Turbo-liquidations in the Netherlands make it possible for entrepreneurs to shut down their business in time if the company has no remaining value—for example, to sell off final stock and use the proceeds to repay as many debts as possible. In this way, entrepreneurs can prevent debts from piling up when they can no longer be paid, for instance due to loss of income. The alternative is often bankruptcy, where creditors typically recover far less. The temporary law increases transparency, offers creditors stronger legal protection, and combats abuse.
Under the law, entrepreneurs must actively inform creditors in writing when they dissolve their company. In addition, they are required to submit financial accountability documents to the Chamber of Commerce when using a turbo-liquidation. This makes clear how the final proceeds were spent and why debts could not be fully repaid. There is a risk of abuse if debts remain unpaid. Thanks to the transparency measures in the temporary law, creditors can take action against a turbo-liquidation by demanding access to the company’s records, holding directors personally liable, or asking a court to annul the liquidation. Abuse of a turbo-liquidation constitutes an economic offense under Dutch law and may result in a director disqualification of up to five years.
An evaluation of the temporary law shows that it has largely achieved its objectives. With the financial accountability requirement, turbo-liquidations now offer more transparency and give creditors a stronger legal position. For this reason, the State Secretary intends to prepare a legislative amendment to make the temporary law permanent. The evaluation also highlighted the need to improve enforcement of turbo-liquidations, which will be addressed in the preparation of permanent legislation. In the meantime, the current temporary law will be extended by two years to ensure its provisions remain in effect.
Source: Rijksoverheid.nl
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