De turboliquidatie van de BV (VDHI nr. 131) 2016/15.3.2:15.3.2 Recommendations to amend the law

De turboliquidatie van de BV (VDHI nr. 131) 2016/15.3.2

15.3.2 Recommendations to amend the law

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To remedy the legal defects and loopholes as far as possible and to ensure that the minimum possible misuse can be made of the turbo-liquidation as a method of dissolution of private companies, I recommend the following legislative changes:

A.I. Amendment of Book 2, Section 19(4) of the Dutch Civil Code

Amendment of the current Book 2, Section 19(4) of the Dutch Civil Code:

‘If the legal person no longer has any assets at the time of its dissolution, it then ceases to exist. In that case the board, or on application of Section 19a, the Chamber of Commerce and Industry, shall give notice thereof to the registers in which the legal person is entered.’

to:

If the legal person no longer has any assets and any liabilities at the time of its dissolution, it then ceases to exist. In that case the board, or on application of Section 19a, the Chamber of Commerce and Industry, shall give notice thereof to the registers in which the legal person is entered.

A.II. Explanation

Added to the condition for the turbo-liquidation, being the absence of assets at the time of dissolution, is the absence of liabilities at the time of dissolution. Under the literal wording of Book 2, Section 19(4) of the Dutch Civil Code, currently when only liabilities exist at the time of dissolution, no winding-up needs to take place, as a result of which Book 2, Section 23a(4) of the Dutch Civil Code does not apply. If a legal person has no (foreseeable) assets, but does have liabilities, a liquidation order must be filed (which otherwise in practice will probably often be lifted for lack of assets). In this situation the actions of the receiver will have a purifying effect in cases of misuse of legal persons.

B. Changes to guarantee the protection of creditors

To better guarantee the protection of creditors in the event of the turbo-liquidations and to restore the balance between the shareholders and the board of a private company, I recommend the following changes to the existing legal system:

i.

The shareholders will be involved with the declaration of whether or not assets exist at the time of the dissolution. On the one hand, because it is a declaration that has as a legal consequence that the company is dissolved. On the other, because an incorrect declaration (whether deliberate or not) can result in adverse consequences for the shareholders. This might include the risk of shareholder liability when it subsequently turns out that proceeding with the turbo-liquidation was wrongful and the company is nonetheless restored.

The involvement of the shareholders with the declaration can be achieved by legally require that the directors should prepare annual accounts or a simplified balance for the shortened financial year before the turbo-liquidation. The general meeting shall approve the annual accounts or the simplified balance.

ii.

The dissolution of a private company by means of Book 2, Section 19(4) of the Dutch Civil Code will be published in the Government Gazette and a nationally distributed daily newspaper, so that creditors become aware of the fact that the company has ceased to exist earlier.

iii.

The restoration of a turbo-liquidated company will be entered in the commercial register and published in the Government Gazette and a nationally distributed daily newspaper, so that creditors have the opportunity to become aware of the restoration (and therefore the opportunity to initiate legal proceedings against the company).

C.I. Amendment of Book 2, Section 23c(1) of the Dutch Civil Code

Amendment of the current Book 2, Section 23c(1) of the Dutch Civil Code:

‘If after the date on which the legal person has ceased to exist a creditor or party entitled to the balance turns up or the existence of an asset comes to light, the court can at the request of a stakeholder reopen the winding-up proceedings and if necessary appoint a liquidator. In that case the legal person is restored, but only for the settlement of the reopened winding-up proceedings. The liquidator is authorised to demand back from each of the entitled parties the excess that they have received from the surplus.’

to:

If after the date on which the legal person has ceased to exist a creditor or party entitled to the balance turns up or the existence of an asset comes to light, the court can at the request of a stakeholder reopen the winding-up proceedings and if necessary appoint a liquidator. In that case the legal person is restored with retrospective effect, but only for the settlement of the reopened winding-up proceedings. The legal person is then regarded as continuing to exist to the extent necessary for the winding up of its assets. The liquidator is authorised to demand back from each of the entitled parties the excess that they have received from the surplus.

