Dissolution and liquidation in one deed is also known as ‘turboliquidation’ because of its speed compared to the ordinary procedure. Where speed is one of the biggest advantages of turboliquidation, there is also a downside to it. A good consideration of the procedure to be used is therefore always important.
Conditions of application
Since the entry into force of the new Companies and Associations Code (hereinafter referred to as: CAC), the conditions of application of the turboliquidation have changed slightly.
First of all, it is necessary to consider Article 2:71 of the CAC, which (in application of Article 2:70, 1° of the CAC) regulates the procedure to be followed for the voluntary dissolution of a private limited company (bv), cooperative company (cv), public limited company (nv), European company or European Cooperative Society. This article stipulates that the dissolution can be effected by a resolution of the general meeting, with due observance of the formalities, the attendance quorum and the majority depending on the type of company.
Before the general meeting can adopt the resolution to dissolve the company, a number of formal requirements must be met. For example, the managing body must explain the proposal for dissolution in a report that is included in the agenda of the general meeting. This must also be accompanied by a statement of assets and liabilities drafted no more than three months before the gathering of the general meeting in question or, if the company ceases or is likely to cease operations, a statement of assets and liabilities drawn up in accordance with the same valuation rules as apply to annual accounts. This applicability of the aforementioned valuation rules can be circumvented subject to justification. Subsequently, if applicable, the appointed commissioner or an auditor or external accountant appointed by the management body must check the aforementioned statement of assets and liabilities and issue a report thereon explicitly stating whether the statement gives a true and fair view of the company’s situation. A copy of the aforementioned reports as well as the statement of assets and liabilities must be sent to the partners.
Compliance with these formal requirements is very important: if one of the reports is missing, the resolution of the general meeting pronouncing the dissolution will be null and void. Consequently, the company will be deemed never to have been dissolved.
Important to know: in the case of a general partnership (VOF) or limited partnership (Comm. V.), the reports and the statement of assets and liabilities as set out above must also be drawn up if one wishes to make use of the turboliquidation.
In order to effectuate the conclusion of the liquidation in the same deed as the dissolution, Article 2:80 of the CAC must be taken into account. This article stipulates that turboliquidation is possible if three cumulative conditions are met. First of all, no liquidator may be appointed. Secondly, all debts, both towards partners or shareholders as well as towards third parties mentioned in the statement of assets and liabilities must have been paid or at least the necessary funds must be consigned for this purpose. The payment or consignment must also be confirmed in the report of the commissioner or the appointed auditor or external accountant.
A novelty since the entry into force of the WVV is that not all debts have to be paid or the funds have to be consigned for payment. Creditors can confirm in writing that they agree to the application of a turbo liquidation without their debts having been paid or the funds having to be consigned for this purpose. Such written agreements must also be confirmed in the report of the commissioner, auditor or external accountant.
Finally, depending on the type of company, different voting conditions must be met in order to take the decision regarding the turboliquidation. For example, there must be unanimous consent of all partners in a VOF or Comm. V. A unanimous vote of the shareholders present or represented is required for the other types of companies, but these shareholders present or represented must represent at least half of the total number of shares issued in the case of a bv or cv, or at least half of the capital in the case of a nv.
Dissolution and liquidation in a single deed, or turboliquidation, is often applied for its simplicity and speed. Moreover, this speed can have additional advantages, such as the fact that no new annual accounts have to be filed, social security contributions for new quarters can be avoided, and so on.
The fate of so-called ‘forgotten’ assets has also been clarified since the entry into force of the CAC: if, after the closure of the liquidation, assets appear that were not known at the time of closure, these will accrue in undivided co-ownership to the partners or shareholders, each for their share in the liquidated company.
If, however, ‘forgotten’ assets appear, a creditor whose claim has not been paid in full may demand the reopening of the liquidation. Previously, this was only possible if the closure decision was affected by fraud. In the event of a turboliquidation, the court may appoint a liquidator, even though no liquidator was appointed in the deed.
However, there are also drawbacks to this method of liquidation. For example, the shareholders of a BV, CV or nv will be liable for the debts that have not been paid or consigned at the latest at the conclusion of the liquidation without the need to prove bad faith on their part by the creditor in question, as opposed to an ‘ordinary’ liquidation, where bad faith must be proven before there is such liability. Note that joint and several liability is explicitly excluded here. For each shareholder, however, this liability is limited to the amount received as a result of the repayment of his contribution and his share in the liquidation balance. In addition, shareholders who were acting in good faith may exercise a right of recourse against the directors who were last in office.
Although turboliquidation is undoubtedly the simplest and quickest method of liquidation, one should always take the possible disadvantages into account when deciding to start a turboliquidation. In the event of a turboliquidation, verification of the outstanding debts is all the more important in order to avoid possible liability on the part of the shareholders. To avoid all risks, it is therefore better to allow this verification process to take a little longer than to carry it out in a cursory manner.