Geting your business ready for winter
Autumn has begun. Trees are beginning to shed leaves and prepare for new growth. By analogy, for a company, autumn is traditionally the time to take a critical look at the group structure (the trunk and its branches). The tree must shed its leaves every now and then to create room for new greenery.
Taking a critical look at your BV structure
BVs that in fact no longer serve any purpose bring extra maintenance costs and (liability) risks with them. Every BV, whether active or inactive, has its annual obligation to prepare and publish annual accounts and its regular obligation to file corporate income tax returns. An up-to-date administration must also be present at all times. It is therefore important to dissolve BVs that no longer fulfill an adequate function in a timely manner.
The statutory dissolution procedure
According to the statutory dissolution procedure it is necessary to appoint a liquidator (usually the board) whose task is to liquidate the assets by paying any remaining debts and to account for and distribute any surplus. These so-called ‘accounts of completion’ must be available for inspection at the Chamber of Commerce for at least two months. An announcement of this must also be published in a national newspaper.
If a BV has no assets at the time of the dissolution resolution, the liquidation and distribution phase can be omitted and the company will cease to exist at the time of the resolution. This shortened dissolution procedure is called a turbo liquidation.
The main advantage of the turbo liquidation is the simplicity and swiftness of the procedure. But there are also disadvantages. A company without assets but which still has debts can simply disappear in the same manner. This may harm the interests of creditors.
Temporary law on transparency of turbo liquidation
The government is currently working on a bill to remedy the lack of knowledge of creditors in the event of a turbo liquidation. The turbo liquidation will be covered by more precautionary measures. The BV will be obliged to comply with any financial statements and publication obligations that have not yet been met and to publish a statement of income and expenses. In addition, assets that have already been used to pay debts or distribute to shareholders prior to the time of dissolution must also be accounted for.
This will give creditors a better understanding of the financial situation of the BV as it existed prior to the date of the turbo liquidation, so that they will have more knowledge to successfully oppose the dissolution (or the manner of dissolution) afterwards.
The bill may make the turbo liquidation less attractive for its own use, but it also makes it less vulnerable to abuse. And it is the latter that the legislator is particularly concerned about.
At present, the above still has the status of a draft bill and is intended as a temporary measure in connection with the corona crisis. It is, however, very likely that this new ‘temporary’ rule will be the prelude to a permanent rule, as a safeguard for creditors in the event of a turbo liquidation.
Looking for Legal Advice?
Be sure to engage with a legal advisor at an early stage. We will be pleased to advise you on which dissolution procedure is most suitable in your situation and to guide you through the liquidation process. Contact us today.