment company (beleggingsmaatschappij) and

an investment fund (beleggingsfonds). Section 1 sub b of the Ltba defines an investment

fund as ‘non-incorporated capital comprising pecuniary means or other property raised or

obtained for collective investment with the objective of allowing the participants to

benefit from the revenues of the investments’. An investment trust comprised of

pecuniary means or other property for collective investment with the objective of

allowing the participants to benefit from the revenues of the investments therefore

qualifies as an investment fund as the trust does not qualify as an incorporated legal

entity. Section 4 paragraph 2 of the Ltba then provides that in the event a license

53


Before being replaced, paragraph 3 read: “The notification may be omitted when a right within the meaning of the first paragraph is transferred to secure a payment obligation, provided that this right exists at the time of the transfer or such right shall be obtained directly from a legal relationship that already exists at that time”. 55

See Memorandum of Amendment (Nota van Wijziging) no. 6 pertaining to the national ordinance supplementing Book 3 Civil Code with provisions with respect to the trust, section FF, article III, part 3. 56

See also Uniken Venema/Zwalve, Common Law & Civil Law, Deventer: W.E.J. Tjeenk Willink, 2000, p. 351-355. The term ‘unit trust’ is also used at times. 57

Dutch investment institutions that are not regulated pursuant to the Wft and are thus not afforded the protection contained in section 4:45 of the Wft could be structured by means of a Curaçao Trust.



application is filed for an investment fund, the applicant needs to demonstrate that (a)

the management company (beheerder)58 is a legal entity with full competence (volledige

rechtsbevoegdheid); (b) the assets are held in custody by a depositary (bewaarder)59

that is independent from the management company60; and (c) the assets of the

investment fund are segregated from the assets of the management company and the

depositary as well as any other (legal) person.

The legislator seems to have taken the practical need for the use of the trust as an

investment trust into account throughout the National Ordinance Trust. For instance,

section 3:137 BWC makes an exception to the requirement that the administration has to

be carried out in Curaçao for the investment trust. It is provided explicitly that the

administration of an investment trust may be carried out outside of Curaçao, as this is

often the case with respect to an investment institution.61 In addition, it is provided that

the trustee has the power to, amongst others, dispose of, invest and re-invest the trust

assets.62 This provision makes the use of the trust as an investment trust possible.63

Lastly, the Explanatory Memorandum to the provision at hand states that although a

general power of attorney or a power of attorney for a definite period of time is not

allowed, a power of attorney within the boundaries of the trustee’s mandate or

instructions is allowed. According to the Explanatory Memorandum, the provision (section

3:139 paragraph 2 BWC) does not preclude that management, investment, re-

investment and administration agreements may be entered into with persons of

institutions that perform such activities as a profession.64 This interpretation is relevant

for an investment fund that wishes to obtain a Ltba license. As set out above, one of the

requirements for obtaining a license is that the management company and the depositary

may not be one and the same legal entity.65 This requirement may be complied with,

taking into consideration the explanation that a trustee could have the management

carried out by a person or institution that performs such activities as a profession,

provided that the management company is a legal entity with full competence (volledige

rechtsbevoegdheid). At last, we will also discuss the position of the depositary. In the

context of investment trusts, this role will (similar to the management) generally also be

fulfilled by the trustee as this is the person legally entitled to the trust assets. In the

Explanatory Memorandum, the custody over the trust assets is not included in the list of

activities that the management company may outsource to a third party. It is thus

58

Management company (beheerder) is defined in section 1 sub e as the person fully or partially entrusted with the management of the investment fund. 59

Depositary (bewaarder) is defined in section 1 sub f as the person to whom the investment institution's assets are entrusted for safe-keeping. 60

Explanatory memorandum to the Ltba, p. 21. The Ltba does not exclude the possibility that the management company and the depositary are subsidiaries of one entity, provided that the independence amongst themselves is safeguarded. 61

Section 3:137 paragraph 2, second sentence BWC. See also Explanatory Memorandum, p. 8. 62

Section 3:139 paragraph 1 sub a BWC. 63

Explanatory Memorandum to section 140 paragraph 1 (currently section 139), p. 9. 64

Explanatory Memorandum to section 140 paragraph 2 (currently section 139 paragraph 2), p. 10. 65

