Suspension of payments in the Netherlands (surseance)

A suspension of payments (surseance van betaling) gives a company that expects to be unable to keep paying its debts a court-ordered breathing space, but only against its ordinary unsecured creditors. Secured creditors, preferential creditors such as the tax authorities, and suppliers with retention of title largely stay outside it, which is why many suspensions end in bankruptcy within weeks.

Below we explain how you apply, what the administrator does, which creditors are and are not held off, what happens to staff, lease and suppliers, and when the WHOA is the better route.

What is a suspension of payments?

It is a court procedure that temporarily stops ordinary creditors from collecting their pre-existing claims. The company keeps trading, but its board can no longer act alone.

The court grants a suspension quickly and provisionally on the company’s own petition. At the same time it appoints an administrator (bewindvoerder). From that moment the board may take almost no decision on the company’s assets without the administrator’s cooperation.

The protection is narrower than most people expect. Banks with a pledge or mortgage, the tax authorities for their preferential claims and suppliers with retention of title can in principle continue to act. Because those are usually the creditors that matter most, a suspension frequently converts into bankruptcy. The court can pronounce that bankruptcy when it becomes clear that the company cannot be rescued.

That is why the instrument has largely been displaced for genuine restructurings. Since 1 January 2021 the WHOA allows a company to impose a composition on its creditors and shareholders outside formal insolvency, while the board stays in control. A suspension of payments still has a role where a short, purely temporary liquidity problem must be bridged and the secured creditors support the company.

How do you apply for a suspension of payments?

The company files a petition with the court, signed by the company and its lawyer. A creditor cannot force a suspension on a debtor.

Suspension of payments is governed by Title II of the Dutch Bankruptcy Act (Faillissementswet, Fw). Under Article 214 Fw a debtor may apply when it foresees that it will be unable to continue paying its debts as they fall due. Three features of the scheme matter in practice.

Only the company applies. A creditor who wants to act can only petition for bankruptcy.
The instrument is meant for businesses. Under Article 214(4) Fw it is not available to a natural person who does not carry on an independent business or profession; private individuals fall under the debt restructuring scheme for natural persons.
A Dutch lawyer is required. The petition must be signed by the debtor and its lawyer and be supported by a statement of assets and liabilities (Article 214(2) Fw). A draft composition may be attached, but that is optional.

If the petition is complete, the court will in practice grant a provisional suspension immediately. It appoints an administrator and a supervisory judge (rechter-commissaris).

When does the provisional suspension become definitive?

At a creditors’ hearing the court decides whether to grant a definitive suspension. Ordinary creditors can block it.

Under Article 218(2) Fw the court cannot grant a definitive suspension if creditors representing more than one quarter of the amount of the ordinary claims represented at the hearing, or more than one third of the number of those creditors, object. Under Article 218(4) Fw the court must also refuse it if there is well-founded fear that the debtor will prejudice its creditors during the suspension, or if there is no prospect that the debtor will eventually be able to satisfy its creditors. When the court refuses, it can declare the company bankrupt at the same time.

Where a definitive suspension is granted, the court sets its duration at no more than eighteen months. Under Article 223 Fw the company may apply for an extension before the suspension ends, once or more than once, each time for no more than eighteen months.

Which creditors are bound, and which are not?

The suspension binds mainly ordinary unsecured creditors. Preferential claims, secured creditors and owners of goods under retention of title largely fall outside it.

This is the heart of the matter. Payment of debts that existed before the suspension may, while it lasts, only be made to all ordinary creditors jointly and in proportion to their claims (Article 233 Fw). An individual ordinary creditor therefore cannot be paid ahead of the others.

The position of other creditors is materially different.

Claims that carry a preferential right, such as many claims of the Dutch tax authorities, are not covered by the suspension, except to the extent they cannot be recovered from the assets to which the preference attaches (Article 232 Fw). The same article excludes certain maintenance claims and hire-purchase instalments.
Secured creditors holding a right of pledge or mortgage can in principle enforce their security as if there were no suspension. They do not have to wait for a composition with the ordinary creditors, unless a cooling-off period restricts them.
Retention of title is not a security right but ownership. A supplier who validly agreed retention of title may in principle reclaim the goods delivered, provided the clause was properly agreed and the goods can be identified.

