15.1 Summary

Misuse of companies: a topical problem. The many press reports about fraud involving private companies has not escaped the attention of the Dutch government: in recent years the Minister and Lower House members Groot and Recourt have instigated different initiatives to amend current legislation aimed at combatting and preventing fraudulent schemes with private companies. Surprisingly, current fraud prevention measures, initiated by the government, largely focus on insolvency fraud. At the same time some attention is given to the role of the civil-law notary in its prevention. The government’s primary focus on preventing insolvency fraud is not entirely incomprehensible. The latest figures from Statistics Netherlands date from 2010 and show that in that year nearly four billion euros in total remained in debts left unpaid, nearly 700 million of which resulted from fraudulent insolvencies. While tackling insolvency fraud, given the significant sums of money involved, is highly commendable, a number of critical questions can be raised about this approach by the government. Isn’t this targeted tackling of insolvency fraud actually leading to an unwanted result? Don’t the measures for preventing insolvency fraud result in more fraudulent schemes by which fraudsters actually ensure that the private companies do not become insolvent?

The turbo-liquidation as a method of dissolution appears to offer fraudsters an opportunity to limit personal risks. Book 2, Section 19(4) of the Dutch Civil Code offers the option of dissolving a private company without pursuing winding-up proceedings when there are no longer any assets at the time of the dissolution. The private company ceases to exist immediately after the board has made a statement of dissolution at the Chamber of Commerce. As no winding-up proceedings need to be pursued, the turbo-liquidation is seen as a cheap and quick way to dissolve a private company. The question arises however as to whether this assumption is correct. This research shows the opposite: the turbo-liquidation is not at all as simple as is often suggested. On the contrary, a carefully considered decision on whether or not to turbo-liquidate a private company’s requires thorough legal knowledge.

Although Book 2, Section 19(4) of the Dutch Civil Code is widely used in practice, my conclusion is that certain aspects of the content and the effect of the provision have not been well thought through. The legislative history of the turbo-liquidation to some extent accounts for the poor consideration of Book 2, Section 19(4) of the Dutch Civil Code: there is hardly any discussion of the turbo-liquidation in the parliamentary papers.

As a result of the misconception that the turbo-liquidation is quick and cheap, combined with legal snags associated with this method of dissolution and the stricter tackling of insolvency fraud, the turbo-liquidation seems to offer a way out to private company fraudsters. The fact that the turbo-liquidation simplifies fraudulent schemes with private companies can at least be called curious, since one of the underlying ideas behind the legislative proposal that in part resulted in Book 2, Section 19(4) of the Dutch Civil Code coming into existence was preventing misuse of shell companies.

In view of the above, a number of important questions are raised:

Answers to these questions are given in the next chapter.