For many years those professionals active in the financial services industry in the Netherlands Antilles and Aruba have felt the need to have a legal instrument that would assist in asset protection and estate planning. Upon request of the private sector the government of the Netherlands Antilles initiated this pursuit. After having considered various options including the Liechtenstein's 'Anstalt', the Government decided to introduce the 'Private Foundation' into the legal system of the Netherlands Antilles.

The introduction of NAPF
The Netherlands Antilles Private Foundation ('NAPF') was introduced in the last quarter of 1998 as a result of amendment of a number of existing national ordinances. By National Ordinance of October 19th, 1998 the following ordinances were amended:

the National Ordinance on Foundations;the National Ordinance on Succession Duty;and the National Ordinance on (Corporate) Profit Tax.
These amendments of existing laws were necessary to create the Private Foundation as a separate entity from the Common Foundation, which already existed. The amendment of existing ordinances is common and required in our jurisdiction. Unlike our neighbors from common jurisdictions were it would have been realized by enactment of acts.

Corporate Aspects Incorporating the NAPF
The NAPF is incorporated and registered in the same manner as the Common Foundation. The NAPF may not engage in business for profit. Article 1b states:

A private foundation is a foundation organized as such according to it's articles of incorporation, the object of which may not include the earning of profit through the operation of a business enterprise.

As such the NAPF can stipulate as its purpose: the management of its assets. The management can include making investments, looking for growth and maximum returns on investments and (re-) selling assets to invest. There is no specific limitation on the type of investments. It is explicitly stated in the new legislation that for tax-purposes such management would not be considered to be operating a business for profit.

Unlike the Common Foundation the purpose of a NAPF as stated in its articles of incorporation may explicitly include the making of distributions to incorporator(s) and other parties. To whom distribution can or will be made can be described in the articles of incorporation either in very general or in very specific terms. Article 1b paragraph 2 states:
For the purposes of article 1, third paragraph, of the National Ordinance on Foundations that the distributions to the beneficiaries of the private fund will not be considered distributions.

Amending the articles of incorporation of the NAPF Amendment of articles of incorporation is possible in accordance with the National Ordinance on Foundations, however the new legislation explicitly does not allow for existing common foundations to be converted into NAPFs by merely changing the objectives of the first. Article 1b, paragraph 3 states:
A private fund must be constituted as such. It cannot come into existence through the amendment of the articles of incorporation of a foundation that has not been constituted as a private fund.

Although it is not specifically mentioned in the parliamentary documents it could be argued that one of the reasons why the legislator has chosen for this limitation is to prevent common foundations serving charitable and/or pension fund purposes to be converted into private foundations. Hence frustrating the original purpose of the foundation and creating room for the original incorporators to use the funds of the foundation for other (perhaps personal) purposes.

Civil aspects
Unlike the Anglo-Saxon trust there is no agreement between the trust and the beneficiaries, as such the beneficiaries and/or incorporators of the NAPF do not have any legal claims on the assets being held by the Foundation. The 'purpose-clause' in the articles of incorporation only authorizes the foundation to distribute assets or to make gifts whenever the board of the NAPF considers it appropriate and does not obligate the Foundation to make a distribution and/or a gift.

Fiscal aspects
Profit tax The NAPF is exempt from income and from profit tax. This tax-exemption was made possible due to the amendments of the National Ordinance on Corporate Profit Tax, which eliminates the need to file tax returns.

Gift taxes
Distribution of assets or gifts made by the NAPF is not subject to gift taxes either. Contribution of assets to the foundation is subject to gift tax only if the donor is a resident of the Netherlands Antilles. Hence any contributions made by non-residents are tax-exempt in the Netherlands Antilles, however gift tax may be - depending on the jurisdiction - due in the donor's country of residence

Capital tax
No capital tax is due on establishment of the foundation.

Succession Duty
Amendment of the Ordinance on Succession Duty adds a new paragraph 8 article 5b to the Ordinance, effectively stating that all benefits obtained from a private foundation are exempt from succession duty. Amendment of article 61 of the Ordinance on Succession Duty further stipulates that acquisitions received by the NAPF will be subject to taxation at 25% of the (declared) value, if received from a resident. Accordingly any acquisitions received by the NAPF from a non-resident will not be subject to succession duty in the Netherlands Antilles.

