Reopening the liquidation of a dissolved company
The dissolution of a legal entity can occur in several ways. In this blog, Corporate lawyer Sjoerd Yntema discusses the method of dissolution, the subsequent liquidation and the situation in which creditors or
The assets of a Dutch company reflect the value of all that the company possesses
» Meer over assets assets are dealt with after the legal entity has ceased to exist.
Dissolution of the company
Article 2:19 of the Dutch Civil Code provides an exhaustive list of the existing grounds for dissolution. Dissolution can occur:
- after a decision seeking dissolution made by the general meeting, or the directors of a foundation;
- due to the occurrence of an event that results in dissolution in accordance with the
articles of association
A document, drawn up when a Dutch company or legal person is set up, and which regulates the operations of the company and defines its purpose.
» Meer over articles of association Articles of Association;
- after declaration of bankruptcy by either bankruptcy due to the state of the liquidation assets, or due to insolvency;
- by the complete absence of members in the event of an association, cooperative or mutual insurance company;
- by a ruling made by the Chamber of Commerce (Chamber of Commerce);
- by a court in cases stated in law.
Dissolution by a decision of the Chamber of Commerce can occur if – briefly stated – there are two grounds for dissolution as referred to in Article 2:19a of the Dutch Civil Code. This can be when no directors are registered, no annual accounts are published, and/or tax is no longer paid. Cases of dissolution by a court can be found, among others, in Article 2:20 and 2:21 of the Dutch Civil Code. These concern legal entities whose activity or purpose is contrary to public policy, have deficiencies in formation, whose articles of association do not comply with the legal requirements, or when the legal entity does not fall under the legal description of its legal form.
The dissolution must be made public by registration in the commercial registry. The Chamber of Commerce will announce this in the Staatscourant (Government Gazette) or on the Chamber of Commerce website.
After the dissolution has been declared by a court or in another manner, the assets of the legal entity must be liquidated. In principle, in the event of voluntary dissolution, the directors act as liquidators. In other cases, the court appoints the liquidators.
Liquidators assert the rights of the legal entity, ensure debts/liabilities are paid, and distribute the surplus between the shareholders. During the liquidation period, the name of the legal entity is assigned the term, “in liquidation” so it is clear to everyone that the legal entity has been dissolved.
If there are no assets at the time of dissolution, the legal entity ceases to exist immediately (i.e. without liquidation) pursuant to Article 2:19 (4) of the Dutch Civil Code. This is known as turbo liquidation. In other cases, the liquidation is considered complete when the liquidator believes there are no further assets to be settled. At that time, the legal entity ceases to exist.
After the legal entity has ceased to exist, a creditor or a previously unknown asset may emerge. In that case, the court may reopen the liquidation and, if deemed necessary, appoint a liquidator at the request of an interested party.
The interested party must submit an application to the court, and the court shall then assess whether the applicant has sufficient interest in a reopening. The applicant must demonstrate there is an unsettled asset or, should the interested party be a creditor, that a liquidation balance has been paid to the interested party that can be recovered.
Legal entity is revived
When the court decides to reopen the liquidation and appoint a liquidator for this purpose, the legal entity is revived, but only for the purpose of liquidation. The liquidator is then authorised to claim the excess balance from all entitled persons.
Our corporate lawyers have extensive experience in the field of dissolution, liquidation and reopening of liquidation, and regularly advise and litigate on this.