On 18 December 2015, the Supreme Court passed an important judgement on the possibility for a receiver to object to a liquidation based on a winding-up petition filed by the legal person itself.
When a company is put into liquidation, a receiver is appointed. According to the Dutch Bankruptcy Act (Faillissementswet), any interested party can object to a company being put into liquidation. In the relevant case, a private company with limited liability had been put into liquidation after the company had filed a winding-up petition itself. However, the receiver quickly discovered that there was no income at all, and that none was to be expected either. Therefore, the receiver argued that his activities would only increase the debts, while paying the creditors would not be possible. This was due to the fact that the receiver’s salary is charged to the estate as estate debt. The receiver argued that, in the relevant case, the company should have been dissolved. Therefore, he objected to the company being put into liquidation, taking the position that, in petitioning for liquidation, the company had abused its authority to do so.
As the law is unclear on this, the court requested a preliminary ruling from the Supreme Court on whether the receiver is an interested party within the meaning of the Dutch Bankruptcy Act and whether he can object to the liquidation.
The Supreme Court answered both these questions in the affirmative. The receiver is an interested party as, pursuant to his appointment, he has various statutory obligations to discharge of his duties. Within that framework, he incurs expenses, as a result of which he becomes a creditor to the estate. The Supreme Court ruled that this creates a legal relationship with the debtor.
According to the Supreme Court, the objection is only allowable if it concerns an estate that has (practically) no assets and there are no claims in connection with fraudulent preference and improper administration. A receiver who considers objecting will therefore have to determine this quickly.
It is important to note that this judgement does not mean that the receiver can also object to a natural person being declared bankrupt. The Supreme Court has explicitly indicated that, in answering the questions it was asked, it would limit itself to situations in which a legal entity has been put into liquidation at its own request. An important difference is that a natural person cannot be dissolved pursuant to Section 2:19 of the Dutch Civil Code.
Based on this judgement, receivers may be expected to make use of the possibility to object more often in the future. This makes it important for directors who are unsure as to whether the company should be dissolved or should file a winding-up petition to ensure that they take the correct course.
Further information
For additional information please feel free to contact Peter de Graaf.
