Greater transparency and legal protection in rapid dissolution of businesses
With expedited liquidation, entrepreneurs can quickly and easily close down their business if the business no longer contains anything of value. However, expedited liquidations also carry a risk of abuse, especially if debts are left behind. Minister Franc Weerwind for Legal Protection is taking measures for more transparency, more legal protection for creditors and to prevent abuse. This will make expedited liquidation a more suitable way for entrepreneurs to close down their business. The measures are contained in the Expedited Liquidation Transparency (Interim Measures) Act, which came into force on November 15, 2023.
Expedited liquidations allow entrepreneurs to close down their business in time when the business no longer contains anything of value, for example, to sell the last stocks and use these proceeds to pay off as many debts as possible. In this way, an entrepreneur can prevent debts from mounting further if, for example, they can no longer be paid due to the loss of income. The alternative is often bankruptcy where creditors get much less of their money back. New measures should prevent potential abuse of expedited liquidations, increase transparency and offer creditors more legal protection. For example, entrepreneurs must actively inform creditors about the termination of the business.
In addition, in the event of an expedited liquidation, entrepreneurs will be required to submit financial accounts to the Chamber of Commerce. This makes it clear what the last proceeds were spent on and why more debts could not be paid. Greater transparency also makes it possible for creditors to take action against the expedited liquidation, for example by demanding access to the records, holding directors liable, or having the expedited liquidation reversed by the court. Abusing an expedited liquidation is punishable under the Economic Offenses Act and can lead to an administrative ban of up to five years.
To quickly introduce the measures for greater transparency and legal protection, an interim act has been chosen by which the measures will apply for two years. After this period, the measures can be extended.