"Financing almost impossible with model statutes of government NV's"

October 06, 2011 9:12 AM

The Curaçao Bankers’ Association (CBA) strongly advises against introducing the model articles of association as proposed by the Curaçao government.

The association warns that this will upset the ‘checks & balances’ completely. It would be almost impossible for the government NV’s to find means for investments.

“The functions of the management and the Board of Commissioners (RvC) will be undermined completely. The AVA/minister will them immediately take the place of the management. This will obscure the division of authority and responsibility.” The extent of the management’s responsibility will soon no longer be clear for the management – and therefore also for third parties, internally and externally – or when one can reverse a decision of the management, or if the general interest or the corporation’s interest prevails or not, the CBA states in a press report. “Furthermore, the independence of the RvC, which is to safeguard good governance within a corporation, is seriously injured. Moreover, in a playing field where the power balance is upset, there exists more space for political patronage.”

The introduction of the model articles of association, as proposed by the Curaçao government, is turning the world upside down, according to the CBA. “In the meantime, also four prominent experts in this field declared in an open letter that the model articles of associations contravene the National Regulation and the Code Corporate Governance.” CBA mentions several things the model articles of association stipulate. 1) That the AVA (read: the representing minister) has an unlimited instruction authority; the management is compelled to act upon this instruction. 2) That without stating reasons, the RvC-members can be dismissed or discharged, at all times. 3) That more board decisions than usual within corporation’s level can be presented to the AVA for approval. 4) That the interest of the corporation becomes subordinate to the general interest and to a sound social-economic development.

“It’s obvious that with a weakened ‘governance’ structure, it will become more difficult for banks to commend financial means (which, after all are the savings of clients) to the management of a government NV,” the CBA state. “Furthermore, the model articles of association will make it more difficult to enter into strategic alliances. Therefore, with these model articles of association it will be almost impossible for government NV’s to find means for the necessary investments of these NV’s. The government NV’s will then become more vulnerable and it will affect the service to the public.”

Essential condition

An essential financing and participating condition for banks in important investment projects of government NV’s is a solid governance structure embedded in the articles of association. There is a question of a solid governance structure if the responsibilities are defined clearly and the powers are divided equally between the organs of the corporation, says the CBA. “A corporation without a solid governance structure could lead to an increased risk for the banks.”

5 October 2011