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Unlawful misuse of legal entities

2009 March 12
by Hein Kernkamp

Court: Netherlands Supreme Court

Date: February 27th, 2009

LJN number: BG6445

Case: After an individual has been declared bankrupt it becomes apparent that his home is owned by one of various foundations, founded by the individual. The official receiver that has been appointed in the bankruptcy files suit. The central issue in the procedings was whether the foundations have committed a tort (unlawful act) by co-operating with the transfer of the home for the sole purpose to prevent the creditors of the individual to take recourse on the house.

Held: There can be an unlawful misuse of a legal entity in case someone who enjoys all benefits of a certain asset makes use of a legal entity to hold that asset for the sole purpose to prevent creditors from taking recourse.

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