Explanatory memorandum to the Ltba, p. 8 explains this as follows: the depositary plays an important role with respect to investment funds. It is its responsibility to ensure, on behalf of the participants, that the management company performs its activities in accordance with the articled of association or the regulations. As the assets are held by the depositary, the management company needs to cooperation of the depositary to have disposal over the assets. Hence, it is very important that the depositary is independent from the management company, i.e. that there are no personal or financial relationships between them as a result of which a correct performance of the depositary function could be jeopardized.



unclear whether the National Ordinance Trust would allow this, despite of the

requirement underthe Ltba. However, in the explanatory memorandum to the Ltba it is

stated that an independent depositary is not required for investment companies (being a

legal entity). An investment company is allowed to have custody over its own assets

because it is subject to corporate law provisions, which allow for sufficient asset

segregation. As a result, and also because corporate law provisions allow for consultation

of shareholders, according to the explanatory memorandum, there is no need for

additional safeguarding by a depositary with respect to investment companies. As set out

above, assets are segregated if the Curaçao Trust is used as investment trust. The trust

deed could pose restrictions on the power of disposal of the trustee with respect to the

trust estate as a whole or part of the trust assets.66 For instance, prior consultation of

beneficiaries could be included. In our opinion, the trustee could thus also act as

depositary, provided that the trustee is a legal entity.67 Pursuant to section 4 paragraph

4 of the Ltba, the regulator (the Central Bank of Curaçao and Sint Maarten) could issue a

license even if not all requirements have been satisfied, subject to the condition that the

investment trust can demonstrate that the interests and purposes of the Ltba are

otherwise satisfied. Hence, the regulator has flexibility to avoid unreasonableness when

applying the Ltba.68

Last year, the Curaçao International Financial Services Association (CIFA) sent a letter

addressed to the Minister of Finance with the request to implement certain amendment

proposals (reparatievoorstellen) in the National Ordinance Trust. The letter contains a

proposal to include an explicit provision pursuant to which the trustee may outsource the

management of the trust assets to a third party in the National Ordinance Trust or

Explanatory Memorandum. As set out above, the Explanatory Memorandum already

provides for sufficient assurance in this respect. It is however advisable to obtain

clarification on whether the trustee may outsource the custody (i.e. safe-keeping) of the

trust assets. It is also recommended to consult the Central Bank of Curaçao and Sint

Maarten on the question whether the policy with respect to investment companies

(beleggingsmaatschappij) and the independent depositary is applicable by analogy to the

Curaçao Trust and if so, under which conditions.

7. Finance and security structures69

The Curaçao Trust could also be used in finance transactions. There are situations in

which a lender does not have the necessity to require collateral from the borrower (at the

commencement of the loan), either because the risks are not deemed to be excessive

(e.g. due to the small amount of the loan or the creditworthiness of the borrower) or

because a third party has guaranteed the loan. For example, the mortgage pledge

(hypotheekbelofte) pursuant to which a borrower has a conditional contractual obligation

vis-à-vis the lender to create a right of mortgage or have a right of mortgage created for

the benefit of the lender securing the payment obligations under the loan. Arrangements

like these could be structured by means of a Curaçao Trust, giving the lender more than

just a contractual claim on the borrower for the creation of security interests. The

66


The explanatory memorandum to the Ltba provides that the depositary should also be a legal entity. This requirement is not included in section 4 paragraph 2 of the Ltba. 68

Explanatory memorandum to section 4 paragraph 4 Ltba, p. 22. 69

As set out in paragraph 2 above, there is no prohibition on fiduciary transfers (fiduciaverbod) similar to the Dutch section 3:84 paragraph 3 BW under Curaçao law.



borrower could require the borrower to contribute (real) property (the trust assets) to

the trust. Due to the flexibility of the Curaçao Trust, parties can provide in the trust deed

that the trust assets are held for the benefit of the borrower under certain conditions

subsequent (ontbindende voorwaarden). As soon as the conditions are triggered, the

trustee will hold the assets for the benefit of the lender. What is more, it could also be

agreed that as soon as certain conditions are fulfilled, the trustee is required to create a

right of pledge or right of mortgage for the benefit of the lender. Cooperation of the

borrower is not necessary as the trustee has the power of disposal over the trust assets

and he is acting in accordance with the trust provisions.

