Group liability

Many businesses consist of a group of companies. The bankruptcy of one group company can have serious consequences for the rest of the group.

Are there intercompany claims between the group companies? Have there been significant recent changes in these relationships? What is the exposure to the bank providing group financing for which all group companies are jointly and severally liable? Is the insolvent subsidiary financed by the group, and has the group obtained security for that financing? Has an Article 403 statement been issued under which the parent company has accepted liability for the debts of the subsidiaries?

Assessing the risks

If the bankruptcy of the subsidiary cannot be avoided, it is important to understand in advance the risks of directors’ liability and liability in relation to unpaid creditors of the subsidiary. RWV Advocaten regularly advises and litigates on these matters, both as advisers and in the capacity of administrators or bankruptcy trustees.

Article 403 statements: for better or for worse

Groups of companies often make use of an Article 403 statement. The reason is that subsidiaries belonging to the group may then be exempt from preparing and publishing separate annual accounts. The other side of the coin is that the parent company provides a written statement accepting liability for the obligations of its subsidiaries. This statement is filed with the Trade Register of the Dutch Chamber of Commerce. The statement itself specifies which debts of the subsidiary are or are not covered by the parent company and from which date.

This arrangement is used not only by large international groups, but also by small groups, for example those consisting of just two Dutch private limited companies (BVs).

If your business makes use of an Article 403 statement, bear in mind that if one part of the group runs into difficulties, this can affect the other companies and may weigh heavily on the entire group. In a restructuring, it is important to deal with the Article 403 statement correctly so that the other parts of the group can be brought to safety as effectively as possible.

If one of your debtors runs into difficulties, have it checked whether an Article 403 statement has been issued for that company. If so, even in bankruptcy you may recover your full claim from the parent company.

what our clients say about us

When a customer held Celtic Holding BV liable for losses allegedly suffered as a result of the bankruptcy of its subsidiary Celtic Koeling BV, Harjo Bakker took decisive action. His ability to explain complex legal issues in plain language was invaluable. Ultimately, we won the case, much to our satisfaction.

Joost van Klink

Celtic Holding BV