On 14 March 2023, the Temporary law on transparent expedited liquidation was approved by the Dutch Senate, after it had already passed the House of Representatives on 16 February this year. This law aims to increase transparency in cases of expedited liquidation and to combat abuse.
What is an expedited liquidation?
The regular route to dissolve a legal entity (such as a private limited company under Dutch law, a bv) is the regular dissolution and liquidation (financial settlement). There are legal safeguards for creditors built into this process.
The quicker way to dissolve a bv is called expedited liquidation (in Dutch: turboliquidation). The formal liquidation phase is then omitted. A resolution of the shareholders or the board is sufficient in this case. Expedited liquidation is faster and cheaper: within a few days, the bv is deregistered from the Chamber of Commerce. This is usually chosen for empty bv’s, which no longer have any assets. In short: there are debts but no assets. If there are any assets, expedited liquidation is not allowed. It is then up to a liquidator to distribute the bv's assets.
What is the problem with expedited liquidation?
It does happen that expedited liquidation is used to escape from creditors, or that the procedure is used for cases for which it is not intended. These have been reasons for the Dutch legislator to introduce additional rules. With these rules, the legislator wants to increase confidence in expedited liquidation as a method of dissolution and thus to make the scheme more accessible to companies and to facilitate its use.
What does the Temporary law on transparent expedited liquidation entail?
Legal entities must - as the name suggests - offer more transparency to creditors when carrying out an expedited liquidation: within 10 working days after the dissolution, a balance sheet and a statement of income and expenditure relating to the financial year in which the dissolution took place (and possibly the preceding financial year) must be filed with the Chamber of Commerce.
This should include a description of (1) the reasons for the absence of assets at the time of dissolution and, if applicable, the non-payment of creditors and (2) if applicable: the manner in which the assets of the legal entity have been realised and the proceeds have been distributed.
Financial statements for previous financial years that have not yet been disclosed (including an auditor's report, if applicable) must also be filed. After these filings have been made, the board must notify creditors in writing. This will allow creditors and other interested parties to verify that there is no abuse. If there are grounds to believe that the duty of accountability has not been complied with, creditors can inspect the legal entity's records with the authorisation of the subdistrict court.
Are there penalties for breaching the new rules?
If the bv fails to comply with the obligations just described and creditors have remained unpaid, a director disqualification and a fine can be imposed.
A judge can impose a director disqualification on a director at the request of the public prosecutor if:
- The accountability obligation as described above has not been met; or
- The director deliberately performed actions on behalf of the bv that harmed creditors; or
- The director has previously been involved in an expedited liquidation in the two years prior to the expedited liquidation in which one or more creditors were left wholly or partly unpaid, unless the director is not personally blamed for this.
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Conclusion
Do you want to make use of the possibility of an expedited liquidation? Then please be aware that this procedure is now more comprehensive than it was before. This is a temporary arrangement for two years, but there is an option to extend it. Any questions? The corporate lawyers at SPEE advocaten & mediation will be happy to help you.