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What are the eligibility criteria for initiating liquidation procedures? Are any entities explicitly barred from initiating such procedures?
One or more of the debtor’s creditors, the debtor itself or, in an exceptional case where public interest so requires, the public prosecutor can petition for bankruptcy. A bankruptcy proceeding can also be opened following a suspension of payment proceedings or a debt rescheduling scheme for natural persons. The criterion for opening bankruptcy proceedings is that the debtor has ceased to pay its debts and hence is in a state of insolvency. A creditor requesting bankruptcy has to:
- provide prima facie evidence of its claim against the debtor;
- demonstrate that the debtor is unable to pay its debts; and
- prove that there are multiple creditors, at least one of which has a claim against the debtor that is due and payable.
Notably, specific resolution regimes exist for banks and insurers, and proceedings concerning such institutions are excluded from the scope of the EU Insolvency Regulation (1346/2000).
What are the primary procedures used to liquidate an insolvent company in your jurisdiction and what are the key features and requirements of each? Are there any structural or regulatory differences between voluntary liquidation and compulsory liquidation?
The only Dutch insolvency procedure aimed at liquidation of an insolvent company is bankruptcy. A court-appointed bankruptcy trustee will liquidate the debtor’s assets and apply these to the creditors’ claims.
A bankruptcy petition should be filed with the competent district court:
- in the place of the debtor’s residence or domicile in the Netherlands;
- in the place of the debtor’s office, in the absence of a domicile in the Netherlands; or
- if the debtor has moved out of the Netherlands, its last known domicile in the Netherlands.
There is no framework under Dutch law for a voluntary liquidation of the company, other than a liquidation by means of distribution of the company’s assets followed by a dissolution of the company under Dutch corporate law.
How are liquidation procedures formally approved?
The court will declare a debtor bankrupt if it has ceased to pay its debts. From midnight on the day on which the bankruptcy is declared, the directors lose the authority to dispose of the company’s assets. All individual creditors’ actions and claims are automatically stayed.
What effects do liquidation procedures have on existing contracts?
As a rule, existing contracts remain unaffected by liquidation procedures. However, the Bankruptcy Act 1893 contains a number of provisions on the termination of contracts, including provisions for specific termination clauses for leases (Article 39 of the Bankruptcy Act) and labour contracts (Article 40 of the Bankruptcy Act). If the obligations under a reciprocal agreement have been wholly or partially fulfilled at the time of bankruptcy, the counterparty may request the trustee to declare within in a reasonable period whether the estate is prepared to honour the agreement. If the trustee is willing to do so, he or she must provide ample security to the counterparty for the performance of the estate’s obligations under the contract. If the trustee is not willing to honour the contract or fails to indicate this within the reasonable period set by the counterparty, the estate loses its right to demand performance of the agreement from the counterparty and the counterparty can dissolve the agreement and claim damages as an ordinary, unsecured creditor.
What is the typical timeframe for completion of liquidation procedures?
According to a Netherlands Research and Documentation Centre report:
- 30.9% of all bankruptcies of corporations terminated in 2015 were completed within 18 months;
- 51.2% were completed between 18 months and four years; and
- 16.4% had a lead-time of over four years, with shorter average lead times for liquidations procedures pertaining to natural persons.
Role of liquidator
How is the liquidator appointed and what is the extent of his or her powers and responsibilities?
The liquidator is a court-appointed officer charged with the administration and liquidation of the bankrupt's estate. Neither the debtor nor the creditor can select the liquidator; the liquidator is appointed at the discretion of the court. Bankruptcy trustees are typically lawyers who specialise in insolvency law.
Immediately upon appointment, the bankruptcy trustee must take any necessary steps to preserve the estate. The liquidator’s authority to manage and dispose of the debtor’s estate applies retroactively from midnight on the day on which the bankruptcy is adjudicated.
The liquidator can open letters and telegrams addressed to the bankrupt. In addition, he or she will immediately take possession of the debtor’s records. Whenever the debtor is asked to appear, he or she must appear before the liquidator and provide him or her with all requested information.
What is the extent of the court’s involvement in liquidation procedures?
The trustee is subject to the supervision of the supervisory judge, who supervises the administration and winding up of the estate. Certain acts require the trustee to obtain the supervisory judge’s approval – for example, starting legal proceedings, terminating employment and rental contracts and disposing of assets.
In certain cases and at the request of the debtor or a creditor, the supervisory judge can order the trustee to perform a specific act or refrain from performing an intended act. The court has the power to dismiss the trustee at the request of the supervisory judge, a creditor or a debtor.
What is the extent of creditors’ involvement in liquidation procedures and what actions are they prohibited from taking against the insolvent company in the course of the proceedings?
If desired by the creditors, the court may nominate a committee of creditors to advise the trustee. However, the trustee is not bound by the committee's recommendations. In practice, the nomination of a creditors’ committee is uncommon.
Director and shareholder involvement
What is the extent of directors’ and shareholders’ involvement in liquidation procedures?
The corporate law capacities of the directors and shareholders are generally unaffected by insolvency procedures. The shareholder is entitled to any liquidation surplus.
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