GCV: temporary amendment to turbo liquidation law insufficient

A (temporary) amendment to the law is not sufficient; the necessary measures must be structural in nature. This is according to the Joint Committee on Corporate Law (GCV) in its advisory opinion on the preliminary draft Temporary Act on Transparency on Turbo Liquidation. The legal scope created to combat abuse must be effectively utilized.

The preliminary draft regulates the voluntary dissolution of a legal entity without assets, also known as turbo-liquidation. In its advisory opinion (pdf), the GCV endorses the desirability of improving the position of creditors when using turbo-liquidation. With improved, transparent information provision, creditors will be able to challenge prejudice and thus be better protected. However, the GCV also raises several reservations about the preliminary draft in its advisory opinion.

Abuse
There are indications that many entrepreneurs, partly due to the coronavirus crisis, are considering using turbo liquidation. The expected increase in the use of this scheme increases the risk of abuse if the legal entity ceases to exist, leaving behind debts. Leaving debts unpaid can be related to unlawful or fraudulent conduct by directors. This bill aims to increase the transparency of turbo liquidation, improve the legal protection of creditors, and more effectively combat its abuse.