Statements that the tax authorities can simply “carry on collecting”, or that every bank claim can be “enforced immediately”, are too absolute. The precise position depends on the nature of the right, any attachments already levied, any cooling-off period and the special rules that apply.

For many companies the acute pressure sits precisely with the tax authorities and the bank. Where that is so, a suspension of payments on its own will not solve the problem.

What is the cooling-off period?

A cooling-off period temporarily freezes the rights of secured and other third parties. It lasts at most two months, with one extension of at most two months.

Under Article 241a Fw the court can order a cooling-off period (afkoelingsperiode) at the request of any interested party or of its own motion. During that period third parties, including pledgees and mortgagees, cannot take recourse against assets belonging to the estate, or claim goods in the debtor’s possession, without the court’s authorisation. Creditors of the estate itself are not affected. The court may limit the order to certain third parties and attach conditions to an authorisation.

The cooling-off period gives the administrator time to examine the position of the business and its assets. It is not a solution in itself. A company that needs one in order to survive must have a realistic plan ready within those four months at most.

What happens to staff, the lease and suppliers?

A suspension does not release the company from its running obligations. Wages and rent from the start of the suspension are debts of the estate and must be paid in full.

Wages: from the start of the suspension, wages and the related contributions are debts of the estate (Article 239(3) Fw).
Notice periods: with the administrator’s cooperation the company may give notice, observing the agreed or statutory notice period. Under Article 239(1) Fw six weeks always suffices, unless the statutory notice period under Article 7:672(2) of the Dutch Civil Code is longer than six weeks, in which case that longer period applies.
Dismissal permission: Article 239 Fw only shortens the notice period. Unlike in bankruptcy, a dismissal for economic reasons during a suspension still requires permission from the employee insurance agency UWV under ordinary dismissal law.
Transition payment: under Article 7:673c of the Dutch Civil Code the statutory transition payment (transitievergoeding) is no longer owed once the employer has been granted a suspension of payments.
Wage guarantee: UWV’s wage guarantee scheme can also apply when the court has granted a suspension of payments. For the notice period, however, UWV pays wages only up to the notice period that applies under Article 40 Fw, “both in and outside bankruptcy” (Article 64(1)(b) of the Unemployment Insurance Act, WW). Because a suspension may require the longer statutory notice period, part of the wages can fall outside that cover and remain a cost for the estate.
Lease: from the start of the suspension the rent is a debt of the estate (Article 238(2) Fw). The company as tenant may terminate the lease early against a customary date, and three months’ notice always suffices (Article 238(1) Fw). Only the tenant has this special right; the landlord does not.
Other running costs and new supplies: energy, insurance and other current costs must be paid on time. Whether a new supplier is actually paid depends on the liquidity of the business, so new suppliers are well advised to agree payment terms, retention of title, credit limits and suspension rights in writing before delivering.

Example: a production company with twenty employees applies for a suspension. The wages for the following weeks are a debt of the estate. An employee with twelve years’ service is dismissed; the statutory notice period is longer than six weeks, so the longer period applies. UWV’s wage guarantee does not cover the whole of that period, so the company’s cash flow forecast must allow for the difference.

Should you choose a suspension of payments or the WHOA?

A suspension suits a genuinely temporary liquidity problem with supportive secured creditors. For a real restructuring the WHOA is usually more effective, because it can bind creditors who sit outside a suspension.

Since the Dutch Act on Court Confirmation of Extrajudicial Restructuring Plans (Wet homologatie onderhands akkoord, WHOA) came into force on 1 January 2021, the suspension has moved into the background. Under a suspension you need your ordinary creditors’ agreement, while the tax authorities and secured creditors sit outside it. Under the WHOA the company divides its creditors into classes and the court can confirm a plan that also binds classes that voted against it, including secured creditors, the tax authorities and shareholders. The board also remains largely in control of the process.

