15 April 2024
An ‘expedited liquidation’ is a relatively quick and simple procedure to dissolve a legal entity. This changed on 15 November 2023.
If a legal entity still has any assets after it discontinues business operations, the legal entity must be liquidated before it ceases to exist.
If there are sufficient assets to pay off all debts, then statutory liquidation proceedings must be followed. In case there are more debts than assets, then bankruptcy must be filed.
Both liquidation proceedings and insolvency proceedings contain various safeguards for creditors.
This differs with expedited liquidation. If there are no more assets, there is no need to go through liquidation proceedings at all, even if the legal entity still has debts. Once the resolution to dissolve is made, the legal entity ceases to exist. The board then reports this to the Trade Register. This process does not require financial accounts to be drawn up.
There has been considerable interest in expedited liquidation in recent years. Not only because expedited liquidation is frequently used, but also because it is easy to misuse. For instance, it allows regular liquidation proceedings – with safeguards – to be circumvented by proceeding towards a situation where no more assets exist. Creditors are then surprised by the expedited liquidation, cannot verify what happened to the assets and are left empty-handed.
You can find more information about the options that creditors have after an expedited liquidation here.
On 15 November 2023, the Expedited Liquidation Transparency (Interim Measures) Act (Tijdelijke wet transparantie turboliquidatie) came into force. This law has been introduced to curb misuse and improve the position of creditors.
The entry into force of the new law will impose an information obligation on the board. Within 14 days of dissolution, the board must file various documents with the Trade Register. These include 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 a description of the manner in which the legal entity’s assets were monetised and how the proceeds distributed. In addition, financial statements must also be filed if the legal entity was required to do so.
Acting in breach of these obligations is classified as an economic crime. A fine may then be imposed on the directors. They may also be subject to director disqualification.
Note that these obligations do not apply to directors of legal entities dissolved by expedited liquidation before 15 November 2023.
Are you planning to dissolve your company by expedited liquidation, and wonder whether you are in compliance with your obligations? Or perhaps you have another question about discontinuing your business? Please do not hesitate to contact us.