Withholding tax
Any distribution of assets or funds to non-residents beneficiaries are not subject to withholding tax.

Government fees
No annual Government Fees are due for maintaining a Curacao Private Foundation.

Information needed for the incorporation
The following basic information is required to initiate the incorporation, since the Articles must contain that information:
The proposed name of the Foundation (and at least two alternatives); the name of the Founder; the purpose of the Foundation; the representation of the Foundation; the Foundation is represented by a Board of Directors consisting of one (or more) director(s) acting alone (or jointly), of which at least one must be resident, and that can be supervised by a Board of Supervisory Directors; the manner in which the Board is appointed.

Founder and beneficiaries
The following information has to be submitted prior to the incorporating agent prior to incorporation or formation:
The name, nationality, home and business address and occupation of the Founder and a copy of his/her passport. If the Founder is a corporation then the information is required from the ultimate beneficial owner of that corporation; The name, address and identification number (passport or local ID) of any beneficiary known at the time of incorporation; A reference letter from a reputable law firm, bank or financial institution confirming the trustworthiness and reliability of the Founder; A statement as to the true purpose for the Foundation being established; A declaration as to the source of the funds the foundation is to be funded with.
 
The above information and documentation is kept strictly confidential and is solely for the incorporating agent's records, however the name of the Founder does appear in the Articles of Incorporation of the Foundation and is thus of public record. The incorporating agent can act as Founder in order to preserve the privacy of the client, in which case above information is required for the person on whose behalf of Foundation is to be incorporated.

Founder Rights
In the Articles of the Foundation certain rights and authorities can be vested in the Founder. These may include the right to appoint board members or to approve the appointment of the beneficiaries of the foundation. All the Founder's rights must be set out specifically in the Articles. The Founder may transfer these Founder's rights to any person he desires, by notifying the Board of the Foundation of his decision. Although the Board of the Foundation appoints beneficiaries, the Founder can have rights vested in his Founder Rights to approve any of these appointments.

Capital
There is no minimum capital requirement and the capital does not have to be mentioned in the Articles of the Foundation.

Representation
The Board of Directors should consist of at least one resident Director. A local trust agent can act as such on client's request. A Board of Supervisory Directors may supervise the Board of Directors.

Management & Domiciliary Services
The incorporating agent offers a full range of services to incorporate and maintain a Foundation. Two significant fiduciary services rendered are:
providing a local registered address and office, and
acting as the local Director of the Foundation.
A Curacao based Foundation must have at least one resident Director. Usually one of the incorporation agent’s management companies acts as such and takes care of all the legal requirements.

The following services are included in our basic service package:
Providing the registered office.
Providing one corporate Director.
Filing the required documents and forms with the Chamber of Commerce.
Some other management services that are rendered by the incorporation agent upon the client's request are:
By Resolution of the Board of Directors, the local Director can issue Limited Powers of Attorney in favor of third parties for special transactions or purposes.
Convocation of Directors' Meetings and drafting of Board Resolutions; Director's Meetings can be held in and outside Curacao, however all Directors, including the resident Director(s), have to be notified that a Board Meeting will be held.

For more information contact us at:
Gomez & Bikker Law Offices
L.G. Smith Boulevard 50
P.O. Box 1300 Oranjestad, Aruba.
Tel: (297)-588.7355 Fax: (297)-588.7533
E-mail: info@gobiklaw.com

Note:
Although this memorandum has been prepared carefully, it may only serve as a summary of the facts presented its contents should not be relied upon blindly. The text is intended only as an overview of fundamental regulations of the subject and as such may contain inaccuracies and simplifications in its description of the applicable laws, regulations and case law. Application of rules and regulations in each case are on account of special circumstances and it is recommended that advise of counsel be sought in dealing with the application of the law. The text content may be subject to change. For further information and details please contact our offices.

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