Written by Sander Schouten @ AMS Advocaten
In The Netherlands, a legal entity can be dissolved through different legal procedures. Sometimes, the completion of a bankruptcy will lead to dissolution but more often a company is dissolved by a resolution of the general meeting of shareholders. Dissolution, however, does not automatically mean that the company has ceased to actually exist. Dutch lawyer Sander Schouten, specialized in Dutch corporate law, explains.
Ceased company cannot be sued in The Netherlands
When a Dutch private limited has ceased to exist, it is no longer possible for third parties to bring legal action against this company. There is no legal entity left to sue. This can have ramifications, for example, for creditors who still have an unsettled claim. Therefore the Dutch Civil Code has laid down some rules in order for dissolved limited to actually cease to exist.
Dutch Limited company in liquidation
If at the time of its dissolution the company has no assets, it will cease to exist, there and then. If the limited does have known assets, it will not cease to exist until the limited is officially liquidated. The limited is then “in liquidation” and is required by law to use this term whenever corresponding or communicating with third parties.
Distribution of credit balance by a Dutch liquidator
The (appointed) liquidator shall divide a credit balance among the creditors pro rata (passi paru) of their claims. Any credit balance after liquidation will usually be distributed amongst the shareholders. The liquidator needs to outline the way the credit balance is distributed in the accounts. The accounts and plan of distribution are available to anyone at the Chamber of Commerce. The publication of the accounts must be announced in a newspaper.
Dutch corporate lawyers can oppose accounts
Within 2 weeks after this announcement other creditors or persons entitled to do so, like their lawyers in The Netherlands, can oppose the accounts. If someone opposes the accounts, the liquidator has the option to amend the accounts if he decides to make an additional payment to the opposing party. The liquidation is completed when the liquidators are satisfied that all assets are accounted for. Only then, the company will cease to exist.
After completion of liquidation company will cease to exist
A judge, however, still has the power to reopen the liquidation on request of an interested party. In that case the company will restore but solely for the purpose of winding up the liquidation. So if there happens to be a creditor who claims the company still owes him money, the reopening of the liquidation is his last resort. Interestingly, a dissolved company can even be adjudicated bankrupt when it appears during the dissolution process that there are more debts than assets. The Court does need to assess, however, if bankruptcy is still relevant.
If you have any questions, please contact AMS Advocaten @ info@amsadvocaten.nl.
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