8. The Curaçao Trust as Security Trustee

Another use of the Curaçao Trust in financing transactions is as a security agent (or

security trustee) with respect to collective security arrangements. Whenever there are

more creditors involved in a financing transaction there is also the need for a collective

arrangement of security interests, often by appointing a security agent. Examples are

secured bond issues, securitizations of a large amount of different types of assets and

different types of secured syndicated loans.70 The appointment of a security agent has a

number of advantages.71 According to Kortmann, Rongen and Verhagen, an important

advantage is that one and the same entity can monitor the execution of security interests

without the need to always confer with all the creditors. The trustee determines (usually

at the request of the majority of creditors) when security interests will be executed and

distributes the proceeds of such execution. New creditors can accede without affecting

the security interests and additional security interests can be easily granted to the

security agent.72 73 If a Curaçao Trust is used, the role of the security agent is fulfilled by

the trustee. This may have advantages in the event that a syndicated loan is granted to a

Curaçao or Dutch company or if a Curaçao or Dutch company is a pledgor or mortgagor

within the syndicated financing.

In most cases, especially if there is an international syndicate of lenders, English law is

chosen as the law applicable to the finance documents, particularly due to the

presumption that English judges have more experience with the assessment of

standardized finance documents that are used with respect to syndicated loans.74

However, with respect to financing transactions that (almost) exclusively take place on

the Curaçao market or Dutch market (local borrowers and more than one local and/or

international lenders) there could be a preference for the applicability of local laws,

especially when it concerns smaller companies. For these types of finance transactions,

one could set up a Curaçao Trust for the management of the security interests for the

benefit of the syndicate. Prior to the introduction of the Curaçao Trust, collective security

70

A. Thiele, Collective Security Arrangements (a comparative study of Dutch, English and German Law), Deventer: Kluwer 2003, p. 265. 71

For an overview of these advantages please be referred to A. Thiele, Collective Security Arrangements (a comparative study of Dutch, English and German Law), Deventer: Kluwer 2003, p. 266-269. 72

Kortmann, Rongen and Verhagen, ‘Zekerheidsrechten ten naam van een ‘trustee (I)’, WPNR 01/6459, p. 813. 73

This is contrary to the situation in which security interests come to the benefit of numerous participants jointly (in gemeenschap). See Kortmann, Rongen and Verhagen, ‘Zekerheidsrechten ten naam van een ‘trustee (I)’, WPNR 01/6459, p. 813. 74

Especially the Loan Markets Association (LMA) documentation for the financing and the International Swaps and Derivatives (ISDA) documentation that is usually used for the hedging of the floating interest rate under the financing.



arrangements were often based on representation by an agent. However this was

impractical and inefficient as the security rights were being granted to the lenders

themselves.75

In the event of a loan to a Curaçao borrower in respect of which (most of) the security

interests are being created pursuant to Curaçao law, the use of a Curaçao Trust as

security trustee has become even more attractive as a result of the introduction of

paragraph 3 of section 231 of Book 3 of the Curaçao Civil Code that has been introduced

simultaneously with the National Ordinance Trust.76 The new paragraph 3 provides that:

“the obligation for which a right of pledge or right of mortgage is being granted, may be

owed to a party not being the pledgee or mortgagee. In that case the remainder of this title

shall apply mutatis mutandis if necessary.”

This has brought an end to the discussion of whether a right of pledge or right of

mortgage (due to its accessory nature77) may be created in favor of a security agent

even if it is not the creditor under the secured obligation(s). This has been a topic of

discussion amongst legal scholars and until recently the parallel-debt structure was

regularly being used78 (and to a lesser extent the structures of plurality of creditors

(actieve hoofdelijkheid) and suretyship (borgtocht)).79

It is also possible to use a Curaçao Trust as part of a Dutch law governed finance

transaction as a trust figure is not available in the Netherlands to date. In such cases the

security interests will be governed by Dutch law because the assets of the borrower will

most likely be located in the Netherlands, meaning that a parallel-debt structure will be

necessary. However, there is a preference for an arrangement in which security is

granted to a trustee or fiduciary.80 Because the Dutch Civil Code and the Curaçao Civil

Code are very similar to each other and it is the same Supreme Court that has ultimate

jurisdiction, the Curaçao Trust could be a viable alternative.81

In addition to the advantages mentioned above, the trustee may, during the life of the

Curaçao Trust and to the extent necessary, be replaced relatively easily by succession

75


The provision was similar to section 3:231 of the Dutch Civil Code. 77

Within the meaning of section 3:7 and 3:82 BW(C). 78

If a parallel debt structure is used, the debtor declares that it has an independent payment obligation vis-à-vis the trustee that corresponds with the secured claims of the joint creditors. Payments to the trustee shall hence result in a corresponding decrease of the secured claims of the creditors. The security rights are not created for the payment obligations vis-à-vis the lenders, but for the fulfillment of the trustee’s claim pursuant to the parallel debt. See Kortmann, Rongen and Verhagen, ‘Zekerheidsrechten op naam van een ‘trustee’ (I), WPNR 01/6459, p.816. 79

