Bankruptcy in the Netherlands: how it works for entrepreneurs and creditors

A Dutch court declares a company or a person bankrupt when the debtor has stopped paying its debts and has more than one creditor. The main exception: a debtor who refuses to pay a single, genuinely disputed invoice is not bankrupt, and a business with negative equity that still pays its suppliers is not either. Below you will find how the test works, how a petition is filed and decided, what the trustee does, who gets paid first, and what directors and creditors should do.

The rules are in the Bankruptcy Act (Faillissementswet, Fw). Once a court declares bankruptcy (faillissement), all of the debtor’s assets come under the control of a court-appointed trustee (curator). A supervisory judge (rechter-commissaris) oversees the trustee. The trustee sells the assets and shares the proceeds among the creditors in the order the law sets.

Bankruptcy ends a business. It does not rescue it. If your aim is to keep the company alive, look at the alternatives further down this page first. From the moment the judgment is given, you lose control of the company and the trustee takes over. That is why the timing of your decision matters far more than the paperwork that follows.

When does a Dutch court declare a bankruptcy?

A court declares a bankruptcy when the debtor is in a position of having ceased to pay (opgehouden te betalen). In practice this means there is at least one claim that is due and payable, and at least one other creditor.

Article 1 of the Bankruptcy Act sets this single test. Case law fills it in with two requirements that a petitioning creditor has to make plausible. First, there must be a claim that is due and payable. Second, there must be at least one other creditor. This second requirement is called plurality of creditors (pluraliteit van schuldeisers). A debtor that refuses to pay one disputed invoice is not bankrupt. A debtor with several creditors it cannot pay is.

Insolvency in the accounting sense is not the test. It does not matter whether debts exceed assets. A company with a healthy balance sheet but no cash can be declared bankrupt. A company with negative equity that still pays its suppliers cannot. The court looks at payment behaviour, and it looks at the situation on the day of the hearing.

Does it matter whether the debtor is a person or a company?

Yes, a great deal. A company disappears after its bankruptcy, while a person keeps the unpaid debts.

The procedure applies to natural persons and to legal entities. When a legal entity is wound up in bankruptcy and nothing is left, the entity ceases to exist. Its unpaid debts disappear with it. When a natural person is declared bankrupt, the unpaid part of each debt can still be enforced after the bankruptcy ends. A bankruptcy therefore gives a private person no clean slate. Only the statutory debt restructuring scheme for natural persons (Wet schuldsanering natuurlijke personen, Wsnp) can do that.

Which procedure fits: bankruptcy, suspension of payments, WHOA or Wsnp?

Dutch insolvency law offers four routes. Bankruptcy liquidates, suspension of payments buys time, the WHOA restructures debts without insolvency, and the Wsnp clears the debts of a private person.

Choosing the wrong route, or choosing too late, is the most expensive mistake in this field. The table below sets out the main differences.

The WHOA is the route most often overlooked. Its full name is the Act on the Confirmation of Private Composition Agreements (Wet homologatie onderhands akkoord). It allows a company that is heading for insolvency, but still has a viable business, to impose a composition on unwilling creditors. It can even bind shareholders, as long as the statutory safeguards are met.

The WHOA only works while there is still something to restructure. In practice that means months before a bankruptcy petition would be filed. Our article on the WHOA scheme explained sets out the procedure. Suspension of payments is covered in a separate article.

What do these procedures cost and how long do they take?

That differs too much between cases to give a reliable figure. Any amount quoted in advance is a guess.

A small bankruptcy without assets is often closed within months for lack of assets. A group insolvency with foreign subsidiaries can run for years. What we can say is this. The supervisory judge fixes the trustee’s fee, and that fee is paid out of the estate before the creditors receive anything. The fees of a WHOA restructuring are paid by the company itself, and they can be substantial.

How is a bankruptcy petition filed and decided?

There are three routes: the debtor files its own declaration, a creditor petitions the court, or the public prosecution service applies in the public interest. The district court of the debtor’s place of business or residence decides.

How do you file your own bankruptcy?

You use the court’s own form, you do not need a lawyer, and the judiciary charges no court fee for this procedure. What the court does need is a complete picture of your finances.

A natural person, or the board of a legal entity, can file its own declaration (eigen aangifte). The form states which documents to attach. Expect to provide a recent statement of assets and debts, a list of all creditors with amounts and addresses, an overview of assets and their realistic value, recent bank statements, and the employment contracts of any staff. An incomplete filing costs weeks. Those weeks matter when payroll is due.

