Article 47 of the Dutch Bankruptcy Act (Faillissementswet) deals with the payment of a debt that was already due and payable before the bankruptcy. Such a payment is an obligatory act, so the bankruptcy trustee (curator) can only annul it if the creditor knew that a bankruptcy petition had been filed, or if the payment resulted from collusion (overleg) aimed at favouring that creditor.
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Why is a due payment normally safe?
Because the debtor was legally obliged to pay. The general bankruptcy pauliana in Article 42 Bankruptcy Act only covers acts the debtor was not obliged to perform. Article 47 protects normal payment practice: a creditor that received what it was owed generally does not have to repay it, even if it knew the debtor was in financial difficulty.
When can the trustee still annul the payment?
In two situations only. First, when the recipient knew at the time of payment that the debtor’s bankruptcy had already been applied for. Knowing that the debtor was in trouble, or that a petition was being prepared, is not enough. Second, when the payment was the result of consultation between debtor and creditor with the aim of giving that creditor priority over the other creditors. The trustee must prove both the facts and the knowledge or collusion.
What counts as collusion?
Dutch case law requires more than the creditor simply pressing for payment. There must be cooperation between debtor and creditor aimed at preferring that creditor. This risk is real in groups and family businesses, for example when a director arranges repayment of a loan from his own holding company or from a related party just before the bankruptcy.
What should directors and creditors keep in mind?
When bankruptcy threatens, selective payments to related parties carry the highest risk. Apart from annulment, they can lead to personal liability of directors for improper management. A deliberate and documented payment order, which treats creditors equally where possible, reduces that risk.
Frequently asked questions
What is the consequence of annulment?
The creditor must return the payment to the estate and can then file its original claim in the bankruptcy as an ordinary creditor.
Does the rule also apply to set-off?
Set-off has its own rules in Articles 53 and 54 Bankruptcy Act.
Related terms
- Article 42 Dutch Bankruptcy Act (bankruptcy pauliana)
- Actio pauliana
- Set-off
- Article 68 Dutch Bankruptcy Act (the bankruptcy trustee’s task)
Our corporate lawyers advise creditors and directors on payments made shortly before a bankruptcy and on trustee claims. Want to know what this means for your situation? Book a free introductory meeting.
