On 15 November 2023, the Temporary Act on Transparency of Expedited Liquidation (Turbo Liquidation Act) will enter into force. It aims to increase trust in the expedited liquidation procedure by improving its transparency, the legal protection of creditors and combatting the abuse of the procedure.
Background
Expedited liquidation or “turbo liquidation” refers to the voluntary dissolution of a legal entity that has no assets at the time of dissolution. The legal entity ceases to exist, even if it still has debts. The turbo liquidation procedure is a simple and quick way to dissolve a legal entity.
The existing legislation is open to abuse because it allows directors to dissolve a company with debts but no assets without having to be held accountable. To combat the abuse, the Dutch government has introduced the Turbo Liquidation Act.
Key measures
- Accountability and disclosure obligation: The management board is obliged to file several financial documents with the trade register of the Dutch Chamber of Commerce within 14 days after the dissolution. The management board must notify its creditors of this filling without delay.
- Director disqualification: When creditors remain fully or partly unpaid, the court may, upon the request of the public prosecutor’s office, impose a disqualification on the director.
- Right of inspection: If the management board fails to comply with the accountability and disclosure obligation, creditors have the right to inspect the legal entity’s retained records with the authorisation of the subdistrict court.
What's next
The measures in the Turbo Liquidation Act initially apply for a period of two years. Throughout this period, the effectiveness of the measures will be monitored to determine whether the measures should be implemented permanently.
Find out more
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.
