Ending a legal entity through fast-track liquidation

What is a fast-track liquidation?

Fast-track liquidation, also known as turbo-liquidation, is a way to end a legal entity in the Netherlands. It can be used for:

• a private limited company (BV),
• a public limited company (NV),
• a coöperatie (cooperative),
• an onderlinge waarborgmaatschappij (mutual insurance association),
• a stichting (foundation)'
• or a vereniging (association). 

You cannot use a fast-track liquidation to end a sole proprietorship (eenmanszaak) or a general partnership (VOF).

Conditions for fast-track liquidation

You may only use fast-track liquidation if there is no money or other assets (proceeds) at the time you decide to wind up the business (also known as a resolution to wind up). You must also provide financial information and notify creditors.

Should you opt for a fast-track liquidation or not?

What are assets?

Assets include various items within a business, such as:

• money in the bank
• inventory and stock
• property
• shares in other companies.

Claims are also assets. Claims are payments that your business is yet to receive. Examples of claims are:

• an amount you will receive from clients or other debtors
• payments you can still receive if you take action. For example, if you send a customer a payment reminder
• a deposit that you get back after a rental period
• an amount you will get after cancelling an agreement

What if there are still assets?

Do you still have any money or other assets at the time of dissolution? If so, you cannot wind up the business via a fast-track liquidation. In that case, you must follow the standard deregistration procedure and first dissolve and liquidate the business: This means that you must:

• sell or distribute all assets
• repay all debts as far as possible
• take into account the interests and priority of creditors 

What if there are debts?

Fast-track liquidation is possible even if a business still has some debts but there are no assets. Are there significant debts? It may be better to file for bankruptcy. In a bankruptcy, you appoint a trustee who has experience in handling debts correctly.

Transparency Fast-track LiquidationAct

Under the Temporary Act on Transparency Fast-track Liquidation you as a director are required to provide financial accountability for the fast-track liquidation. You must do this by submitting various financial documents to KVK within 14 days of the resolution to dissolve the company. This enables creditors to verify how the proceeds have been dealt with and helps to prevent abuse of the scheme.

Submitting financial documents

These are the (financial) documents you must submit:

• A balance sheet and a statement of income and expenditure for the current financial year.
• If the financial statement for the previous financial year has not yet been submitted to us, please also include the details for the previous financial year.

And also an explanatory note in which you explain:

• why the legal entity has no assets (income) at the time of dissolution
• the amount of income generated and how this revenue was distributed (if applicable)
• why creditors have not been paid (if applicable)

Informing creditors

As the board of the legal entity, you must notify the creditors in writing that you have submitted the documents for fast-track liquidation to us. You can ask us for a copy of the information you have submitted via the KVK Service Centre. This will enable creditors to assess whether they agree to the fast-track liquidation.

If creditors suspect that errors have been made or that important information is missing, they may:

• ask the court for access to the financial records
• request that the liquidation be carried out again
• apply for the legal entity to be declared bankrupt, even if it has already been wound up

Risks of using fast-track liquidation

Fast-track liquidation may seem like a quick and simple process, but it also has risks. If you  carry out the fast-track liquidation incorrectly (either intentionally or unintentionally), you are in violation of the rules. As a director, you may be held personally liable. This could result in a fine or a ban on directorship.

Is it later discovered that the business still has an asset? Creditors can request that the liquidation process is reopened through the courts. This is also the case if the fast-track liquidation was applied incorrectly, either intentionally or unintentionally. Creditors can also apply for the bankruptcy of the already terminated legal entity.

Personal liability

Creditors can hold a former director personally liable via legal action if the director has acted unlawfully with intent. This can, for example, if the director:

• knowingly paid some creditors and not others without considering the order of priority among creditors
• hides money or assets, for example by transferring money to a private account shortly before the fast-track liquidation
• sells stock or assets at an unrealistically low price
• deliberately disadvantages creditors
• withholds important financial information

Fine for late submission of financial documents

If you fail to submit the documents in full or on time, you are committing an economic offence, which is a crime. The Financial and Economic Integrity Service of the Ministry of Finance may draw up an official report on this. The Public Prosecution Service may then impose a fine on you. The Public Prosecution Service may also bring the case before a court.

Ban on directorship

In certain situations, the Public Prosecution Service can request a ban on directorship. If this happens, you are banned from holding any directorial positions in a legal entity for a maximum of 5 years. This can happen if, for example, you: 

• do not follow the rules governing fast-track liquidation
• deliberately disadvantage creditors
• have been involved, on at least 2 occasions in the past 2 years, in a bankruptcy or fast-track liquidation in which creditors were not paid in full. You are personally blamed for this having happened

Ongoing (employment) agreements

It is not usually advisable to choose fast-track liquidation if there are debts or ongoing agreements. For example, rental or employment contracts that cannot be easily ended. If you do then choose for fast-track liquidation, you run the risk of being personally liable as director. 

Consequences for insurance, permits and financial schemes

Dissolving and deregistering a legal entity can affect:

• business bank accounts
• financing
• insurance
• pension funds
• (municipal) permits

To avoid problems, always check with the organisation you are dealing withm before deregistering the legal entity.

Getting started with fast-track liquidation

Do you want to wind up your organisation via a fast-track liquidation? If so, first check that there really are no assets left. 

If in doubt, seek advice from an accountant, a solicitor or the KVK Advice Team. You can then proceed with the procedure that applies to your legal structure:

• Fast-track liquidation for a private limited company (BV)
• Fast-track liquidation for a stichting, vereniging, or VvE