Curacao - Regulation

Curacao - Regulation

International funds and fund management survey

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1.1 Type of funds

Funds and investments companies are jointly defined in the relevant legislation as investment institutions. Funds are therefore also referred to herein as investment institutions.

Curaçao regulations distinguish the following, partially intersecting principal classifications of funds.

  • Investment funds, not having legal personality, versus investment companies, having legal personality. An investment company will often be incorporated as a private limited company, with the shares in such companies being the participating interests. A mutual fund is an investment institution as it invests funds contributed by persons, and the profit from this investment is shared by the persons having contributed the funds, whether the mutual fund is a corporation, partnership, or unincorporated pool of funds.
  • Open-ended versus closed-ended investment institutions. An open-end investment institution issues or acquires participating interests at the request of the public. If the institution does not continuously issue or re-acquire participating interests, it is defined as a closed-end investment institution. If an investment institution does not have an obligation to re-acquire the participating interests at the participant's request, but does act as and open-end institution, it is considered an open-end institution for the purposes of the applicable laws.

The categories of objects invested in, such as, securities versus raw materials, do not determine whether Curaçao regulations apply to a fund. 

1.2 Laws

The most relevant laws governing funds are the National Ordinance on the Supervision of Investment Institutions and Administrators 2002 (NOSIIA), the National Ordinance on Supervision of Banking and Credit Institutions 1994 (NOSBC), the Civil and Commercial Codes of Curaçao, and regulations of the Bank van Curaçao en Sint Maarten (Central Bank).

Pursuant to section 45 NOSBC, permission from the Central Bank is required to apply to the public in or from Curaçao, directly or indirectly, with regard to inter alia the raising of funds. The prohibition to raise funds under this rule is not applicable to investment institutions attracting funds for collective investment in order to allow the participants to share in the proceeds thereof. Depending on the activity or the target group, funds, investment companies, and administrators (each as defined in the NOSIIA) should in principle obtain a license or an exemption under the NOSIIA from the Central Bank for the offering of their participating interests, respectively their administrative services, in or from Curaçao.

The NOSIIA contains the conditions, which have to be satisfied by investment institutions and by fund administrators to be allowed to carry on the proposed activities, and determines in which cases these institutions or administrators require a license or exemption to operate and in which cases no license or exemption is required. Most investment funds are generally exempt or able to obtain exemption from the licensing requirements of the Central Bank.

Exemptions: A general exemption from the licensing requirement under the NOSIIA is available at present for the following investment institutions:

  • offering participating interests exclusively to professional investors or to parties comparable to professional investors
  • operating within a restricted circle as defined by the Central Bank
  • qualifying as having investment as a secondary activity
  • investment (research) clubs.

No license or exemption need be obtained under the NOSIIA for, inter alia:

  • the offering of participating interests in an investment institution by natural persons other than in the exercise of their business or profession
  • securities investment intermediaries not constituting a stock exchange
  • venture capital companies as defined by the Central Bank.

Dispensations: When applying for a license, foreign investment institutions subject to adequate home-country supervision can receive dispensation of certain stipulations of or deriving from the NOSIIA, amongst which part of the accounting requirements mentioned in the section Accounts and prospectus below.

Administrators: At present, the following exemptions are available for administrators:

  • administrators that provide administrative services in Curaçao but are domiciled in a country where, in the Central Bank's judgment, adequate supervision on administrators is exerted
  • administrators domiciled outside Curaçao and that provide administrative services in Curaçao exclusively to investment institutions exempted by the Central Bank
  • administrators domiciled in Curaçao and that provide administrative services exclusively to investment institutions licensed or exempted by the Central Bank.

Certain criteria should be met in order to qualify for the above exemptions. Exemptions and dispensations can be obtained upon submission of a request to the Central Bank.

Licensing: If an exemption cannot be obtained, and a license is required, the Central Bank shall grant a license to an investment institution if the person applying for the license demonstrates that the investment institution and the custodian, if employed by the investment institution, satisfy the requirements laid down in the Central Bank's instructions concerning competence and integrity, financial securities, conduct of business, and the provision of information to the participants and the general public (for more information, see below sections).

The person applying for the license of an investment fund also has to establish that the management company is a legal person with full competence, the investment fund's assets are entrusted for safe-keeping with a custodian independent of the management company, and the investment fund's assets are separated from the capital of the management company, the custodian, and any other persons.

The Central Bank has to decide on the application within 60 days of receiving the complete application.

In deviation of the above licensing requirements, the Central Bank may grant a license to a person applying to it if such person demonstrates that it cannot be reasonably expected to fully satisfy certain of the applicable requirements, and it demonstrates that the objectives intended by the NOSIIA are sufficiently realized otherwise.

1.3 Managers, trustees, and custodians

A licensed investment institution is required to have a custodian and must be managed by a management company; these requirements do not necessarily apply to exempt institutions. The management company may be the fund itself or the party in charge of managing all or part of the fund. The custodian may only be a legal person, whose main business it is to hold and administer investment assets for third parties. The latter also applies to custodians if contracted by exempt institutions.

For licensed investment institutions, the management company should be a legal person with full competence; the investment fund's assets should be kept with a custodian independent of the management company; and the investment fund's assets should be separated from the capital of the management company, the custodian and any natural or other legal persons. The daily management of licensed investment institutions may be exercised by either individuals or companies, but should contain at least two individuals, at least one of which residing in Curaçao. Central Bank approval is required for the appointment of directors in a licensed investment institution. Exceptions to the aforesaid conditions can be made under certain circumstances. 

