2.2 Deficit liquidation

Bankruptcies versus (deficit) liquidation

Companies in difficulty sometimes prefer the liquidation of the company over a restructuring or a bankruptcy. Such liquidation almost always ends with a deficit. In the new Code of Companies and Associations, the possibility of a deficit liquidation is now also legally anchored and regulated for the first time (see Articles 2:84 and 2:97 of the WCA).

In a bankruptcy, the trustee is chosen and appointed by the commercial court. In a liquidation, the shareholders largely retain control over the company and the settlement of the liquidation. They can appoint a liquidator of their choice.

In a liquidation, the existing negative impact and reputational damage surrounding a bankruptcy (and the publicity that goes with it), as well as the negative impact on the creditworthiness of the involved directors (and shareholders) of the company can be avoided.

A liquidation usually proceeds faster and is less costly (hourly rate compared to scales calculated on realized assets in bankruptcy).

There are therefore different possibilities for recovery in addition to bankruptcy:

• Deficit liquidation: the liquidation is concluded with a deficit with the consent of the creditors and outside of bankruptcy. The creditors are thus left entirely or partially out in the cold with their explicit consent.
• Ordinary liquidation with forgiveness of debts: prior to or following the liquidation, a (explicit or implicit) forgiveness of debts by the creditors takes place so that the liquidation can be concluded without a deficit.
• Ordinary liquidation with takeover of debts by the shareholders: the shareholders accept taking over the deficit at the conclusion of the liquidation so that the liquidation can be concluded without a deficit.
• Restructuring under the Act on the Continuity of Enterprises (amicable agreement and judicial reorganization whose admission requirements are relaxed).

We act as liquidator of companies, even if there is a risk that the liquidation will result in a deficit.