Voluntary Wind-Down - The Dutch Temporary Turboliquidation Transparency Act

What is a turboliquidation?

Dutch law provides for the process of a turboliquidation. This is an expedited process for the voluntary wind-down of a company, which can be used to liquidate a company that does not have any assets (but may still have liabilities). The purpose of a turboliquidation is to terminate inactive companies in a straightforward manner, in part to prevent their misuse and in part to clean up the registers of companies. 

If a turboliquidation is used, a company ceases to exist from the time of the decision by the (general meeting of) shareholders to dissolve the company, without a formal liquidation of the assets of a company being required. However, a company’s dissolution by operation of law is potentially open to abuse by dishonest directors who dispose assets to qualify for the process without accountability, since the former Dutch framework for the dissolution of companies without assets did not provide sufficient transparency safeguards for creditors.

The Temporary Turboliquidation Transparency Act

On 15 November 2023, the Dutch Temporary Turboliquidation Transparency Act (Tijdelijke wet transparantie turboliquidatie) (the TTTA) came into effect. It applies to voluntary liquidations occurring after 15 November 2023 and is valid for an initial period of two years. The TTTA increases transparency and accountability such that the board of a company must provide information on the company’s financial position. The objective is to strengthen protection for creditors and to prevent misuse of the turboliquidation process.

However, the TTTA does not change the fact that the company ceases to exist immediately after adoption of the dissolution resolution. Therefore, a company can still be wound down quickly using the process of a turboliquidation.

What information must be shared?

To increase transparency and accountability, the management board of the dissolved company must file with the Dutch Chamber of Commerce upon its dissolution:

• its annual accounts for the current fiscal year (and for the preceding fiscal year to the extent not yet published); 

• a description of: (i) the cause of the absence of assets, (ii) the manner in which the company’s assets have been liquidated and the manner in which the proceeds have been distributed, and (iii) the reasons why creditors remained unpaid; and 

• its financial statements for the preceding fiscal years (and if applicable the auditor’s report). 

Once this information has been filed, the managing board immediately must give written notice thereof to the company’s creditors. 

Gross failure to comply with the foregoing obligations or performing (or omitting to perform) acts which prejudice the company’s creditors may lead to director disqualification, meaning that a director is temporarily excluded from managing any companies (or being appointed as supervisory board member). The same applies to a director who, in the two preceding years, was subject to a bankruptcy or a turboliquidation at least twice, where the director was personally liable for the company’s creditors not being paid. In addition, not complying with obligations to file the annual accounts, descriptions, and financial statements is classified as an economic crime.

Turboliquidation or WHOA?

The Dutch restructuring tool, the WHOA (the Court Approval of a Private Composition (Prevention of Insolvency) Act (‘Wet homologatie onderhands akkoord’), also referred to as the Dutch Scheme, has been the centre of attention in the Dutch restructuring community (see ‘A bright future for the Dutch restructuring practice | Global law firm | Norton Rose Fulbright’). The WHOA has proven to be a successful restructuring tool, however it differs from a turboliquidation given their different goals. Nonetheless, the WHOA can also be used for a controlled wind-down of a company, particularly where a company still has assets, but these are outweighed by debts. 

A proceeding under the WHOA may be time-intensive, demands careful preparation, and requires the court’s approval. By contrast, a turboliquidation may be seen as a useful and expedited alternative when a company no longer holds assets.