Temporary law on transparency accelerated liquidation takes effect in November 2023

As of Nov. 15, 2023, the Temporary Law on Transparency of accelerated liquidation (turboliquidatie) will take effect. This law will take a step in preventing the abuse of accelerated liquidation. In this article, we explain what accelerated liquidation entails and how this temporary law will affect current legislation. 

What is accelerated liquidation?

By means of accelerated liquidation, a company can be dissolved and liquidated on its own initiative through a rapid manner. This is possible because there are no more assets in the company at the time of dissolution. The time of dissolution coincides with the termination of the company. This applies even if the company still has expenses. In an accelerated liquidation, no liquidation takes place due to the fact that there are no assets to liquidate. Therefore, there is also no need to appoint a liquidator or receiver to sell the assets and pay the creditors, and a public announcement of the company’s liquidation is not necessary. Furthermore, the company immediately ceases to exist as soon as it is dissolved. This makes it possible to immediately deregister the company from the Chamber of Commerce (Kamer van Koophandel) without the intervention of a court. 

In practical terms, this method of liquidation is prone to abuse and creates legal uncertainty. Especially when the companies cease to exist leaving behind liabilities. The criticism of this mainly focused on the lack of checks and balances around the position of creditors and financial statement liabilities. This new legislation seeks to address these criticisms. By increasing transparency, the idea is that it will increase confidence in accelerated liquidation and make it more accessible to business owners. 

What does this mean in practical terms?

The management of the company must file a number of documents with the trade register of the Chamber of Commerce within fourteen days of dissolution. These are the following documents: 

• A balance sheet and a statement of income and expenditure relating to the financial year in which the legal entity was dissolved as well as the previous financial year (if, at the time of dissolution, no financial statements for the previous financial year have yet been published); 
• A description of: 
  • (a) the cause of the absence of income at the time of dissolution;  
  • (b) if applicable, the manner in which the assets of the legal entity were disposed of and the proceeds distributed; 
  • (c) if applicable, the reasons why a creditor or creditors remained unpaid in whole or in part; and 
• The financial statements for the fiscal years preceding the fiscal year in which the legal entity was dissolved, if there is a statutory duty to disclose them that has not yet been fulfilled (if applicable, including an auditor’s report). 

After these deposits are made with the Chamber of Commerce, the board immediately makes written notifications to creditors. 

Restraining order

Restraining order 
The law also regulates an extension of the civil ban on administration to improve the legal protection of (unpaid) creditors in accelerated liquidation. The purpose of this extension is to prevent rogue dissolutions without assets as much as possible. It also provides the possibility to impose measures against directors. The expanded management ban consists of two parts: 

1. A regulation in Book 2 of the Civil Code that makes it possible for the public prosecutor to apply for a management ban when rogue dissolutions occur; and
2. An amendment to an existing regulation in the Bankruptcy Act whereby a dissolution without assets counts in assessing whether there is recidivism.

Directors who repeatedly or seriously abuse a dissolution without assets, thereby duping creditors, may be temporarily barred from holding a directorship or supervisory board position by this extended board ban. This can be imposed if a number of conditions are met.  

This Temporary Law on Transparency accelerated liquidation provides a temporary arrangement of two years. It may be extended if there is an intention to introduce it permanently. On July 5 this year, the law was published in the Official Gazette and as of November 15 it will enter into force. 

We are happy to advise you on the (accelerated) liquidation of your company. Want to know more? Please contact one of our specialists.