How does a creditor’s petition work?

A creditor’s petition must be filed by a Dutch lawyer (advocaat) under Article 5 of the Bankruptcy Act, and the creditor pays a court fee. The creditor must make both its own claim and the other creditors plausible.

Usually the creditor names a supporting creditor whose claim is also unpaid. There is no statutory minimum amount for the claim. When a debtor argues that a claim is too small or disputed, the debate is about whether the claim can be established quickly in these summary proceedings, not about a figure. The court fee is set each year and published by the judiciary. It is higher for organisations than for private individuals.

What happens at the hearing?

The hearing takes place in chambers, usually within a few weeks, and it is short. The court often decides the same day or shortly afterwards.

The debtor can appear and explain why the test is not met or why the claim is genuinely disputed. The debtor can also ask for suspension of payments instead, which the court may grant. It is often sensible to put your position in writing before the hearing. If the debtor pays or secures the petitioning claim before judgment, the basis for the petition normally disappears.

In its judgment the court appoints the trustee and the supervisory judge. The bankruptcy is entered in the Central Insolvency Register (Centraal Insolventieregister), which anyone can consult.

What changes on the day of the judgment?

The debtor immediately loses the power to manage and dispose of its assets. Creditors can no longer enforce their claims individually.

Attachments lapse. Pending proceedings about claims that must be verified in the bankruptcy are suspended. You can appeal against a declaration of bankruptcy, but the time limits are short. In the meantime the judgment takes effect straight away.

What does the trustee do?

The trustee manages and liquidates the estate in the interest of all creditors together, under the supervision of the supervisory judge. The trustee is not the debtor’s adviser and does not represent any single creditor.

That distinction surprises entrepreneurs and creditors alike. In practice the trustee takes possession of the books and records and secures the assets. The trustee decides whether to continue the business for a while, collects outstanding invoices and sells what can be sold. The trustee also publishes reports on the bankruptcy at regular intervals.

Can the trustee undo transactions made before the bankruptcy?

Yes. Legal acts that harmed the creditors can be set aside through the avoidance action (faillissementspauliana).

For certain acts performed within one year before the bankruptcy, Article 43 of the Bankruptcy Act presumes that both parties knew the creditors would be harmed. This includes many acts with related parties. The other side must then prove the opposite. Transferring assets to a friendly buyer shortly before the filing is the most common way for a director to turn a bad situation into personal liability.

The trustee’s second important power is the investigation into how the board ran the company. That investigation is where claims against directors come from. We discuss them below.

How do creditors submit their claims?

Creditors submit their claims to the trustee, not to the court. The trustee checks each claim against the records.

Disputed claims are dealt with at the verification meeting (verificatievergadering) or in separate proceedings that follow from it. In many Dutch bankruptcies no verification meeting is ever held. The estate turns out to hold too little, and the court closes the bankruptcy for lack of assets. Filing a claim is still worthwhile. It costs little, and it is the only way to share in a payout if there is one.

Who gets paid first?

The law sets the order, not negotiation. Secured creditors come first, then the costs of the estate, then preferential creditors, and ordinary creditors last.

Creditors with a right of pledge or mortgage stand outside the bankruptcy. They may enforce their security as if there were no bankruptcy, although the trustee can set them a reasonable period to do so. What remains goes first to the estate debts (boedelschulden). These include the trustee’s fee and obligations the trustee itself takes on. Next come the preferential claims, among which the tax authority and employee claims rank prominently. Only then do the ordinary unsecured creditors share what is left, in proportion to their claims. In an insolvent estate, ordinary creditors often receive nothing at all.

What happens to employees in a bankruptcy?

Employment contracts do not end automatically when a bankruptcy is declared. The trustee may give notice without permission from the UWV or the court, and with a shortened notice period.

Under Article 40 of the Bankruptcy Act, the trustee observes the agreed or statutory notice period, but never needs to give more than six weeks. In practice the trustee gives notice within days. Until the contracts end, they continue, and the wages over that period become estate debts.

Employees are protected by the wage guarantee scheme run by the UWV. It takes over unpaid wages for a limited period before the end of employment, the wages during the notice period, and holiday pay and holiday allowance within statutory limits. Employees apply to the UWV directly, usually at an information meeting organised by the trustee. The scheme does not cover a transition payment (transitievergoeding) on dismissal by the trustee. It also does not cover claims that fall outside the statutory periods.