See Asser/Van Mierlo/Van Velten 3-VI* 2010/44. Kortmann, Rongen and Verhagen are of the opinion that when a right of pledge or right of mortgage is for the benefit of a person other than the person that its entitled to the secured claim, this would be legally valid if this other person is a “trustee”. This is an example of the “fiducia cum amico” figure. 80


For the legal effect of a Curaçao Trust in the Netherlands see the article of J. de Boer.



under universal title82, without affecting the security interests.83 The security interests

will not be affected by an eventual bankruptcy of the trustee.84

9. Protected Cell Company

Section 3:276 BWC provides that a creditor may recover his obligatory claim from all

assets belonging to his debtor. The trust assets form a separate estate (afgescheiden

vermogen) and therefore form an exception to section 3:276 BWC.85 In the corporate

practice, there is also a need for the possibility to create separate estates (afgescheiden

vermogens) within one company. Such a company, that already exists in other offshore

jurisdictions86, is also referred to as a Protected Cell Company (“PCC”) or Segregated

Portfolio Company. The idea behind a PCC is that the company has a general estate

(algemeen vermogen) and segregated estates (“cells”). The use of segregated estates

avoids a situation in which recourse can be sought from the general estate of the PCC or

one of the other segregated estates (cells) for obligations pertaining to one single

segregated estate (cell). For obligations that cannot be attributed to one single cell,

recourse may be sought from the general estate of the PCC. Each cell is administered

separately. Shares are issued in the capital of the PCC that give right to profits from a

specific cell. Examples of situations where different cells within one company are

desirable include umbrella funds and captive insurance companies. Section 1:1 of the

Dutch Act on Financial Supervision (Wft) gives a description of an umbrella fund

(paraplubeleggingsinstelling). The capital of an umbrella fund87 is divided into separately

administered segregated estates (administratief afgescheiden vermogens), these are the

sub-funds88. Each sub-fund may have its own investment guidelines and risk profile and

also its own terms and conditions applicable to the sub-fund and the participants. The

sub-funds are separate from each other only on the books, meaning that losses in one

sub-fund could also affect other sub-funds. If a PCC is used, sub-funds are not only

administratively separate funds but also legally segregated from each other. Another

example is the so-called captive insurance companies. A captive insurance company is an

insurance company that insures the assets and risks of its holding company or other

group companies. The captive insurance company pertains to a group that is active in a

different market. By using a PCC, it can be ensured that the premiums of those insured

are paid and the resulting accumulated capital are solely employed towards coverage of

82

Section 3:145 paragraph 1 BWC, with the implementation of the National Ordinance Trust a new sentence has been added to section 3:80 paragraph 2 BWC as a result of which a succeeding or acceding trustee obtains the trust assets under universal title. 83

N.S.G.J. Vermunt, ‘De trust in het zekerhedenrecht’ in: N.E.D. Faber et al. (ed.), Fiduciare verhoudingen (Libellus Amicorum prof. mr. S.C.J.J. Kortmann), Deventer: Kluwer: 2007, p. 262. 84


Explanatory Memorandum to section 155 (p.13) states that the justification for this exception lies in the fact that the settlor has transferred the trust assets to the trustee under the condition that the trust assets shall be employed for the benefit of third parties not being the trustee itself. The trust assets are not intended for the benefit or use by the trustee. 86

Guernsey, Bermuda, British Virgin Islands, Mauritius and Seychelles. 87

An umbrella fund could be an investment fund (beleggingsfonds) or an investment company (beleggingsmaatschappij). 88

The Wft defines a sub-fund as a separately administered segregated part of the capital of the investment institution which includes pecuniary means or other property raised or obtained for collective investment with the objective of allowing the participants to benefit from the revenues of the investments. These collective investments and the distributions of the profits are subject to the specific conditions applicable to the relevant separately administered sub-fund.



the secured risks of that specific company and does not affect the accumulated capital of

the other insured persons.

