The Interim law on transparent expedited liquidation will enter into force on 15 November 2023

The Interim law on transparent expedited liquidation will enter into force on 15 November 2023. With this alert, we would like to briefly update you on what this bill entails.

Content of the legislative proposal
Accountability and disclosure obligation

Expedited liquidation (turboliquidatie) refers to the dissolution (at their initiative) of legal entities without assets as defined in Section 2:19 of the Dutch Civil Code (DCC). The fourth paragraph of Section 2:19 DCC reflects the essence of the expedited liquidation: If at the time of dissolution the legal entity no longer has assets, it will cease to exist. The time of dissolution coincides with the time of termination of the legal entity. Expedited Liquidation Transparency (Interim Measures) Act (de Tijdelijke wet transparantie turboliquidatie) increases transparency re expedited liquidation. By doing so, the Dutch government aims to prevent abuse when terminating legal entities through expedited liquidation. Especially in those cases where the legal entity ceases to exist leaving behind debts. For a more comprehensive discussion of expedited liquidation and the reasons for the legislative proposal, please refer to our earlier alert.

The legislative proposal provides for an accountability and disclosure obligation for the board. If the legal entity is terminated through a expedited liquidation, the board must file the following documents with the trade register of the Chamber of Commerce within fourteen days of dissolution:

• a balance sheet and a statement of income and expenditure relating to the financial year in which the legal entity was dissolved (if at the time of dissolution no financial statements for that year have yet been made public, a balance sheet and a statement of income and expenditure for the previous year should also be filed);
• a written statement of reasons for the lack of assets at the time of dissolution, the reason for the non-payment of creditors (if applicable) and the manner in which the assets of the legal entity have been realized and the proceeds distributed (if applicable);
• the financial statements for the financial years preceding the financial year in which the legal entity was dissolved, if there is a statutory obligation to do so which has not yet been fulfilled, including an auditor's report, if applicable.

In addition, the board must notify the creditors of the dissolved legal entity in writing of this filing of documents without delay.

Director disqualification
The legislative proposal also introduces a civil-law management disqualification for (current and former) directors or de facto directors if the legal entity has been dissolved by a dissolution decree or a decision of the Chamber of Commerce and has simultaneously ceased to exist while one or more creditors have not been paid in full or in part. The civil director disqualification is a legal possibility to impose a board disqualification on directors who commit bankruptcy fraud or are guilty of mismanagement in the run-up to a bankruptcy. The ban temporarily prevents directors from managing legal entities.

In the case where debts remain, the legislative proposal allows directors to be disqualified from management if they:

• failed to comply with the proposed filing obligations in an expedited liquidation (see above);
• have deliberately significantly prejudiced one or more creditors in the run-up to the dissolution, or
• have repeatedly been involved in a dissolution without assets leaving debts or in bankruptcy and they are personally blamed for this.

Temporary character
The legislative proposal has a temporary character of two years, but also contains the possibility of extending it if there is an intention to introduce the measures in this law permanently.

The main reason for the temporary character is that the law can be introduced quickly, without the need for a structural legislative amendment. This is because the Minister of Legal Protection expects an increase in the number of entrepreneurs wishing to cease trading because of the COVID-19 pandemic. This brings an increased risk of abuse of expedited liquidation.

How can we be of service to you?
Advice and guidance from BUREN can help you realize and/or deal with expedited liquidations. Want to know more? Feel free to contact us.