Fast-track liquidation requires better control and enforcement
Leiden University has published a research report on the working of the Temporary Act on the Transparency of Fast-track Liquidation in the Netherlands. The Act aimed to facilitate faster and more transparent business termination. Has this been achieved?
Fast-track liquidation is the term for the rapid procedure for the dissolution and termination of a legal entity that no longer has any assets. It is in the interest of entrepreneurs that their business can be terminated in a straightforward manner through fast-track liquidation. At the same time, creditors value a transparent procedure to ensure they are not unfairly disadvantaged during the process.
The Temporary Act on the Transparency of Fast-track Liquidation was introduced in 2023. It aimed to achieve a better balance between the interests of entrepreneurs and those of creditors, removing the disadvantages of fast-track liquidation as much as possible while retaining its advantages. A number of obligations and sanctions were introduced to achieve this.
However, the research conducted by Leiden University and SEO Amsterdam Economics has revealed that the Act is not contributing significantly to tackling fraud and abuse in fast-track liquidation. The reason for this is the limited monitoring and enforcement of compliance with the obligations that were introduced. This is having a negative effect on the operation of the Act.
The researchers recommend extending the Temporary Act, but ensuring more effective monitoring and enforcement of compliance. An extension is recommended as the Act has led to improvements in certain areas. During the period of the extension, a bill can be prepared to amend the Act.
The research was commissioned by the WODC (Research and Data Centre) at the request of the Dutch Ministry of Justice and Security. The empirical research was conducted in collaboration with SEO Amsterdam Economics.