1.4 Investment restrictions

No statutory investment restrictions apply to investment institutions. However, a licensed investment institution and the custodian, if employed by the investment institution, are obliged to observe instructions stipulated by the Central Bank as regards, inter alia, financial securities.

Exempted investment institutions are in principle not obliged to adhere to the aforementioned restrictions. An exemption may be granted subject to restrictions and regulations; restrictions may, though, only be set as to the scope of the exemption.

If the articles of association and/or the prospectus of an investment institution - whether such institution in licensed or exempt - contain investment restrictions, such restrictions must be observed.

1.5 Borrowing

In general, investment institutions may borrow money or grant loans if these activities fall within the scope of its articles of association and its prospectus. As referred to above, a licensed investment institution and the custodian, if employed by the investment institution, are obliged to observe instructions if stipulated by the Central Bank as regards, inter alia, financial securities.

Exempted investment institutions would not receive such instructions, save for those listed in the next paragraph. 

1.6 Accounts and prospectus

An investment institution that has not obtained an applicable exemption or dispensation is required to submit annual financial statements with explanatory notes, an auditors’ report thereof and a management letter to the Central Bank, within a period after the close of the financial year, to be determined by the Central Bank in consultation with representatives of the financial sector. In addition, every such investment institution may be required to provide interim reports on its business to the Central Bank.

Both licensed and exempt investment institutions should have a prospectus. The prospectus of an exempt institution should mention the exempt status and that the institution is therefore not subject to Central Bank supervision. A licensed investment institution must before publicly soliciting have a prospectus available that meets Central Bank conditions and has been reviewed by the Central Bank. 

1.7 Supervision

The Central Bank supervises all financial institutions. The supervision of funds in Curaçao is carried out by the Central Bank. The Central Bank is the designated entity to issue the license or exemption, if one is required, or to confirm that no license or exemption is required.

1.8 Fund ownership

There are no restrictions on the percentage of units in the fund which may be held by one person or group of persons.

An investor, who is able, directly or indirectly, to exercise a 25 percent degree of control in an investment institution, its management company, or its subsidiaries, is considered a large investor. An investment institution need not disclose the names of its large investors, but it should disclose the fact that they exist, and the number of their transactions, in its annual accounts, its semi-annual figures and its prospectus. In certain cases, if an investment institution can establish that the participation is linked to its incorporation, is temporary and that the participation does not harm the other investors’ interests, it may receive a dispensation from this requirement.

Substantial holdings in listed investment institutions may require disclosure pursuant to the National Ordinance on the disclosure of major holdings in listed companies (Lmz). This Ordinance is not discussed here.

1.9 Fund structure

Funds of funds, umbrella funds and hedge funds are permitted in Curaçao. The principal structures available for funds in Curaçao are the limited liability company (naamloze vennootschap or N.V.), the private limited liability company (besloten vennootschap or B.V.), and the limited partnership (commanditaire vennootschap or C.V.). The N.V. and the B.V. have legal personality and may as such act as the management company of funds. If a general partner of a limited partnership organized under Curaçao law (C.V.) is a legal entity, it may also, in principle, act as the management company of an investment fund if it is able to comply with the stipulations of the NOSIIA. 

1.10 Stock exchange

Funds in Curaçao may be listed at recognized stock exchanges. The Dutch Caribbean Securities Exchange N.V. (DCSX) became a licensed Exchange on 1 February 2010. The DCSX has launched on 20 January 2011. 

1.11 Bank secrecy

Curaçao has anti-money laundering laws and a banker’s code of practice. On 29 July 2006, the National Ordinance on the taxation of savings income entered into force (NOTSI). The NOTSI has been introduced in order to conform to EC Council Directive 2003/48/EC on the taxation of savings income. Pursuant to the NOTSI, certain companies are obliged to withhold tax on interest payments as defined in the NOTSI to certain residents of a European Union Member State who are the beneficial owners to such interest payments.

1.12 Fund set-up

A fund can be organized in Curaçao in a few weeks. (If there are no complications in the structure of the fund, the incorporation costs would be approximately USD5,000). The license to operate may be issued by the Central Bank within 60 days from the date that all conditions have been complied with, unless the fund is not required to have a license, in which event the exemption may be received sooner. 

1.13 Foreign funds

No license or exemption need be obtained under the NOSIIA for funds and investment companies of which the supervision exercised in the country of residence is deemed to be adequate by the Central Bank, such as The Netherlands, the United States (insofar as investment institutions listed with the Securities and Exchange Commission are concerned), Jersey, Guernsey, and Luxembourg. 

1.14 Bearer shares

A fund may issue bearer shares if the fund is structured as an N.V. Curaçao law provides that bearer shares may only be issued when fully paid up. There are no restrictions on the transferability of bearer shares.

1.15 Use of the internet

There are currently no specific legal regulations in Curaçao with regard to the advertising of investment funds through the internet. Considering the central rule of the NOSIIA, however, the sale of participation in funds by internet from Curaçao or concerning participation in Curaçao funds, is subject to the central rule of the NOSIIA: “No person may solicit or accept money or other assets for participation in an investment institution which has not obtained a license from the Central Bank in or from Curaçao, nor may rights to participate in such an institution be offered.” There are some funds that use the internet as a marketing tool. 

© 2017 Meijburg & Co Caribbean, Tax Lawyers, is an association of limited liability companies and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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