Group liability

Many businesses are members of a group of companies. The bankruptcy or insolvency of one of the group companies can have a massive impact on the rest of the group.

Are there any intracompany debts?
Was the group recently restructured?
What is your exposure to any bank that has granted loans to the group for which all the group companies are jointly and severally liable?
Is the insolvent subsidiary being financed by the group?
Did the group obtain any collateral from the subsidiary?
Has an Article 403 statement been issued (under which the parent company accepts liability for the debts of all group companies)?

If the subsidiary has no choice but to go into liquidation, you need to have a clear picture in advance of the risks in terms of the liability of the company directors and any liability vis-à-vis the subsidiary’s creditors.

We regularly advise companies and pursue legal proceedings in this connection, acting not just as advisors but also as administrators and receivers.

Article 403 statements: for better or for worse

Groups of companies often issue something known in Dutch law as an ‘Article 403 statement’, i.e. a statement subject to Article 403 of the Dutch Civil Code. This exempts individual group companies from the obligation of preparing and publishing a separate set of financial statements, on condition that the parent company issues a written statement accepting liability for its subsidiaries’ debts. The Article 403 statement is filed at the local Chamber of Commerce (in the Trade Register). The statement lists the debts of each subsidiary for which the parent company is liable, and states the dates as from which this liability applies.

Not just large international companies, but also small groups (consisting of just two private limited companies, for instance) make use of this type of statement.

If your company issues an Article 403 statement, you should remember that, if one group company gets into trouble, this will also affect the other members of the group.

Indeed, the group may be unable to bear the strain and go under as a result. In the event of the group having to be reorganised, it is essential to ensure that the obligations resulting from an Article 403 statement are properly discharged, so that the other members of the group are given a safe passage to a secure future.

If you hear that one of your debtors is in financial difficulty, do find out whether it is the subject of an Article 403 statement. If it is and if the company goes into liquidation, you should be able to pursue a claim against the parent company for the full repayment of your receivable.

Our lawyers are highly experienced in dealing with Article 403 statements. Acting as we do regularly both as advisors to companies subject to such statements and as receivers, we are familiar with both sides of the coin and can supply you with precisely the type of assistance you need.