CONSOLIDATED LIQUIDATION OF BANKRUPT ESTATES UNDER THE LAWS OF THE NETHERLANDS ANTILLES AND ARUBA
Only possible in exceptional circumstances
Bankruptcy in general serves the purpose of liquidating assets and distributing the proceeds among the combined creditors.
Sometimes, several companies belonging to one and the same group of companies go bankrupt. In principle, the trustee in bankruptcy has to administer and liquidate the assets of each of the bankrupt estates individually.
A problem might occur if the businesses of the companies involved have been interwoven financially and/or organizationally in such a way, that it is exceedingly difficult to untangle the financial affairs of the various entities or not feasible from a cost perspective. If that is the case, the trustees (or the trustee if he has been appointed as such in respect of all the estates involved) may apply to the court and ask permission for a so-called combined liquidation (a.k.a. a consolidated liquidation or substantive consolidation).
If the court grants such permission, the separate estates will be liquidated as if it concerned only one bankrupt estate: the various assets and liabilities are dealt with (merged) in a single combined liquidation. The result will be that inter-company claims disappear. Also, instead of separate meetings of creditors, only one (combined) meeting of creditors will be held.
Since a consolidated liquidation might have far-reaching consequences for individual creditors (e.g. a creditor that has a claim against one company which is guaranteed by the other entities involved may face the elimination of the value of such guarantee), the court shall only grant permission if such liquidation has no foreseeable negative consequences for the various creditors.
Karel Frielink
Attorney (Lawyer) / Partner
