How to close a company in the Netherlands: ‘Turbo’ liquidation of a Dutch legal entity

In the Dutch legal system, there are two ways to dissolve a legal entity: formal dissolution proceedings and “turbo liquidation.” A law amending the legal provisions on turbo liquidation came into force on 15 November 2023. International companies in particular are struggling with these new regulations. The Ecovis experts explain the details.

While the formal dissolution procedure is subject to several legal requirements, such as a two-month objection period and publication in a national newspaper, turbo liquidation comes into effect when a legal entity has no assets at the time of the dissolution resolution (by the shareholders). In this case, the legal entity automatically ceases to exist once this resolution takes effect.

What the new law on turbo liquidation means

There have been concerns about the misuse of turbo liquidation, especially when a legal entity with debts applies for the procedure. Since the entity is automatically dissolved when it has no assets, it does not need to account to creditors. If a creditor wishes to claim from the entity, it may no longer exist. The bill aims to increase transparency, improve the position of creditors, and combat misuse of the procedure. This should ultimately enhance trust in the use of turbo liquidation.

The bill introduces a requirement for management boards to disclose certain financial information when opting for turbo liquidation. In the event of non-compliance, management board members can be banned from acting as directors in the future. Additionally, it increases the ability of creditors to access information.

Do you need to dissolve a company in the Netherlands? We can help you ensure the process is legally compliant.

Allard Schuering, civil-law notary and partner KienhuisLegal – Member of ECOVIS International, Utrecht, Netherlands

How it works

In addition to the (shareholders) resolution to dissolve a legal entity without assets, the legal entity will be required to file certain documents with the trade register of the Dutch Chamber of Commerce. These documents include financial statements for the final year in which the entity is dissolved and the previous year if no financial statements have been made public, an explanation of the reason for the lack of assets and the existence of debts and, if applicable, how the assets were liquidated before the dissolution.

The board is also obliged to inform creditors in writing. Failure to comply will be punishable under the Economic Offenses Act. The penalty may include removal from the trade register and a ban for the managing director meaning that he/she cannot act as a managing director of any Dutch legal entity for the next five years. In the case of dissolution without assets, the managing director ban included in the Bankruptcy Act also applies. The Public Prosecution Service can also request a managing director ban.

Conclusion

The new law aims to improve the position of creditors and enhance the image of the turbo liquidation process. In practice, it means that there are more requirements that must be met before a company can be dissolved, even in a simplified manner.

For further information please contact:

Allard Schuering, civil-law notary and partner KienhuisLegal – Member of ECOVIS International, Utrecht, Netherlands
Email: Allard.Schuering@KienhuisLegal.nl