Turboliquidation under magnifying glass from 15 November

From 15 November 2023, there will be significantly more requirements for dissolving a company through turboliquidation. To prevent abuse and improve transparency for creditors, the legislator is creating accountability and disclosure obligations. Experts question the effectiveness of the measures.

Efficient and cheap, but susceptible to fraud

Turboliquidation has been around since 1994, but has gained momentum in recent years. In 2021, it involved about 44,000 business closures. This means that most companies terminate through turboliquidation.

The popularity of the remedy is due to its simplicity and cost-effectiveness. If the company meets the requirement that there are no more (potential) assets, the business closure does not involve a liquidator. The company may still have debts, but the company does not have to notify creditors. As a result, creditors sometimes discover years later that their debtor no longer exists and they can whistle for their money.

Moreover, taking action against a “turbo-liquidated” company is very difficult. If creditors suspect that a benefit is being withheld, they have to make this plausible themselves. This, while they usually have little information about the company. Often, a creditor will not have the information to make it plausible that any benefits are remaining. They are therefore 1-0 behind in most cases.

From 15 November additional information obligation

To accommodate creditors, the temporary Transparency of Turbine Liquidations Act regulates an improved information obligation. Under the new regime, the company’s directors being turboliquidated must file a balance sheet, annual accounts and a statement of ‘income and expenses’ with the Chamber of Commerce within two weeks.

It must also be clear what caused the lack of income and – if applicable – how the legal entity’s income was monetised and distributed. If creditors remain unpaid, it should also explain why this is so and, in addition, creditors should be notified after the documents have been filed. This way, the creditors can still defend against the turboliquidation.

Defence against turboliquidation

Creditors can oppose the turboliquidation in three different ways. They can (i) request that the liquidation be reopened, (ii) hold the board liable or (iii) file for bankruptcy.

Board ban for abusive directors

The fear of abuse in turboliquidations has also meant that directors who abuse the turboliquidation can now be banned from management. These are turboliquidations where debts have remained unpaid and:

1. Failure to comply with the filing obligation
2. Deliberately harmed one or more creditors
3. Repeated involvement in a dissolution in which debts have remained unpaid, where a personal fault can be attributed to this director.

The question is whether the soup is eaten as hot as it is served. According to an expert in the Financieel Dagblad, only the public prosecutor can apply for an administrative ban in turboliquidations. A similar model applies to bankruptcies. In the Netherlands, only 10 board prohibitions were imposed in connection with bankruptcy fraud between 2016 and 2021.

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