Protect yourself as an entrepreneur against bankruptcy of your trade partner

Protect yourself as an entrepreneur against bankruptcy of your trade partner

If you are an entrepreneur, it is important that you are protected against the risk of your partner going bankrupt. Parties that negotiate a proper retention often outsmart the curator. This can be done by setting up good general conditions. Another effective way to protect yourself against a bankruptcy is to establish collateral (a lien/pledge or mortgage). Lien and mortgage holders can exercise their rights as if there is no bankruptcy.

A common type of security is a lien on debtors. Such a lien can be established in an agreement. That contract (called a ‘deed’) must then be registered with the tax authorities. Receivables arising after this deed are not covered by the lien. Subsequent debtors will have to repeatedly be pledged anew.

Another common type of security is to establish a lien on the inventory and any trading stock. When invoices remain unpaid, the pledgee may claim the pledged goods and sell them to the public. If in bankruptcy occurs in the meantime, the pledgee can  then often pass the curator and exercise his or her rights as if there is no bankruptcy.

Examples of recent questions sent to our lawyers by creditors in bankruptcy:

  • I have delivered goods to a large department store that is now bankrupt. The invoices are not paid. The curator is working on a relaunch of the company and sells my goods. This generates revenue, but I do not receive anything. Is this allowed?
  • I have lent private money to my limited liability company and therefore I have a lien on receivables, which was established in a deed two years ago. The limited liability company is bankrupt by now and the curator believes that recent creditors are not affected by that because a new lien deed would have had to be set up for that. Is that correct?
  • I have a lien on receivables, but I have no insight into who the debtors are. Without that information, I can not collect the debts from them. What can I do?
  • I am a creditor in bankruptcy. The company has purchased goods from me at a time when they knew that bankruptcy was imminent. The invoices are not paid. Can I hold the director personally liable because he knew the company could never pay me? I have a lien on receivables from a bankrupt limited liability company, but I find out now that the curator has collected this without me knowing it. Can I claim the proceeds to the curator? Can I hold the curator liable?

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