AEC General remarks
The Aruba exempt corporation (hereinafter the 'AEC'), is a legal entity organized under the laws of Aruba. The AEC is a flexible corporate body, especially geared for international business.

The AEC may not conduct business activities within Aruba other than maintaining an office in Aruba. The shares of an AEC cannot be held directly or indirectly by Aruba residents, or by companies resident in Aruba. The company is also explicitly prohibited from conducting banking or insurance activities or other such activities, which would make it a credit or financial institution under Aruba laws regarding the supervision of financial institutions. However, since 1996 the Central Bank of Aruba has agreed for the use of AEC as a corporate body for mutual funds.

The AEC must have at least one local registered agent. Any AEC that does not have a local representative is considered not to be in good standing and can be dissolved by court decision upon request of the Attorney General. The AEC must pay an annual registration fee to the Aruba government of US$ 285,- (two hundred and eighty five US dollars). The AEC that remains delinquent in the payment of this registration fee can be dissolved by court decision upon request of the Aruba Attorney General.

Company formation
The formation of an AEC requires only one founder that does not have to participate in the share capital of the AEC. The AEC is formed by a deed, which must be executed before a civil law notary. Prior to its incorporation a declaration of no objection from the Ministry of Justice must be obtained.

Articles of incorporation
The articles of incorporation must be drawn up in the Dutch language and must contain the bylaws. The articles of incorporation must contain: (i) the name; (ii) the statutory seat; (iii) the object; (iv) the duration; (v) the authorized capital; and (vi) the par value of the stock of the corporation. It also has to contain the number of shares each of the founders has subscribed and the amount to be paid on each of these shares at the time of the incorporation and the name(s) of the initial managing director(s) of the corporation.

Capital requirements
The AEC is not subject to a minimum amount of issued and paid up shares. At least one share with voting power must be issued at incorporation and must remain outstanding at all times. 

Shares
Besides voting shares the AEC may issue non-voting shares and/or shares with limited voting rights provided that at least one share with full voting power has been issued. The shares can be issued in registered or in bearer form. Furthermore the AEC may also issue preferred and cumulative preferred shares.

Board of managing directors
The board of managing directors of an AEC can consist of one or more managing directors. The local registered agent is appointed at incorporation of the AEC. In addition offshore legal entities or individuals not domiciled in Aruba can also be part of the board.

The financial statements
The AEC is not obliged to prepare annual financial statements provided that the bylaws stipulate that financial statements are not required. If the bylaws do not contain such provision, the AEC's management must present a profit and loss statement and a balance sheet to the general meeting of shareholders within eight months following the end of the AEC's book year.

Exemption of taxes
The AEC as a subject is exempt from Aruba corporate income tax and all other taxes, which would normally be applicable to Aruba corporations. Profit distributions of the AEC to its non-resident shareholders are not subject to any Aruba withholding tax.

Statutory seat
The statutory seat of corporation is situated in Aruba. Since November 1996 it is possible to change the statutory seat of an offshore company to a jurisdiction other than Aruba.

Exemption from the requirements of licenses
In principle all Aruba corporations need a business license and a director's license and are also subject to the regulations regarding foreign exchange. AEC's are exempt from these regulations, requirements and licenses.

Incorporation costs and annual costs
The incorporation costs amount to US$ 1.800,=. Annual costs are the management fee of US$ 1000,=, which includes the government fee of US$ 285,= and the fee of US$ 35,= for the Chamber of Commerce.

Uses of the Aruba Tax Exempt Company
Although the Kingdom Tax Arrangement does not apply to AEC companies and an AEC is not allowed to operate as a credit or banking institution, the uses of an AEC for sound international business purposes are almost endless. The explanatory memorandum for the introduced with the bill for the AEC is therefore is very brief about the possible uses of the AEC.

Mutual funds and securitization
Since 1996 the Central Bank of Aruba has agreed to the use of an AEC for a corporate body for mutual funds. An AEC can also be used as a special purpose vehicle for instance for the securitization of certain assets or for the certification of assets (separation of the legal and economic property).

E-commerce
With the Internet as the new stage for the global market for many companies it virtually makes no difference were their established. The AEC is used as a tax exempt corporate body to conduct business on the Internet.

Estate planning and asset protection
Depending on the applicable estate law, the wishes of the client, and the heirs involved and other relevant factors, an AEC company can be a useful instrument for estate planning.

Possible professional malpractice law suits and increasing exposure of business companies to al sorts of claims, have increased the focus on how to lawfully protect one's assets from creditors. The AEC company can be a useful instrument for asset protection purposes.

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 informational 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.

© Copyright 2000 ZGB

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