Date: November 21, 2016
Modified November 14, 2023
Written by: Reinier Pijls
Reading time: +/- 2 minutes
Every day, as business owner , you try to make your business a success. Nevertheless, unforeseen circumstances - a disappointing market or the bankruptcy of a major debtor - may cause your company to run into financial difficulties, forcing you to ask yourself whether it is still sensible and responsible to continue your business.
In that case, you should ask yourself whether it is necessary to pull the proverbial plug on the business - after all, there may be alternatives - and in what way, preferably least risky for you privately, this should be done.
The best way to terminate a business depends on your chosen legal form. Do you operate a sole proprietorship, a partnership (for example, a partnership or limited liability company) or do you do business through a limited liability company?
Assuming you are operating through a limited liability company, there are generally three ways in which the company can be terminated:
1. Through a dissolution and liquidation;
2. Through a turboliquidation;
3. Through a bankruptcy
Dissolution and liquidation of a company is the method prescribed by law for terminating a company if the company's income exceeds its debts. There may be grounds for dissolution and liquidation, for example, if you expect the company to incur a loss, which loss the company will not be able to sustain in the future, or if you wish to discontinue the business early for some other reason. With this method of termination, the General Meeting of Shareholders must pass a resolution of dissolution and appoint a liquidator who will liquidate the company's assets and distribute the proceeds to the company's creditors. Any balance (if any) is distributed to the shareholders.
If there are no assets and no debts, you do not need to dissolve and liquidate. In that case, you can "turboliquidate" the company. With this method of termination, the General Meeting of Shareholders passes a resolution for turboliquidation, after which the dissolution and cessation of existence are reported to the Registers of the Chamber of Commerce where the company is registered. Liquidation is therefore omitted with turboliquidation because there is simply nothing to liquidate.
There are some risks associated with turboliquidation, so it is important that you seek proper advice on this matter. Moreover, it is also unclear whether turboliquidation is allowed at all if, although the company has no assets, it still has debts. In recent rulings, the District Court of Gelderland (ECLI:NL:RBGEL:2016:3490) and the Arnhem-Leeuwarden Court of Appeal (ECLI:NL:RBMNE:2013:4941) are of the opinion that turboliquidation is not ruled out if there are also still debts.
If the company can no longer meet its payment obligations in the short term and there are several creditors whose claims go unpaid, the company is generally in a state of having ceased to pay. You should file for bankruptcy of the company in this case. After all, you do not want to be accused later of having "muddled through too long" or for a creditor to accuse you of having already known or should have known at the time of entering into an agreement with him that the company would no longer be able to fulfill the agreement and would no longer have any recourse. Indeed, in such cases you run the risk of being held personally liable for unpaid corporate debts. As a general rule, you would be wise in any case to carefully assess, prior to the bankruptcy, whether and if so what risks there are for you privately associated with an actual bankruptcy.
When filing for bankruptcy on its own, the General Meeting of Shareholders passes a resolution to file for bankruptcy, after which a petition is filed with the court requesting that the company be declared bankrupt. This is generally done by an attorney, but it is not mandatory.
One of the most difficult choices for a business owner is to decide whether, when and in what manner to terminate the business. We are happy to assist you with this difficult choice. We can also immediately investigate whether there are no alternatives to terminating the company so that you can continue your business. After all, that is what you want most.
As attorneys for business owners , we understand the importance of staying ahead. Together with us, you will have all the opportunities and risks in sight. Feel free to contact us and get personalized information about our services.