What is a restart out of bankruptcy?

A restart (doorstart) is a sale by the trustee of the viable parts of the business to a new company. It is not a way to shake off debts: the buyer acquires assets, while the old debts stay behind in the estate.

The assets sold are often stock, contracts, the customer base and goodwill. The trustee must obtain the best achievable price for the creditors. A former director who wants to buy back the business will therefore be compared with competing bidders and will have to pay a market price.

Employees have no automatic right to move with the business in a genuine bankruptcy. Article 7:666 of the Dutch Civil Code disapplies the rules on transfer of undertaking when the employer has been declared bankrupt. The buyer chooses whom to take on and on what terms, within the limits of equal treatment law. Where the sale was prepared before the bankruptcy in a pre-pack, the position is less settled and specific advice is needed. Our article on a restart after bankruptcy deals with this route in detail.

When is a director personally liable after a bankruptcy?

A director is liable for the deficit in the estate if the board manifestly mismanaged the company in the three years before the bankruptcy, and that was an important cause of the bankruptcy. The limited liability of a BV protects the shareholder, not a director who ran the company badly.

This rule is in Article 2:248 of the Dutch Civil Code (BW). Each director is jointly and severally liable towards the estate. The trustee brings the claim on behalf of all creditors together. Under paragraph 6, only mismanagement in the three years before the bankruptcy counts. A discharge the shareholders granted to the director does not stand in the way of the claim.

Which administrative failures make a claim easy?

Poor record keeping and late annual accounts. Either one creates a legal presumption against the board.

If the board did not keep proper records as Article 2:10 BW requires, or did not file the annual accounts on time under Article 2:394 BW, the law treats the board as having performed its duties improperly. It also presumes that this was an important cause of the bankruptcy. The director then has to prove that another, outside cause brought the company down. That is genuinely difficult. Late filings are therefore the first thing a trustee checks.

What other grounds for liability exist?

A director can also be liable towards a specific creditor in tort, for unpaid taxes and pension contributions, and under any personal guarantee he or she signed.

Liability in tort under Article 6:162 BW typically arises when a director enters into obligations while knowing that the company cannot perform them and will offer no recourse. Unpaid payroll tax, VAT and pension contributions have their own regime. The board must notify the tax collector in writing that the company cannot pay. It must do so without delay, which in practice means within two weeks after the tax became payable. If the notification is late, the director is presumed to be responsible for the non-payment and must prove otherwise.

Personal guarantees given to a bank or a landlord bind the person who signed them, whatever happens to the company. Our article on when a Dutch BV director is personally liable works out these grounds in full.

Does filing on time protect the director?

Yes, it is a form of protection in itself. A board that keeps trading while it knows the company cannot pay builds up exactly the exposure that Articles 2:248 and 6:162 BW are designed to catch.

Dutch law has no statutory duty to file at a fixed moment. But continuing to take on new debts once the position is hopeless is what turns a company failure into a personal claim.

Which mistakes cost the most?

Acting too late is by far the most damaging mistake. After that come selective payments, neglected formalities, overconfidence in the BV form, and an incomplete filing.

Every alternative to bankruptcy needs something left to work with. A WHOA composition needs a viable business. Suspension of payments needs a realistic prospect of recovery. An informal arrangement needs creditors who still believe a payment is coming. All three disappear in the months in which an entrepreneur hopes the next quarter will be better.

The second mistake is selective payment. Paying the supplier you need next week, while leaving the tax authority and a former employee unpaid, is understandable. It is also dangerous. It invites both an avoidance action by the trustee and a personal claim, especially where the payment went to a party connected to the director. If money is short, take advice before you decide who gets paid, not afterwards.

The third mistake is neglecting the formalities that create presumptions against you. Records you cannot produce and accounts that were never filed turn a defensible business failure into a near-automatic liability. The fourth is assuming the BV is a complete shield. Personal guarantees, tax liability and mismanagement all cut straight through it. The fifth is a filing so incomplete that the court cannot decide on it. That wastes the only weeks the debtor still had.

What should creditors do?

Take security at the start of the relationship, and act quickly and formally once a customer gets into difficulty. Your recovery is largely decided before the bankruptcy.

