When starting a business, its registration should be on top of the list of priorities. Sometimes, the entrepreneur is aware himself of registration being legally required, at other times it is either the bank, the supplier, or the landlord who want the entrepreneur to be a registered business, before anything else.
Either way, business registration should be taken care of immediately.
What many entrepreneurs do not realize is that, according to the State Ordinance on the Trade Register (Handelsregisterverordening), business owners and managing directors have the legal responsibility to keep their company information up to date, at all times. Third parties who consult the Trade Register must be able to rely on the information provided being accurate, and therefore business owners and managing directors can be held accountable for failing to register the correct information timely. This includes every change, no matter how big or small. All changes, mandated by law, must be registered within 7 days after the occurrence of the fact.
And even though it may seem normal to inform others when you have a new address, new phone number, email address, or a new managing director, or business cancellation, in everyday life it still doesn’t occur that way. Some postpone these filings for months, even years, and then, problems emerge.
And when problems occur, it may be already too late, and some may be tempted to apply a quick solution, antedating this change, instead of stating the true date on which the fact occurred. This may still not solve the entire problem, apart from being an unlawful act on its own. Legal problems may emerge if, for instance, other parties are able to prove that filed data are factually incorrect, and may consider filing a complaint with judicial authorities, or file a court case, if financial or other damages are a consequence.
Also, the problem is that, according to the law, third parties do not need to take into account the change in the company’s data, before the date on which this has been filed at the Chamber. As it was not filed until that certain date at the Chamber, others simply could not acknowledge the fact before, and thus are not bound to any consequences thereof. Of course, all (legal) consequences of this late filing then bear upon the person failing to register timely.
In those cases that the Chamber detects an incorrect filing, the Secretary of the Chamber may refuse the filing, or if the incorrectness is detected after filing, he may also request the Court of First Instance to nullify the filing. Next, he may consider filing a complaint at the Prosecutor’s Office, if proof exists of antedating with the purpose of achieving personal or corporate gain. Hence, avoid maneuvering yourself in such a situation by filing timely.
In order to make compliance easy, businesses are allowed to make unlimited changes/amendments in the Trade Register, free of charge. No appointments are needed to make changes, they are processed in 24 hours and voila, business goes on as usual.
Also, preventing any awkward situations in the future, we have listed the changes in companies’ data that occur daily in Aruba, and the importance of registering these changes at the Aruba Chamber.
1. Moving your business (change of address)
This is one of the easiest changes in company information, yet very important to have the actual address registered, especially if the business needs a business license to operate. Failing to update this detail could have as a consequence temporary closure of the business, by the Department of Economic Affairs during a possible check on licenses.
2. Cancelling your business
This is one of those changes that many people do not realize how important it is. By turning the “closed” sign on your business does not mean the Chamber will automatically press the delete button.
Business cancellation is only a fact after the business owner or managing director has filed a cancellation form together with a valid ID. The cancellation will be registered within 24 hours.
Keep in mind that for sole proprietorships, this amendment is all that is required for the business to cease to exist. For other types of business, such as the legal persons ( NV, VBA or AVV), it means the corporation is no longer operating any commercial activities, but the legal entity still exists, with all the obligations that come along with it, including being registered at the Trade Register.
When inactive businesses are not cancelled in the Trade Register, the Tax Department considers them as active and the consequences can be huge, as tax debts do not just disappear. To make this scenario worse, the lack of a good administration will only make it more difficult to convince the Tax Department that the business was not commercially active, as the absence of an administration may look like irresponsible business management, from a tax collector’s perspective.
Unfortunately, in this case, even when the business owner states the date the business actually stopped its operations on the registration form, still it is the date that he came to Chamber to cancel his business that actually counts.
3. Liquidating your business (business dissolution)
Here the legal entity (company) ceases to exist. There are different procedures depending on the business type to be dissolved. Advice is always available at the Chamber.
General partnerships (Maatschap, VOF & CV)
According to the Code of Commerce, the business partners in such partnership must cancel all the affairs of the business, unless it is stated otherwise in their partnership agreement.
When this does not happen, third parties may assume, based on the information registered in the Trade Register, that the business is still operating and if any of the partners acts on behalf of business, depending on the agreement, it may be binding, giving all partners 100% liability.
Corporations NV, VBA & AVV
With the liquidation of corporations, a different procedure is required. In this process, the shareholders have to decide during a General Shareholders’ Meeting to dissolve the company and have it documented in minutes. The date of dissolution can only be that of the meeting, or after this has taken place.
When a corporation cancels its business operation, and has not dissolved the corporation itself, as a legal entity it continues to exist. And so do the obligations towards the Tax Office, the obligation to file their annual financial report and a copy of shareholders’ register, and payment of the annual contribution fee at the Aruba Chamber. Neglecting these obligations and not taking action for a couple of years can have far-reaching consequences, even in the personal lives of the managing directors involved.
4. Appointing a new managing director
When failing to register actual managing directors, the corporation has the risk that when something goes wrong, all those involved will be held accountable for 100%. Let us not forget that the only legally authorized person to represent the corporation is the managing director, not the shareholders. Of course, in some cases the shareholder may be a registered managing director as well.
The following example will show why it is so important to register new managing director, immediately when they are appointed: A managing director, who is not registered in the Trade Register, signs a contract with a third party, agreeing that the corporation will deliver certain goods or services to the third party for a certain amount of money. The corporation delivers its part of the deal, but the third party does not. When going to court, it turns out the person who signed the contract does not have the authority to represent the corporation, as officially he is not the managing director. Therefore, the shareholders may think that the easiest way to solve this problem is by going to the Chamber and register the managing director, but they would want to antedate the registration, in order to have it appear that the managing director had authority to represent the corporation when the contract was signed. Apart from not being ethical, and the corporation not being able to escape from the fact that the other party only acknowledges the fact as of the date of registration at the Chamber, a complaint may be filed at the Prosecutor’s Office, if proof exists of antedating.
5. De-registering former managing directors
The same goes in this case, only the other way around. A managing director has retired, or was dismissed by the shareholders’ meeting, but never deregistered his name from the Trade Register. Needless to say, that this person remains liable for the company’s actions, whatever they entail, without him being present. In case a court is involved, he will have to show evidence he was not involved in transactions that harm or even incriminate him.
But the knife always cuts both ways, and as he remains the managing director, it also means that he still can tie the company to certain liabilities. Yes, it can be proved in court he acted in bad faith, but the company can also be held accountable for negligence of failing to report the fact that he no longer is the managing director in the Trade Register.
Consequences can be devastating for both parties. And antedating is never the solution.