Dutch law in German

A new (temporary) regime for turboliquidation

A new (temporary) regime for turboliquidation 525 400 Ekelmans Advocaten
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Turboliquidation, the process of swiftly winding up a legal entity, only exists in the Netherlands. Directors in countries such as Germany or England do not have this option. Turboliquidation is a coveted tool among ‘Dutch’ directors: as many as 36.456 turboliquidations took place in 2022. However, the landscape is about to change as the (prima facie restrictive) Temporary Turboliquidation Transparency Act is set to come into effect on 15 November 2023.

The quick and easy liquidation of a legal entity will soon be (partially) curtailed. On 14 March 2023, the Dutch Senate approved the Temporary Turboliquidation Transparency Act in response to concerns about fraud in turboliquidations during the corona pandemic. The aim of the law is to provide more transparency to creditors who are currently left in uncertainty following a turboliquidation. The law will be in effect for two years, with the option of a two-year extension, starting from 15 November 2023. With these impending changes, the question arises: Will turboliquidation continue to be an attractive option for the directors of Dutch BV or NV?

Turboliquidation, the process of swiftly winding up a legal entity, only exists in the Netherlands. Directors in countries such as Germany or England do not have this option.

How does turboliquidation currently work?

The current requirements for the turboliquidation of a company are simple. First and foremost, the company must find itself in a situation where it possesses no assets whatsoever—this means no inventory, cash, and outstanding receivables. To achieve this, directors initiate the process of “emptying” the company before proceeding with the turboliquidation. Subsequently, shareholders can pass a resolution of dissolution to officially terminate the company. Normally, in a standard liquidation, the liquidation phase then begins. However, in the case of turboliquidation, this phase is bypassed since the company has already been fully depleted of its assets. Consequently, the company ceases to exist immediately.

What changes for company directors and turboliquidating?

The fundamental requirements for turboliquidating a company remain unchanged. However, the director will now have to undertake additional actions. A mere report of the turboliquidation to the Chamber of Commerce will no longer suffice. Once the new law takes effect, directors must also submit supplementary documents and inform creditors accordingly.

These additional documents include:

  • A balance sheet and a statement of income and expenditure for the year in which the legal entity was dissolved, along with the previous financial year if, at the time of dissolution, annual accounts for that year have not yet been made public.
  • A description of the cause for the lack of benefits.
  • A detailed account of how the company’s income has been monetized and the proceeds distributed.
  • An explanation of the reasons why creditors remained wholly or partially unpaid.

Furthermore, the board is required to file financial statements for any previous financial years if they have not already been submitted. Additionally, the board must duly inform creditors about the filing of these documents with the Chamber of Commerce and inform them that the legal entity has been wound up.
The underlying objective of these obligations is to ensure prompt notification to creditors regarding the liquidation. Failure to fulfill these obligations could result in serious consequences for the board. In such instances, it would be considered an economic offense, subject to penalties that may include up to six months’ imprisonment, community service, or a fine of up to €22,500.

What is creditors are disadvantaged?

In the event that it comes to light that directors have caused harm to one or more creditors during the liquidation process, the court reserves the authority to impose an administration ban on those directors for a period of up to five years. The circumstances warranting such a ban include:

  • Failure of the directors to file the requisite documents with the Chamber of Commerce and neglecting to notify creditors of the ongoing liquidation.
  • Intentional actions taken by the directors prior to the turboliquidation that resulted in prejudice to one or more creditors.
  • Personal culpability of the directors for previous bankruptcy or turboliquidation occurrences, having been involved in such situations twice before.

The turboliquidation remains a useful tool despite the new requirements

The turboliquidation remains a valuable tool despite the introduction of new requirements. While the new law introduces additional obligations, turboliquidation still offers a convenient means to wind up or restructure legal entities. Shareholders should not be deterred by these new requirements, as the legislation primarily targets fraudulent activities and not those shareholders seeking a legitimate and efficient liquidation process.

Questions?

If your company has a Dutch branch and you are considering restructuring or dissolution, turboliquidation could still be a viable option for you. Should you require more information on turboliquidation or have any other questions related to corporate law, I invite you to reach out for a no-obligation consultation.

Author

Pim Lieffering is a corporate lawyer. He deals with all aspects of corporate law, from drafting and litigating on commercial contracts to advising on mergers and acquisitions. When Pim is asked a question, he always looks at the bigger picture. Because he looks just that little bit further, he regularly surprises his clients with creative solutions.

Dutch law in German

Dutch law in German 1200 801 Ekelmans Advocaten
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Nuances and differences in interpretation

Misunderstandings often arise when doing business abroad because of the differences between countries in their legal systems. The language barrier does not help either. Negotiations between Dutch and German business partners are often conducted in German, but this frequently results in interpretation differences, while nuances can also be ‘lost in translation’.

Our international German Desk team is specialized in giving Dutch and German clients legal advice and assistance in their cross-border activities. Because we understand both Dutch law and German law, we are able to explain the differences to lawyers working for a German company or law firm.

The differences are not only in the laws themselves but also in the procedures and practices. For example, people in the Netherlands are more likely to try and negotiate a deal whereas in Germany they resort to litigation sooner. Our firm has an outstanding track record in litigation but we often prefer other methods for settling disputes.

Businesspeople also frequently see a cultural difference in the rules and regulations. Broadly speaking, Germany has more rules and they are observed according to a literal interpretation. The Netherlands has fewer rules and the tendency is to look at what was intended rather than the literal interpretation.

It would be impossible for German lawyers, whether working for a company or a law firm, to master all the finer points of Dutch law. That is why our specialist team assists legal counsels and lawyers with practical advice and legal assistance in their activities in the Netherlands.

Lost in translation

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