Temporary law on transparency turboliquidation
A boom in bankruptcies was expected at the beginning of the Covid pandemic. This expectation did not materialise, partly due to the many support measures that the government has rigged for business. Many companies took advantage of NOW, TVL and also special tax deferral schemes. These schemes have now expired and companies have to stand on their own feet again and possibly repay excess support received. From 1 October 2022, entrepreneurs will also have to repay deferred taxes. For this, they have a deadline of five years. It was revealed this week that tens of thousands of companies have not yet started repaying these deferred tax debts. The tax authorities recently sent warning letters.
Despite the end of support measures, there has not yet been a big increase in bankruptcies. For now, there is only a slight increase. The introduction of the WHOA (Homologation of Private Arrangements Act) has only limited reach so far and cannot be seen as a cause of the low number of bankruptcies.
However, a trend of entrepreneurs themselves deciding to quit can be observed. For the private limited company, this brings turboliquidation back into the picture. In August 2021, LVH reported in an article on turboliquidation that a draft bill Temporary Turboliquidation Transparency Act had been drafted. On 16 February 2023, the second chamber passed the bill as a hammer piece. On 14 March 2023, the first chamber disposed of the bill as a hammer piece. The date of entry into force will be further determined. The purpose of the bill is to increase the protection of the position of creditors and transparency on the scheme and thus prevent abuse.
Turboliquidation
Turboliquidation is a quick way to dissolve a private limited company. This form is designed for companies that have no assets. Since there are no assets, there are no assets that need to be liquidated. There will be no liquidator and the company is immediately dissolved and deregistered from the Chamber of Commerce. This method of dissolution is settled in a few days. Creditors often only notice later that the company on which they have a claim has been deregistered and no longer exists.
Reopening liquidation
If a creditor does not agree with the way the company’s assets have been liquidated – and in the case of a turboliquidation, no liquidation has taken place – the creditor can request the court to reopen the liquidation. Any creditor can make such an application. However, if these proceedings show that there are no assets that can still be liquidated, reopening the liquidation is pointless. There is no interest. The creditor must therefore make a plausible case that there is still a potential benefit to be expected. The court must exercise restraint in assessing this potential benefit. The presence of such a benefit may be assumed quickly.
Company in liquidation
If the company grants the application to reopen the liquidation, the company will revive (in liquidation), but only for the purpose of settling the reopened liquidation.
Appointment of liquidator
The court will appoint a liquidator who will have to examine whether there are any assets and, if so, distribute those assets. Not infrequently, the court will draw from the known pool of liquidators when choosing a liquidator.
Costs
A creditor should not proceed too lightly to request the reopening of the liquidation. The company whose liquidation has been reopened has no funds (yet) so the creditor will have to pay the liquidator’s costs. If the liquidator subsequently concludes that there are no assets that still need to be liquidated, the creditor will have had a lot of costs without any proceeds (a benefit still to be distributed).
Impact temporary law transparency turboliquidation
Under the new law, in the event of a dissolution without assets, the board must file a balance sheet and a statement of income and expenditure for the financial year in which the company was dissolved with the trade register within 14 days. This must include a description of the cause of the lack of assets at the time of dissolution, the manner in which the company’s assets have been realised and how the proceeds have been distributed.
Immediately after these documents are filed, the board of the company must notify the unpaid creditors in writing.
Penalties for liquidation in breach of the new law
If the board of the company does not comply with the obligations under the Temporary Transparency Turboliquidation Act, the court may, at the request of the public prosecutor’s office, impose a board ban or a fine if:
the board has not filed the previously mentioned documents;
the management board has significantly prejudiced creditors;
the board has been involved in a dissolution without assets at least twice before in the 2 previous years, unless the board is not to blame.
Changed position of creditors
Will the new Temporary Act on Transparency of Turboliquidation really improve the position of creditors now? That remains to be seen. The board of the company to be dissolved will have to take some additional measures. But the obligation to file documents and communicate to creditors does not take away the fact that the decision to dissolve has been taken and creditors are confronted with the consequences of this decision afterwards. If they believe the liquidation was not carried out correctly, the ball remains in the creditor’s court to apply for the liquidation to be reopened. The new law does not change this.
Looking for a corporate law lawyer?
If you would like to know more about the dissolution of a company, turboliquidation or a request to reopen the liquidation, please contact Rob Steenhoek.
