Reinier advises national and international companies
reinier.russell@russell.nl +31 20 301 55 55Most business relationships run smoothly. Goods are delivered, services are provided and invoices are paid on time. Occasionally, however, a customer or business partner fails to pay. What can a creditor do in that situation?
Dutch law provides several ways to recover unpaid debts from businesses. These range from informal reminders to court proceedings and enforcement measures.
What strategy is best depends on several factors, such as the amount of the debt, the relationship between the parties and the financial position of the debtor.
In most cases a debt arises from a contract. One party delivers goods or services, and the other party agrees to pay for them. If the debtor fails to do so, this may constitute a breach of contract.
Under Dutch civil law, creditors may then claim payment of:
Before certain legal remedies become available, the debtor must be in “default” (verzuim). This means that the debtor has not paid within the agreed payment period.
As a rule, the payment period between businesses may not exceed 60 days, unless a longer period has been expressly agreed and this is not grossly unfair to the creditor. Additional rules apply when large companies contract small and medium-sized enterprises (SMEs). In those situations, the statutory payment term is 30 days.
Usually, the contract between parties already states a fixed payment deadline. In that case the debtor may automatically be in default once that deadline has passed. In other situations, the creditor must first send a notice requesting payment within a reasonable period. Once the debtor is in default, the creditor may claim statutory interest and may start considering further recovery measures.
Debt recovery in the Netherlands usually follows a step-by-step approach. Creditors rarely start with court proceedings immediately.
Common steps include:
This step-by-step approach often increases the chances of recovery while keeping costs under control.
Timing plays an important role in debt recovery. The longer a debt remains unpaid, the harder it may become to collect it. A debtor may experience financial difficulties, move assets or even go bankrupt. For this reason, it is usually advisable not to wait too long once an invoice becomes overdue.
Debt recovery is not only a legal issue. Commercial relationships and financial considerations also play a role.
For example, in a situation where a creditor wishes to maintain the business relationship with the debtor or where the debtor is experiencing financial difficulties, aggressive enforcement measures may not necessarily lead to a better outcome. In that case a negotiated solution or payment arrangement might be preferable to immediate litigation.
At the same time, timely payment may be crucial for the creditor’s own financial position. If invoices remain unpaid, this can put pressure on the creditor’s cash flow and may affect the ability to pay suppliers or meet other financial obligations.
If negotiations fail, and the debtor refuses to cooperate or disputes the claim without valid reasons, legal action may be unavoidable.
Although the legal framework for debt recovery in the Netherlands is relatively clear, the situation may differ from case to case. Creditors should therefore always consider the circumstances before deciding on a recovery strategy.
Another factor is the value of the claim. Court proceedings involve time and costs. For smaller claims it may therefore be more efficient to attempt an amicable solution first. For larger claims, creditors may decide to escalate more quickly.
International aspects may also arise in debt recovery matters. For example, enforcement may involve assets located in another country. Within the European Union several legal instruments facilitate cross-border recovery of debts.
Because each situation is different, creditors will benefit from obtaining legal advice at an early stage. A well-considered strategy can significantly increase the chances of recovering the outstanding debt and reduce the costs of debt collection.
Are you dealing with unpaid invoices? Then it will be helpful to obtain legal advice at an early stage. The experts of Russell Advocaten can assist you with assessing the best strategy for recovering your claim and guiding you through the collection process. Please contact us:
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