A retention of title clause, a pledge over receivables, a bank guarantee or a guarantee from the director all turn an ordinary claim into something worth having. General terms and conditions that were properly agreed make those clauses enforceable against the trustee.

Once a counterparty is in trouble, stop extending credit and suspend further deliveries. Invoke your retention of title in writing and identify the goods. Consider a prejudgment attachment (conservatoir beslag) with the court’s leave before assets disappear. Check whether a parent company issued a declaration of liability for its subsidiary.

After the declaration of bankruptcy, file your claim with the trustee together with the underlying documents. State any preference or security you rely on, and answer the trustee’s questions promptly. The practical steps are set out in our article on the bankruptcy of your contract partner. For the position after a debt restructuring of a private individual, see our overview of what you can still recover after a Wsnp clean slate.

Should you petition for your debtor’s bankruptcy?

Sometimes. A petition is a collection tool as well as an insolvency tool, and it is sometimes the only thing that produces payment. But it is a blunt tool.

If the petition succeeds, you join the queue like every other creditor. A petition is worth considering where there is reason to believe assets are being moved. It is worth avoiding where a realistic payment arrangement is available.

In summary

• A Dutch court declares bankruptcy when the debtor has ceased to pay and has more than one creditor (Article 1 Fw); negative equity alone is not the test.
• Bankruptcy liquidates. If you want to save the business, look at a WHOA composition or suspension of payments while there is still something to restructure.
• The trustee takes over the estate, can undo harmful transactions and pays creditors in the statutory order; ordinary creditors often receive little or nothing.
• Directors are personally at risk for mismanagement in the three years before the bankruptcy (Article 2:248 BW), especially if records or annual accounts are missing.
• Creditors protect themselves best with security agreed at the start and quick, formal action once a customer gets into trouble.

Frequently asked questions about bankruptcy

Can I start a new business after a bankruptcy?

Yes. Dutch law has no general ban on setting up or managing a new company after a bankruptcy. What can stand in the way is a personal liability that survives, an outstanding guarantee, or a civil director disqualification (civielrechtelijk bestuursverbod). A court can impose such a ban for a limited period at the request of the trustee or the public prosecutor, in cases of serious misconduct (Article 106a Fw).

How long does a bankruptcy take?

There is no fixed term. A bankruptcy without assets can be closed within months. One with a running business, disputed claims or a liability claim against the board can take years. The bankruptcy ends when the final distribution list becomes binding, when a composition is confirmed, or when the court closes it for lack of assets.

Am I personally liable for the debts of my BV?

As a shareholder, in principle not. As a director, you can be, on the grounds set out above: manifest mismanagement under Article 2:248 BW, tort towards a specific creditor, an unreported inability to pay taxes, or a personal guarantee you signed.

What happens to my employees?

Their contracts continue until the trustee gives notice. The Bankruptcy Act allows a shortened notice period of no more than six weeks. The UWV takes over unpaid wages, notice-period wages, holiday pay and holiday allowance within statutory limits.

Can a bankruptcy petition still be withdrawn?

A petitioning creditor can withdraw its petition until the court has ruled. A debtor who filed its own declaration can ask to withdraw it before judgment. Once the bankruptcy has been declared, the options are an appeal or, where the debtor can satisfy the creditors, a composition or an annulment on the statutory grounds.

What does a bankruptcy cost?

Filing your own declaration is free of court fees. A creditor’s petition attracts a court fee, set each year and published by the judiciary, plus the cost of the lawyer who files it. The supervisory judge fixes the trustee’s fee, which comes out of the estate before the creditors are paid.

How can we help with a bankruptcy?

The decisions that decide the outcome of an insolvency are almost always taken before a court is involved. Should you restructure or file? Which creditor do you pay? What do you document, and how fast do you react when a debtor goes quiet? Those decisions are far easier to defend afterwards when they were taken with advice.

Law & More advises entrepreneurs, directors and creditors on Dutch insolvency law. We assess the alternatives to bankruptcy, prepare a WHOA composition or a suspension of payments, file and defend bankruptcy petitions, negotiate a restart with the trustee, and bring or defend claims against directors. We act for Dutch and international clients and work in English. You can read further in our corporate law guides. Unsure where you stand? Tell us about your situation. We will let you know your options within one working day.

How Law & More can help you with this is explained on our corporate lawyer page.