31 Mar Corona special (update) | How to deal with your debtors

Posted at 08:56h in Newsletters, Nieuwsbrieven, Nieuwsbrieven by

Once again we received many additional questions from our clients and relations as a result of our earlier post “Management measures during times of crisis“, such as ‘How to deal with non-paying clients?’ and ‘ What means are available in connection thereto, partly in view of the closure of the courts?’.

We advise you to observe the following steps.

  • First review the contracts with your clients . You may have general terms and conditions that are applicable. Determine what the exact arrangements are in general and in particular look at what has been determined about:

      1. payment terms and due date for outstanding costs and work in progress;
      2. the applicable interest rate and (collection) costs that may be charged in the event of late payment;
      3. the possibilities of demanding fulfilment of the terms of the contract or terminating the contract based on payment default and claiming damages; and
      4. the possibility to require security for payment of your invoices.

This is particularly a good time to check whether your general terms and conditions offer sufficient protection.

  • If you have taken out credit insurance, please contact the insurer directly to ensure that you do not omit any of the conditions set by the insurer.
  • Have you not taken out credit insurance? Notify the particular client in writing that he or she is late with the payment of outstanding invoices and has been in default since the expiry of the payment term(s). Summon your client to pay within a few (reasonable) days. Also state that interest and/or costs are due and hold your client liable for the damages that you suffer as a result of the payment default. Please feel free to contact us if we can further advise you on this matter.
  • Keep communicating with your client and investigate if you can reach an agreement for payment of the outstanding invoices. Stipulate securities (as far as this is possible and realistic). In connection hereto, think of pledges on inventory and personal guarantees from the director/major shareholder. If you reach an arrangement, record it in writing and exercise the necessary caution in doing so.
  • If you do not receive any payments on a short term, you can consider one of the following actions:

      1. enforcing payment through court proceedings. Due to the current crisis and the closure of the courts until a date to be determined after 6 April 2020, the handling of almost all current and new cases has been postponed or delayed. Enforcing payment through court proceedings therefor does not offer a quick solution. Summary proceedings have a turnaround time of approximately 6-8 weeks outside the crisis period and main proceedings 6-8 months. Apart from time, proceedings also cost money (lawyer’s fees, court registry fees). These costs are not allocated in full without special contractual arrangements. Collecting low claims or trying to collect money from insolvent clients, will generally cost more money than it generates. If a client is solvent, but one fears that this solvency will decrease over time, it is possible to seize goods or claims from the client (such as attachment on bank accounts). An attachment procedure is a separate petition procedure in which the client is not heard; the court often decides on the same day on which the petition is submitted whether the attachment request is granted. In view of the special nature of the procedure and the current crisis, requests for attachment are subjected to very critical scrutiny; the threshold is high in order to prevent clients from getting deeper into financial problems as a result of a casually granted attachment;
      2. applying for the bankruptcy of your client by means of a petition to the court (to be submitted by your lawyer). Bankruptcy can be applied for when your client is unable to meet his or her payment obligations towards you and at least one other creditor. One of the consequences of bankruptcy is that a trustee will be appointed by the court to manage the company, who will distribute the estate and/or investigate a restart of the company. Since a bankruptcy petition can be withdrawn, it is sometimes used as a means of exerting pressure, but it can be counterproductive if it destroys a company’s future earning capacity. It is advisable to be cautious with a bankruptcy petition and to consider it as a last resort.

We advise you to always keep communicating with your client, even if you may already have started court proceedings. It is always worth trying to make good agreements yourself, for example about instalments, interest due and possible securities. If so, make sure you set out these agreements in writing. The lawyers at Vestius can assist you with this.

Do you have questions about this article or our previous article? Please contact Sander Pieroelie (+31 6 22287865), Henk Brat (+31 6 55394459) or Sara Karem (+31 6 12871576). We are of course at your side in these difficult times and you can also reach us on our mobile phone number outside the usual business hours.

Published on 31 March 2020
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