We are of the opinion that it is possible to create segregated estates (cells) within one

company pursuant to the National Ordinance Trust. Section 3:134 BWC provides that

legally competent natural persons as well as legal persons may act as trustee. The settlor

may act as trustee.89 Accordingly, it should be possible to create segregated estates

(cells) within one company, provided that the company (PCC) is the trustee. The

incorporator of the company could act as settlor and set up a trust, but the latter can

also be done by the company itself pursuant to section 3:134 paragraph 2 BWC. The

beneficiaries of the segregated estate could be the shareholders that are entitled to the

profits made in the relevant trust (cell). The corresponding shares are issued to the

beneficiaries at the incorporation.

It is required that the trust be set up by notarial deed.90 This could also be the notarial

deed of incorporation of the PCC, in which one or more trusts (cells) are created. It is

also possible to appoint a protector for each trust.91 The trust needs to be registered with

the trade register of the Curaçao Chamber of Commerce and Industry92 and the

incorporated company as well.93 It is recommended to allow for the registration of the

trust as part of the registration of the PCC, in order for it to be clear when searching the

trade register that the company is a PCC. An even better solution would be to allow for

the registration as PCC in the trade register, without there being any requirement to

register each trust (cell) separately. By using the words protected cell company in the

name it should be clear to all that the company has segregated estates (cells).

It could also be considered to include additional statutory provisions requiring the PCC to

comply with special administrative requirements. For instance, the requirement to

prepare separate accounts (balans) and income statements (winst- en verliesrekening)

for each separate cell. This could be included in section 137 paragraph 2 of the National

Ordinance Trust. In addition, specific provisions for the liquidation of the PCC and each of

the trusts (cells) could be included in title 7. As long as that is not the case, the PCC shall

need to be closely monitored by advisors, including the civil-law notary that will execute

the notarial deed of incorporation of the PCC and the creation of the trusts.

10. Conclusion

The implementation of the National Ordinance Trust seems to provide for new

possibilities for the financial sector in Curaçao. Arrangements that have been developed

in the past to reproduce the trust as much as possible can now be structured by using

the Curaçao Trust. The current Curaçao and Dutch law alternatives do not always have

the same legal consequences as a trust. In addition, the arrangements that are used are

often complex and hard to explain to foreign parties.94 The mere fact that the Curaçao

Trust is a trust could give these parties a sense of confidence and understanding.

Furthermore, the trust allows for new possibilities. The purpose of this article was to give

89




Section 3:161 BWC. 93


J.W.A.B. Biemans, ‘Tijd voor de trust’, NTBR 2011/71.



an overview of how the Curaçao Trust could be used in the commercial practice.

However, the question of whether the Curaçao Trust will in fact become a success

depends on the applicable tax regime and the confidence of the commercial and legal

practice on the soundness of the legal framework. Especially for parties in civil law

jurisdictions, whom are generally not familiar with trusts or are reluctant in using trusts,

the Curaçao Trust could be attractive as Curaçao is a civil law jurisdiction. Although it is

originally a common law instrument, the Curaçao Trust is embedded in our civil law legal

system, possibly making it easier to comprehend than the real common law trust.95

To conclude, setting up a Curaçao Trust could also have advantages from a Dutch

perspective as opposed to the use of trusts from other jurisdictions. Section 13 of the

Hague Trust Convention makes it possible for a trust not to be recognized if the

characteristic features (kenmerkende elementen) are more closely connected (nauwer

verbonden) with the Netherlands.96 This escape is however not applicable to Curaçao

Trusts as the Curaçao Trust has legal effect pursuant to section 40 of the Charter for the

Kingdom of the Netherlands (Statuut).97 Section 10:126 of the Dutch Civil Code which

provides that a legal act performed with the intention of transferring property pursuant to

Dutch law to a trustee of a foreign law governed trust is not an invalid title on the mere

grounds that the legal act have been performed with the intention of transferring

property merely to provide security for a debt or performed without the intention of

bringing the property into the estate (vermogen) of the acquirer, also is a clear indication

that the Curaçao Trust introduces possibilities for use in the Netherlands. What is more,

the fact that the trust deed is a notarial deed means that the legal consequences

(rechtsgevolgen) pertaining thereto will have to be recognized on the grounds of the

Charter for the Kingdom of the Netherlands (Statuut). Another advantage is that the

Dutch Supreme Court (Hoge Raad) has ultimate jurisdiction. This increases the

confidence of those who wish to make use of the Curaçao Trust.

95

J.W.M. Thesseling, ‘De Antiliaanse trust’, WPNR 1999/6356, p. 342. 96

See J. van Rijn van Alkemade, ‘Yes, the Dutch can tame the trust! (I)’, WPNR 96/6317, p. 368. 97

See J.de Boer elsewhere in this issue.

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