Temporary law on transparency of so-called “turbo liquidations”
On 14th March 2023 the Dutch Senate voted and adopted the Temporary law on transparency of the turbo liquidations (the “Law”). This means that the Law may enter into force shortly.
The so-called turbo liquidation currently allows for legal entities to dissolve and cease to exist providing that they do not have any assets. The turbo-liquidation procedure is an easy and fast procedure (the legal entity can be dissolved and deregistered from the Dutch Trade Register within days), no liquidation of assets and liabilities occurs. A turbo-liquidation can also be applied if the legal entity has no assets, however when it does have debts. The government deems that this feature leads to abusive situations.
The Law introduces several changes to the dissolution procedure by means of a turbo liquidation. Foremost, the board of directors will be required to file certain documents and information in order to ensure transparency to its stakeholders. By doing so, the government intends to improve the legal protection of creditors and combat abuse more effectively. Especially in those cases where the legal entity ceases to exist leaving behind debts.
These documents and information obligations consist of the following:
- Balance sheet and statement of assets and expenditures for the year during which the entity will be liquidated or if the balance sheet and statement of assets and expenditures is not available for that year, the balance sheet and statement of assets and expenditures for previous year;
- Description of the reason for lack of assets at the time of liquidation;
- If applicable: the way how the assets were liquidated;
- If applicable: the reason why the debts remained unpaid.
- Annual accounts of previous year(s) to the extent that the publication requirement was not met.
Furthermore, the Law prescribes that the board needs to inform the creditors of the legal entity about the turbo-application.
The Law authorizes the public prosecutor’s office to request the court to impose a ban to perform the function within the management board. The public prosecutor’s office is authorized to request such a ban if one or more creditors have not been satisfied partially or in full if:
- the member of the management board did not meet the requirements for filing the required documents;
- the member of the management board deliberately performed or omitted to perform acts on behalf of the legal entity performed or omitted to perform acts, as a result of which one or more creditors have been substantially prejudiced;
- in the two preceding years the members of the management board, either as such or as a natural person acting in the exercise of a profession or business, has been involved at least twice in a bankruptcy of a legal entity or in a termination of a legal entity by means of a turbo liquidation without satisfying creditor(s) partially or in full and the member of the management board is personally blamed for this.
Creditors will also have a right to inspect the retained records of the dissolved legal entity if the board has failed to meet its transparency obligations as outlined above.
This is a temporary regulation for two years, however it may be extended if there is an intention to introduce measures from this law permanently.
If you have any questions about the turbo liquidation procedure, please do not hesitate to contact us.
The information herein is general in nature and cannot be considered as advice.
