Aruba Parliament Approves Legislation Removing the Power of Courts to Order Reinstatement of Directors

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.
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[co-authors: Thijs Jan Leijsen, Sophie van Lint]*

The Parliament of Aruba approved a new corporate law impacting the legal position of statutory directors on the island country. A consequence of the new legislation is that courts will no longer be able to order the reinstatement of the employment agreement of a statutory director. From now on, if the termination of employment of a statutory director is considered manifestly unreasonable by the court, the applicable remedy will be limited to compensation.

Aruba is the only island in the Dutch Caribbean where a statutory director can have an employment agreement with the applicable company in addition to his or her statutory appointment. On Curaçao and Saint Maarten, a person appointed as a statutory director will usually provide services under an agreement for services but this is essentially doing so on a self-employed basis and not as an employee.

In Aruba when a director is dismissed (in most cases following a general meeting of shareholders) the dismissal decision is judged from both a corporate and employment law perspective, each of which has separate criteria. As a result, the dismissal decision may be lawful from a corporate law point of view, but not from an employment law perspective.

Under the new corporate law, in such a case the legislature of Aruba deemed it undesirable for the court to be able to reinstate the employment of the dismissed director. If the termination breaches employment law, compensation may be awarded to the statutory director by the court, but not an order for reinstatement.

This new regulation may prompt legal entities to dismiss a statutory director earlier, if they consider themselves safe in the knowledge that the statutory director will at least not return. However, careful attention remains prudent.

*VanEps Kunneman VanDoorne

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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