An agreement with your creditors, what is it and what are the possibilities for your company?
It sounds so nice, to reach a settlement or agreement with your creditors, and then be financially stronger and look for better times. But why would a creditor, let alone all your creditors, agree? When it comes to (contractual) obligations, you are fully responsible for your debts. It is of course possible that you (temporarily) cannot meet your payment obligations, for example if things are going badly for you. To meet your creditor (s) you can try to make a payment arrangement, but you can also make a surrender or settlement proposal. The new arrangement will then replace the original obligation.
But what if a deal has to be made with more than a few creditors? Or if a settlement proposal is not accepted, while it is necessary for your business operations? Then other measures are needed.
The law offers entrepreneurs who act in a personal capacity (sole proprietorships and self-employed persons) the option of a compulsory settlement. Obviously, conditions apply, such as (i) respecting the principle of the equality of creditors (de paritas), (ii) a complete and well-ordered file and (iii) an offer that you are ultimately capable of (maximally). For the latter requirement, it is advisable to obtain business advice.
If the company is a legal entity (such as a BV), the compulsory settlement judge will not provide a solution. In that situation it is wise to formulate a concrete rescue plan and to seek financing to pay for that rescue plan. You can then (preferably) apply for a postponement of payment (moratorium) at the court. If the court has granted your company a postponement of payment, it is possible to submit a settlement to the unsecured creditors. After a vote in court on the proposed composition, the court will be able to confirm the composition. This means that the plan becomes binding in its entirety, even if one or more creditors refuse to agree. If the rescue plan is insufficiently concrete, the court will convert the deferment of payment into bankruptcy. Even in bankruptcy, a settlement can be submitted to the unsecured creditors.
Feel free to contact us if you have any questions about the possibilities for your company.
Clint Schmidt
Insolvency and restructuring specialist at Zuidweg & Partners