The tax position deserves separate attention: the Dutch tax authorities assess any composition offered to them against their own collection policy before they vote.

The choice depends on the cause and expected duration of the liquidity problem, the size of current obligations, the balance between ordinary, preferential and secured debt, the funding available during the procedure, the feasibility of a composition, and whether the business is viable after restructuring.

If the suspension ends in bankruptcy and a restart comes into view, the position of the workforce changes fundamentally. The protection of employees on a transfer of undertaking does not apply when the employer has been declared bankrupt and the business belongs to the estate (Article 7:666 of the Dutch Civil Code); during a suspension of payments it still does. What that means for the transaction is set out in Restarting a business out of a Dutch bankruptcy, and what it means for employees in Your Dutch employer is bankrupt.

What does a suspension of payments cost?

The costs consist of court fees, legal fees and the administrator’s remuneration. That remuneration is set by the court and is paid ahead of the ordinary creditors.

Because the administrator’s fee ranks ahead of the ordinary creditors, it must be clear in advance whether there are sufficient means to continue the business during the procedure. Before applying you should at least have a view of:

the liquidity needed during the procedure and the expected income and expenditure;
the willingness of key funders and suppliers to cooperate;
the position of the tax authorities and other preferential creditors;
whether a composition or a WHOA process can be financed.

An application without a realistic liquidity forecast can weaken the company’s position rather than relieve it. Our hourly rates are set out on lawyer fees in the Netherlands.

What should you do if your customer applies for a suspension of payments?

First establish whether your claim is ordinary, preferential or secured, and whether it arose before or after the suspension. That classification largely determines your rights of recourse and your voting rights.

With security (pledge, mortgage): you keep your position in principle, unless a cooling-off period temporarily restricts you.
With retention of title: you may reclaim the goods, provided the clause was validly agreed and the goods can be identified.
Without security: you cannot enforce individually. File your claim with the administrator in good time and vote at the creditors’ hearing or on a proposed composition.
On new supplies during the suspension: agree payment, credit limits, retention of title and the right to suspend further deliveries in writing beforehand. This limits the risk but offers no absolute certainty.

In summary

A suspension of payments is a court-ordered breathing space that the company itself applies for, with a lawyer; a creditor cannot impose it.
It binds mainly ordinary unsecured creditors; secured and preferential creditors and suppliers with retention of title largely stay outside it (Article 232 Fw).
A cooling-off period of up to two months, extendable once by two months, can temporarily hold off secured creditors (Article 241a Fw).
Wages and rent are debts of the estate from the start of the suspension, and dismissals for economic reasons still need UWV permission.
For a real restructuring the WHOA is usually more effective, because it can bind dissenting classes of creditors, including secured creditors and the tax authorities.

Frequently asked questions

Can a creditor apply for a suspension of payments against my company?

No. Only the debtor itself can apply, together with its lawyer (Article 214 Fw). A creditor who wants to force the issue can only petition for bankruptcy.

How long does a suspension of payments last?

A provisional suspension lasts until the court decides on the definitive suspension. A definitive suspension lasts at most eighteen months and can be extended, each time for at most eighteen months (Article 223 Fw). In practice many suspensions end much earlier, in a composition or in bankruptcy.

Do I still have to pay my employees during a suspension?

Yes. From the start of the suspension, wages and the related contributions are debts of the estate (Article 239(3) Fw). Where the company cannot pay, UWV’s wage guarantee scheme may step in, within its limits.

In closing

A suspension of payments is neither a general ban on collection nor an automatic lifeline. It can work where a liquidity problem is temporary and there is a genuine prospect of recovery. It is less suitable where the business is structurally loss-making, or where the largest creditors are secured or preferential.

Are you considering a suspension of payments, or is a Dutch customer of yours in one? Our insolvency lawyers assess your position and determine with you whether a suspension, the WHOA or another arrangement offers the best prospect; see our page on bankruptcy and insolvency. 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.