The Bottom Line
- Payment Can Trump Paperwork: A Dutch Caribbean court has ruled that a shareholder who has been fully paid for their shares, but has not completed the formal legal transfer, can be blocked from exercising their shareholder rights based on principles of “reasonableness and fairness.”
- Formal Transfer Remains Crucial: The ruling underscores the critical importance of executing a formal deed of transfer for shares. Failing to do so creates significant legal ambiguity, even when a sale price has been agreed upon and paid.
- Past Rights Can Persist: While future rights may be extinguished, the court allowed the shareholder access to historical financial records necessary to pursue a separate, pre-existing damages claim, highlighting that some rights may survive the informal sale.
The Details
This case, originating in Aruba, involves a classic founder dispute. A co-founder of a company offered to sell his shares and resigned his directorship in 2000. Years of disputes followed, including a previous court case that confirmed he was still legally a shareholder because the shares had never been formally transferred. Between 2013 and 2016, the remaining shareholder made a series of substantial payments, totalling over Afl. 115,000, which the court concluded were payment for those very shares. When the former co-founder later demanded to see the company’s annual accounts from 2009 to 2022, the company refused, arguing he was no longer a shareholder in substance, even if he was still one on paper.
The Joint Court of Justice faced a legal puzzle: what are the rights of a shareholder who is still the legal owner of shares but has already been paid for them under a sale agreement? The court’s decision split the issue in two. It first reaffirmed the legal formality: without a signed deed of transfer, the shares were not legally delivered, and the seller remained the registered owner. A simple “recognition” of the sale by the company was deemed insufficient to complete the transfer against the seller’s objections.
However, the court then applied the overriding corporate principle of “reasonableness and fairness,” which governs the relationship between shareholders. It reasoned that because the selling shareholder had agreed to the sale and accepted full payment, he was legally obligated to cooperate with the formal transfer. To allow him to continue exercising full shareholder rights—such as demanding ongoing financial information—would be unfair to the buyer. The court effectively ruled that his shareholder rights were extinguished from the moment he was paid. As a result, his claim for financial statements from 2016 onwards was denied. He was, however, granted access to the accounts from 2009 to 2015, as they were relevant to a separate, pre-existing damages claim established in the earlier litigation.
Source
Source: Gemeenschappelijk Hof van Justitie van Aruba, Curaçao, Sint Maarten en van Bonaire, Sint Eustatius en Saba
