Can directors’ liability still cause a turboliquidated company to declare bankruptcy?

Introduction

Dissolution of a company can take place in several ways in the Netherlands. One of these options is turboliquidation, a procedure described in Article 2:19 paragraph 4 of the Dutch Civil Code (BW). The essence of this is that at the time of the dissolution decision, there must no longer be any assets present in the company.

Nevertheless, it is possible that an unexpected (potential) benefit may arise after the dissolution. This issue was the focus of a decision of the District Court of The Hague on October 16, 2024 (ECLI:NL:RBDHA:2024:16981). In this case, a company that had previously been dissolved via turboliquidation was declared bankrupt after all, with a potential directors’ liability being considered a gain.

Facts and Background.

The matter revolved around a dispute between Oak Management B.V. (“Oak”) and a dissolved company (the “Company”). Oak claimed that it had a claim against the Company and argued that several creditors had not been paid. This prompted Oak to ask the court to declare the Company bankrupt.

The Company acknowledged both Oak’s claim and the fact that it had unpaid debts. However, by November 2022, it had already had itself dissolved and deregistered from the Chamber of Commerce, stating that there were no remaining assets in its assets. Therefore, according to the Company, bankruptcy was unnecessary.

Oak disagreed. It argued that the Company’s financial statements had not been timely filed, a violation of Article 2:394 of the Dutch Civil Code. According to Oak, this could give rise to directors’ liability under Article 2:248 of the Dutch Civil Code. This could give rise to a benefit justifying the Company being declared bankrupt.

Court’s analysis

The court assessed whether Oak’s petition met the requirements for a declaration of bankruptcy. In doing so, it concluded that:

1. Oak’s claim was sufficiently plausible;
2. There were multiple unpaid creditors; and
3. The Company was no longer able to meet its payment obligations.

An important point in the considerations was that, even after its dissolution, a company can still be declared bankrupt. This can be done if:

• There are indications that benefits are available; and
• The other conditions for bankruptcy are met.

In this case, the violation of the filing requirement was seen by the court as an indication of manifestly improper management. This improper conduct was presumed to be a major cause of the Company’s financial problems. On this basis, directors could be held liable for the deficit in the estate. Because the court assumed that a potential benefit could arise as a result, it decided to declare the Company bankrupt. Until the bankruptcy is settled, the Company will continue to exist.

Critical consideration

While this ruling is legally defensible, it also raises questions about the boundaries of turboliquidation and directors’ liability. In my view, the court should have examined more carefully whether the alleged claim against the directors was actually feasible. After all, the mere existence of a potential claim does not automatically mean that a tangible benefit is present.

Such a sweeping decision, such as declaring a dissolved company bankrupt, should at a minimum require at least a cursory review of the feasibility of the liability claim. Otherwise, there is a risk that a turboliquidation will be too easily breached on the basis of only hypothetical gains.

Questions?

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