Does a claim against a company that ceased to exist after liquidation become time-barred?

The Dutch Supreme Court clarified in a recent ruling whether and, if so, when a legal action against a legal entity that has ceased to exist after liquidation would become time-barred. Also, the interruption doctrine came up for discussion. Hidde Reitsma, contract law lawyer, discusses the ruling and explains its outcome.

Dutch director provides security: limited company into liquidation

The Dutch bank Rabobank had concluded a financing agreement with a limited company. For this purpose, the director of the limited company had provided a security up to an amount of € 100,000. The limited company was declared insolvent on 6 April 2005, and on 2 March 2006, the liquidation was completed due to insufficient funds. The limited company had, therefore, ceased to exist.

Guarantor claimed that security had been extinguished

After the company ceased to exist, Rabobank demanded that the guarantor should be ordered to pay under the guarantee contract. The guarantor took the view that the guarantee had been extinguished pursuant to Section 853 of Book 7 of the Dutch Civil Code.

Bank’s claim against limited company time-barred?

For the application of Section 853 of Book 7 of the Dutch Civil Code, it is required that the right of action to claim the performance of the obligation by the limited company has become time-barred. In this case, this raised the question whether Rabobank’s claim against the limited company had become time-barred.

Dutch Court and Dutch Court of Appeal: claim not time-barred

The Court and the Court of Appeal both took the view that Rabobank’s claim against the limited company had not become time-barred and, consequently, the security had not extinguished pursuant to Section 853 of Book 7 of the Dutch Civil Code. The Court came to this conclusion after the following consideration. Rabobank’s claim continued to exist after the date on which the company ceased to exist and, if it should appear that there is any income, can be recovered pursuant to Section 23(c)(1) of Book 2 of the Dutch Civil Code.

Guarantor: ‘Claim had become time-barred’

The guarantor tried to overrule the Court of Appeal’s judgement in the Dutch Supreme Court by claiming that the claim had become time-barred because Rabobank had not interrupted the limitation period in respect of the limited company in time. The Supreme Court did not agree with this. A limitation period will not expire until the liquidation of the legal entity has been reopened. This means that reopening the liquidation is a prerequisite for the continuation of the limitation period. For this reason, a limitation period of a claim does not have to be interrupted during the period when the legal entity no longer exists.

No reopening liquidation of the company, no time-barring

A claim against a company that has been wound up after the liquidation order and has ceased to exist will not become time-barred until the company’s liquidation has been reopened. A new limitation period will run from the reopening of the liquidation. Furthermore, interruption of the right of action to claim the performance is not required during the period that the legal entity ceased to exist.

Lawyer for claims against liquidated companies

Are you a creditor with a claim against a company that was liquidated after a liquidation order and, therefore, has ceased to exist? The fact is that it is clear from the above that your claim in the Netherlands will not become time-barred until the liquidation of the company has been reopened. After all, a new limitation period of six months will commence from the moment of reopening.