Turbo-liquidation of an empty BV or foundation: what directors must watch for

Introduction

A window-frame company leaves six customers with defects and unpaid judgments, dissolves itself through a turbo-liquidation and, shortly afterwards, continues its activities under a new name. The customers are left empty-handed — the company no longer exists. Even so, in March 2023 the District Court of Rotterdam ordered the director to pay, in person, over €109,000 in unpaid claims.

For a director, turbo-liquidation is the fastest way to bring an empty BV (a Dutch private limited company) or foundation (stichting) to an end: a dissolution resolution, a notification to the Commercial Register, and the legal entity ceases to exist. No liquidator, no waiting period, no costs. It is precisely that simplicity that tempts carelessness. Whether a director walks away unscathed or becomes personally liable depends on a handful of choices around the moment of dissolution. The judgments analysed show sharply which choices these are.

What is turbo-liquidation?

Turbo-liquidation is not a separate procedure but an application of Section 2:19(4) DCC. That subsection provides that a legal entity which, at the time of its dissolution, no longer has any assets ceases to exist at that moment. No liquidation then follows. The board merely files a notification with the Commercial Register.

Importantly, the arrangement is not reserved to the BV. Section 2:19 DCC appears in the general provisions of Book 2 and therefore applies to every legal entity: the BV and the NV, but equally the association, the cooperative and — often overlooked — the foundation. An empty foundation can therefore also be turbo-liquidated. The only difference lies in the dissolution resolution: for a BV the general meeting decides (Section 2:19(1)(a) DCC), for a foundation the board, unless the articles of association provide otherwise. In 2022 the District Court of Midden-Nederland applied to the board of a turbo-liquidated foundation exactly the same liability standard as to a director of a BV.

The only statutory condition is the absence of assets. Debts may well exist — that is precisely the situation for which the arrangement is intended. The concept of "assets" is interpreted broadly: it covers not only existing assets but also potential assets, such as outstanding claims, goodwill, a trade name or a claim in respect of directors' liability. A person who liquidates while such assets existed did not meet the statutory condition.

Since 15 November 2023 the Temporary Act on Transparency of Turbo-liquidation (Tijdelijke wet transparantie turboliquidatie) also applies. The new Section 2:19b DCC requires the board, within fourteen days of the dissolution, to file with the Commercial Register a balance sheet and a statement of income and expenditure, together with a description of the cause of the absence of assets and the reason why creditors have remained unpaid. Annual accounts not yet published must still be filed, and creditors are informed in writing. If that obligation is breached and creditors remain unpaid, the district court may, under Section 2:19c DCC, impose a civil-law directors' disqualification. The arrangement has since been extended until 15 November 2027, and the State Secretary has announced an intention to anchor the obligations permanently thereafter. Directors would therefore do well to treat the filing and information obligations as permanent.

When may you turbo-liquidate — and when not?

For a director who wishes to bring a legal entity to an end, the difference between three routes is decisive. With dissolution with liquidation (winding-up), existing assets are wound up: a liquidator sells the assets, pays the creditors and distributes any surplus. In a bankruptcy, a trustee in bankruptcy appointed by the court takes over the assets and distributes them among the creditors collectively. In a turbo-liquidation there is nothing to distribute: because assets are entirely absent, liquidation is dispensed with and the legal entity immediately ceases to exist. Which route is permitted depends on the financial position — and the case law guards that boundary strictly.

If there are assets, liquidation is the appropriate route. The liquidator — as a rule the board itself (Section 2:23 DCC) — realises the assets and distributes any surplus to those entitled (Section 2:23b DCC). If the liquidator discovers that the debts exceed the assets, then in principle bankruptcy must be applied for, unless all known creditors consent to continuing the liquidation outside bankruptcy (Section 2:23a(4) DCC).

If the debts exceed the assets, the company belongs in a bankruptcy. This may be applied for by the company itself or by a creditor, and presupposes that the debtor has ceased to pay and that there is more than one creditor. A trustee in bankruptcy appointed by the court then attaches the entire estate, investigates the estate — including for possible claims from a bankruptcy actio pauliana or from directors' liability — and distributes the proceeds according to the statutory order of priority. For the board one boundary is decisive: if the estate is empty from the outset and nothing further can be generated, then filing for its own bankruptcy is not a valid choice but an abuse of power. In the R.M. Trade case (18 December 2015) the Supreme Court held that in that situation the board must take the route of Section 2:19 DCC, because a bankruptcy without assets to distribute merely saddles the trustee with unpaid work. Advocate General Timmerman set that choice against the wider problem of the "empty estates" — bankruptcies without recoverable assets — and argued for a statutory solution. The same abuse standard applies where a creditor seeks to force the bankruptcy of an already turbo-liquidated company; that situation is dealt with separately in the analysis on filing for bankruptcy against an empty estate.

If assets are entirely absent, turbo-liquidation remains — and for the board it is not only the fastest but the legally correct route. The company is dissolved and, because there is nothing to liquidate, immediately ceases to exist (Section 2:19(4) DCC). The boundary is, however, more subtle than "whether or not there is a balance in the account". Potential assets also count: outstanding claims, goodwill, a trade name or a claim in respect of directors' liability (Section 2:9 DCC). If such assets exist, turbo-liquidation was not permitted. It is precisely on this point — the presence of existing or potential assets — that virtually every dispute about turbo-liquidation turns, and there arises the personal liability that is the focus below.

