Suspension of payment in the Netherlands
Written by:
Marcel van den Ende
Dutch Court can grant suspension of payment
When a Netherlands company has payment problems, it can ask the Court to grant suspension of payment. During the period the suspension of payment is granted, the company cannot be forced to pay certain amounts owed. Suspension of payment will end once all creditors are paid, a private or judicial agreement is reached, or when the company is declared bankrupt.
Suspension of payment as alternative to bankruptcy
Suspension of payment is a deferment of payment for a company in temporary financial difficulties. Suspension of payment is requested through a petition from the District Court. Are you considering applying for a moratorium? Then consult a lawyer in advance who can advise you and submit the petition on your behalf.
Deferral
Suspension of payment means "deferred payment" and is aimed at the survival of a company.
For a moratorium, there must be temporary and financial problems to be solved in the short term.
Suspension of payment is often followed by bankruptcy
If it turns out that the financial problems are not temporary and the company can no longer structurally pay its bills, bankruptcy usually follows. It is for this reason that the legislator has started looking for a better functioning reorganization scheme for companies that are over-indebted, such as the Chapter 11 procedure in the United States. That has become the law called 'WHOA', which is expected to be introduced in 2020.
Law on the Homologation of a private agreement on debt restructuring (WHOA)
The WHOA makes it possible for companies with over-indebtedness to restructure debts by concluding a private agreement with their creditors and shareholders. If the conditions are met and the court approves the agreement, all creditors and shareholders are bound by it, even if they have not agreed to the agreement. This new coercion agreement provided for in the WHOA should make it possible for companies, that are over-indebted but are viable, to restructure outside the bankruptcy situation.
Dispute between shareholders and management
A shareholders' resolution is required for a bankruptcy application. The management is entitled to apply for a moratorium. If the shareholders do not want bankruptcy and the management sees no other option, applying for a moratorium is often the option. The administrator can still apply for the bankruptcy.
Further information
If you would like to discuss a possible moratorium on payments or the new WHOA with a lawyer, you can of course contact us to discuss this with us. It is not without reason that our motto is "Your problem, our concern."
More information?
Marcel van den Ende will gladly help you further.