C.II. Explanation

Added to the current legal wording concerning the reopening of the winding-up proceedings and the associated restoration of the legal person is that the legal person is restored with retrospective effect and that the legal person is regarded in such situations as continuing to exist to the extent that this is necessary for winding up its assets. This change is necessary to make clear that retrospective effect is attached to the restoration, as a result of which a restored legal person must be regarded as continuing to exist in the interim.

This is because without retrospective effect of the restoration, the actual aim of the restoration of a (legally valid) turbo-liquidated company (guaranteeing the protection of creditors by liquidating the assets still in existence) is not done justice, at least in the situation in which there is an asset that did not yet exist at the time of dissolution. Where no retrospective effect is given to the restoration of a company in such a situation, the company did not exist at the time of the appearance of the asset and a non-existent company cannot of course be a debtor. The provisions laid down in Book 2, Section 19(5) of the Dutch Civil Code – that following dissolution the company continues to exist to the extent that this is necessary for the liquidation of its assets – also do not apply in the case of a legally valid turbo-liquidation: the turboliquidated company ceases to exist on the dissolution, precisely because no assets exist and therefore no liquidation of the assets is possible.

D. Amendment of the scope of Book 2, Section 248(6) of the Dutch Civil Code

The current Book 2, Section 248(6) of the Dutch Civil Code stipulates that the board of a private company can only be held liable for improper administration that has taken place three years before the insolvency. According to the parliamentary history, this limit was introduced to prevent the provision being too onerous for directors.

When directors have however deliberately chosen to put a private company through the turbo-liquidation, they do not in my view deserve this protection and the threeyear period of Book 2, Section 248(6) of the Dutch Civil Code does not need to be followed strictly.

E.I. Amendment of Section 8 of the Collection of State Taxes Act

Amendment of the current Section 8 of the Collection of State Taxes Act:

‘The collector publishes the tax assessment by sending or issuing the assessment notice drawn up for the tax debtor by the inspector, on the understanding that an invitation to pay, made by the inspector in the form of an electronic message, is sent to the tax debtor electronically by the collector.

A tax assessment is payable by the tax debtor in full.’

to:

The collector publishes the tax assessment by sending or issuing the assessment notice drawn up for the tax debtor by the inspector, on the understanding that an invitation to pay, made by the inspector in the form of an electronic message, is sent to the tax debtor electronically by the collector.

A tax assessment is payable by the tax debtor in full.

Notwithstanding paragraph 1, the collector publishes the tax assessment by serving it at the office of the Public Prosecution Service at the District Court in The Hague if the tax debtor has ceased to exist on the date of its dissolution and in so far as a claim for liability for its tax liability as referred to in section 49(1) has taken place. In that case an extract from the tax assessment is published in a national daily newspaper.

E.II. Explanation

Under the current tax liability regime there is no liability without a collectable tax liability. A tax assessment only becomes collectable under Section 9 in conjunction with 10 in conjunction with 8(1) of the Collection of State Taxes Act on expiry of a period laid down therein counting from publication of the tax assessment. Section 8 of the Collection of State Taxes Act stipulates that the Collector publishes the tax assessment by sending or issuing the assessment notice drawn up for the tax debtor by the inspector.

This regime has the result that – when a tax assessment is imposed on a company that has already been turbo-liquidated – the company has not defaulted on the payment of its tax liability because the tax liability is not collectable. It is however the opinion of the Supreme Court that when these formal requirements made of the tax liability are adhered to, in the present cases this does not serve an interest of the party held liable guaranteed by the Collection of State Taxes Act 1990 and detracts from the aim of the legal provision in the matter of directors’ liability. The party held liable (i.e. the former director who is held liable for the tax liability under Section 36 of the Collection of State Taxes Act) will not in such a case be able to remonstrate with the Collector that the assessment was not made known to those who have incurred the tax liability in accordance with Section 8 of the Collection of State Taxes Act.

In my view this approach of the Supreme Court is highly desirable, in particular with a view to judicial efficiency. However, because the Supreme Court, with this approach, sets aside as it were the legal requirement that the assessment must be made known to the tax debtor (Section 8 of the Collection of State Taxes Act), the legal certainty is impaired. With this in mind I recommend amendment of the legal wording of Section 8 of the Collection of State Taxes Act.

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