What must a director watch for in a turbo-liquidation?

The case law yields five concrete points of attention for a director who wishes to turbo-liquidate:

1. Establish that there really are no assets — including potential ones. Inventory, receivables, goodwill and a trade name all count.
2. Ensure proper records. The absence of filed annual accounts turns against the board in virtually every set of proceedings.
3. Comply with the filing and information obligation of Section 2:19b DCC, on pain of a directors' disqualification.
4. Do not continue the business without accountability in a new company; a transferred asset without arm's-length consideration is a red flag.
5. If the estate is genuinely empty, choose turbo-liquidation — and not filing for your own bankruptcy, because that is then an abuse of power.

When are you personally liable as a director?

Personal liability does not arise easily: what is required is that the director can be made the subject of a serious personal reproach (Section 6:162 DCC). In a turbo-liquidation this is the case where the board liquidated while it knew, or ought to have known, that there were still assets from which the creditors could have been paid.

The window-frame case before the District Court of Rotterdam shows how things go wrong. The customers argued that, on its dissolution, the company still held inventory, tools, receivables and a trade name that had passed to the new company. Because they themselves had no access to the records — and the company had never filed annual accounts — the court placed an enhanced burden of assertion on the former director, who after all held the books. When he produced not a single document to show that the assets had disappeared, it was established that assets still existed and that the director knew of them. That amounted to a serious personal reproach and therefore liability for the full loss. The co-defendant father was not regarded as a de facto director: he was a sales adviser and point of contact, but did not determine policy.

The flip side of that same broad concept of assets appears from a judgment of the Court of Appeal The Hague. The maintenance company S.A.S. B.V. dissolved itself only after the construction-industry funds had applied for its bankruptcy, arguing that there were no assets. The court held, in line with the Adjuncten Properties/Söderqvist judgment, that a company that has disappeared through turbo-liquidation can still be declared bankrupt where possible assets prima facie appear. Because S.A.S. had never published annual accounts, it was established under Section 2:248 DCC that the board had manifestly improperly performed its duties. The resulting liability claim constituted, in the court's view, a potential asset for the estate — enough to uphold the bankruptcy.

When does a turbo-liquidation hold up?

Turbo-liquidation is a legitimate instrument, and not every creditor's complaint succeeds. In a real-estate case before the District Court of Noord-Nederland, the creditor Evemij reproached the director for having turbo-liquidated two companies. The court dismissed the claim: the mere fact of a turbo-liquidation does not amount to a serious personal reproach — with a genuinely empty estate, a bankruptcy application would in fact constitute abuse, as appeared above. The creditor who argues that assets still existed bears the burden of assertion on that point, and Evemij did not make it plausible that anything remained after repayment of the preferential tax debt.

That the liability framework for the foundation is identical is confirmed by a case before the District Court of Midden-Nederland in Lelystad. The board of a foundation that ran a band had divided the assets among the band members and then turbo-liquidated the foundation. A band member dismissed as a director claimed over €47,000 and held the remaining directors personally liable. The court applied the same standard as for a BV and dismissed the claim: the claimant turned out to have no due and payable claim against the foundation at all. Without a claim there is no prejudiced creditor, and therefore no ground for directors' liability.

What does this mean for directors?

The common thread is that turbo-liquidation itself is rarely the problem; the handling of assets and records is. A person who wishes to liquidate would do well, before the dissolution resolution, to record that and why there are no assets, to put the annual accounts in order and to comply with the filing and information obligation of Section 2:19b DCC. As soon as assets, claims or goodwill pass to another company, the consideration must be at arm's length and demonstrable — the absence of substantiation shifts the burden of proof to the director. For creditors the mirror image applies: a turbo-liquidation can be challenged, but only with concrete indications of concealed assets. Further background can be found in the analysis on directors' liability and insolvency and in the overview of when a director bears the estate deficit.

Cited case law

Supreme Court
- Supreme Court 27 January 1995, ECLI:NL:HR:1995:ZC1631 (Adjuncten Properties/Söderqvist)
- Supreme Court 18 December 2015, ECLI:NL:HR:2015:3636 (R.M. Trade)

Advocate General's Opinion
- Opinion of Advocate General Timmerman 6 November 2015, ECLI:NL:PHR:2015:2336 (in HR 18 December 2015, R.M. Trade)

Courts of Appeal
- Court of Appeal The Hague 2 July 2015, ECLI:NL:GHDHA:2015:1846

District Courts
- District Court Noord-Nederland 2 March 2022, ECLI:NL:RBNNE:2022:870
- District Court Midden-Nederland 23 November 2022, ECLI:NL:RBMNE:2022:4610
- District Court Rotterdam 15 March 2023, ECLI:NL:RBROT:2023:2334

Juriaan de Vries — lawyer at Prime Law, specialising in corporate and commercial litigation. See the disclaimer.

See also

• Directors' liability: the bases and the defence
• Bankruptcy and the trustee
• Filing for bankruptcy against an empty estate: court of appeal finds abuse of power
• Section 2:248 DCC: when does a director bear the estate deficit?
• Construction costs doubled at a beach club: the Beklamel standard and Ontvanger/Roelofsen
• De facto director: when is a non-director liable in bankruptcy?