A few concrete guidelines:

• How to deal with your creditors?
• Can you still hold a general meeting?
• Is it wise to pay a dividend?

Last week we posted an article with the do’s and don’ts for directors in times of crisis. You can find this article here. We received many additional questions from our clients and relations in reaction to this article. The most important topics we covered with them will be discussed in this article. For the sake of clarity: our previous do’s and don’ts remain of unchanged importance to directors.

• Dealing with your creditors

We rather advise you to proactively contact your creditors yourself (landlord, important suppliers, banks, etc.) if you foresee that you will not be able to pay them in the long run. In fact, experience shows that a proactive attitude produces more results and a higher award factor instead of just letting it happen. In that case, we advise you to first go through the contracts with your creditors to see what the possibilities are for deferral of payment, suspension and/or cancellation. Are you unable to find a solution? Feel free to call us, we will help you immediately. Once you have gone through this initial process, we advise you to draw up a letter containing the following elements: (i) indicate that you may run into payment problems in the long term, (ii) tell a clear and honest story, (iii) show understanding for the interests of your creditor, (iv) indicate what measures have been or are being taken by your company to deal with the crisis and (v) make a reasonable proposal for a settlement. If there is no acute inability to pay, avoid words to that effect to avoid the possible situation that the creditor may (and will) claim the debts immediately. In that case, explore the possibilities for future payment problems with your creditors. In principle, there is no obligation for directors to proactively and comprehensively inform their creditors with regard to existing agreements. Therefore, limit the provision of information to creditors to the extent of what is necessary. Should you be able to make an arrangement in this scenario, record it in writing and exercise the necessary caution; the crisis may take longer than you think.

• General meetings

You may not be able to avoid holding a general meeting on a short term. A major shareholder resolution may have to be taken or shareholders may require information on the financial impact of the crisis on the company. However, physical meetings are impossible or undesirable because of the measures taken. The articles of association of the company sometimes offer a solution and allow a “digital meeting” via video conference, for example. In that case, resolutions can simply be taken at the “digital meeting”. If the articles of association do not provide for this possibility, resolutions can always be taken outside a meeting. However, it is important that all shareholders, management board members and supervisory board members, if any, are aware of this possibility. We hope that you will find us with your possible questions. Finally, there are also possibilities to grant a proxy.

• Dividend payments

Be careful when making dividend payments. If, as a director, you participate in a dividend payment while the company is in a bad state due to the corona crisis, you run the risk of personal liability if the company is unable to pay its creditors at a later stage. Caution is therefore called for.

Do you have questions about this article or our previous article? Please contact Sander Pieroelie (+31 6 22287865), Henk Brat (+31 6 55394459) or Helger Kamerman (+31 6 51080197). 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 26 March 2020