Foreign legal entities such as the English “Limited” (Ltd.) are recognized in the Netherlands. Abuse of these legal entities occurs regularly. What can you do if you have money from such a limited?
Background
The countries of the European Union recognize each other’s legal entities. This means that a Dutch BV can be active in Germany, a German GmbH can enter into obligations in Belgium, a Belgian BVba can open a branch in the Netherlands, and so on. Not strange in itself. The oldest company on shares, the Vereenigde Oostindische Compagnie, was already active all over the world. A “foreign” legal person can apply to register with the Dutch Chamber of Commerce. If you request an extract, it is stated what the generic name of the foreign legal entity is, who the director (statutory director) is or are and where the company is located. In this article we discuss the activities of the English “Limited” (abbreviated Ltd.) in the Netherlands.
Abuse occurs regularly
It may happen that an English Limited has been incorporated in the United Kingdom, but that the company only has activities in the Netherlands from the start. Well. If an entrepreneur lives in the Netherlands and only focuses on the Netherlands, why did he not opt for a BV? It is perfectly permissible and legal if a Dutch entrepreneur is active in the Netherlands with a Limited, but it often happens that the motive for this is not pure. It is allowed, but it is not always pure coffee. If you are reading this page, you may be dealing with such a situation.
Reasons for using a Limited
One reason for using a Limited may be that the entrepreneur has a history of bankruptcy or fraud, which means that he can no longer set up a Dutch BV at the notary. The Limited is then an escape route if the entrepreneur wants to continue with a business. Bankruptcy fraud occurs regularly. The resources used to combat fraud are not international. Moreover, there are many service providers that actively offer Limiteds and help entrepreneurs get started. Setting up a Limited is not expensive and very easy. An entrepreneur with a past can therefore quickly start again without any obstacles. That makes the Limited attractive.
If a Limited does not offer a recourse
You can litigate against a Limited with an office in the Netherlands before the Dutch court. The judgment can be executed by a bailiff (the steps required to collect payment). If it indeed concerns a rogue entrepreneur, he may not offer recourse, which means that there are no assets and bank balance in the name of the Limited. The creditor is then left empty-handed. The only thing left to do is file for bankruptcy. This can lead to collection , but it can also lead to bankruptcy. Then the mala fide practices of the entrepreneur end. The trustee may also initiate an investigation.
Which creditors usually immediately opt for a bankruptcy application?
One creditor is not the other. Some creditors have special interests or can claim a special legal arrangement in the event of bankruptcy. Employees with arrears of salary can, for example, be reimbursed for their wage arrears with 13 weeks retroactive effect from the UWV on the basis of the wage guarantee scheme . For that reason, employees often opt for bankruptcy immediately; a procedure before the subdistrict court is only a waste of time for them. The same often applies to lessors of commercial real estate . In the event of the tenant’s bankruptcy, they receive the leased property and can rent the space to another tenant who does pay the rent.
Is the Dutch court competent?
If a Limited has all activities in the Netherlands, the Dutch court can hear a bankruptcy application and declare the bankruptcy. The court will then appoint a Dutch trustee. This is not stated in the Bankruptcy Act but in the European Insolvency Regulation . So it does not matter that the Limited is incorporated under UK law and has its registered office in the UK. If a legal entity has activities in several countries, the courts have jurisdiction of the place from which the company manages its interests, i.e. where the head office is located (“Center of main interests” or COMI criterion ).
How do you approach your procedure?
Only a lawyer can file for bankruptcy with the court. The lawyer requests the correct documents from the Dutch Chamber of Commerce and from the Chamber of Commerce in the country where the foreign legal entity was incorporated. In the case of a Limited, this is an extract from the “Companies Registration Office”. The lawyer also prepares the application and submits the supporting documents. The application is usually dealt with in court within 4 weeks, always on a Tuesday. A bankruptcy application is a simple and inexpensive procedure that quickly provides clarity.
After the judge’s ruling
A creditor who files for bankruptcy wants payment in the first place: it is a collection pressure tool. If the bankruptcy is declared, the entrepreneur loses his rights over the company and the bankruptcy trustee settles the bankruptcy. The creditors can then submit their claim. The bankruptcy trustee also investigates whether there is fraud and he can tackle mala fide entrepreneurs with coercive measures. The curator will report the employees with overdue salary to the UWV, which will reimburse the arrears. Furthermore, the trustee terminates the contracts, including the lease of the business premises, so that the lessor can lease the business premises to another person.
written by Marius Hupkes
