Temporary Suspension of Payment Act 2020
Written by:
Hein Kernkamp
Corona Deferral of Payment
The Minister of Justice has published a Preliminary Draft of the Temporary Suspension of Payment Act 2020 for consultation on the internet. The purpose of this new law is to protect entrepreneurs during the Corona crisis from avoidable bankruptcies and redress actions. The intention is that the law will be introduced by means of urgent legislation and that it has a temporary character.
Contents of the Suspension of Payment Act
In the Suspension of Payment Act, the entrepreneur who is confronted with a bankruptcy petition is given the opportunity to ask the court to adjourn the hearing a filed petition for bankruptcy. If this request is granted, this will also result in a deferment of payment for the claim of the creditor who has filed for bankruptcy (Article 2, first and fourth paragraph, under a).
The aim of the Act is to ensure that entrepreneurs are given time to maintain their business and restart after the crisis. The draft provides that the court may grant a deferral of payment if the following conditions are met:
- the entrepreneur is temporarily unable to meet his payment obligations due to a lack of cash;
- this liquidity need arose mainly or exclusively because the entrepreneur was unable to continue (in full) his business operations due to the restrictive measures that the government has issued in connection with the corona virus since 16 March 2020;
- before the announcement of the restrictive measures no such need was present;
- the entrepreneur's business has earning capacity and future prospects, and
- the creditor who has filed for bankruptcy is not materially and unreasonably harmed in his interests by the deferral (Article 2, paragraphs 2 and 3).
If the court adjourns the hearing on the petition for bankruptcy, the debtor cannot be compelled to pay on obligations for which the debtor is currently in default. He will therefore actually receive a deferment of payment for these debts. If the debtor enters into new obligations or a new term of payment lapses with an ongoing agreement (for example a lease), he must be able to pay it. This prevents the debtor's debts from further increasing during the payment delay. In addition, the postponement applies also only for the debtor's payment obligations towards the applicant (s) for bankruptcy. This may involve multiple applicants who file a bankruptcy petition at different moments in time.
If the court has adjourned the processing of an earlier bankruptcy petition for a certain period and also decides to do so with a second bankruptcy petition, it is reasonable that the court will use one term for both cases. The court hereby does not grant a total deferment of payment to all creditors.
Further facilities
Since only the suspension of the treatment of bankruptcy petitions may not be sufficient to enable the entrepreneur to continue his business, the following provisions have also been made:
- As long as the detention continues, a default in the debtor's performance prior to that detention may not be used by the creditor or creditors who have filed for bankruptcy as grounds for - in short - termination, suspension or dissolution of a agreement with the debtor (Article 2 (4) (b)).
- If the suspension request is granted, the entrepreneur can also ask the court to determine that the creditor or creditors who have filed for bankruptcy also cannot exercise their right to recover property belonging to the debtor or to claim goods that are are in the debtor's control without authorization from the court (Article 2 (5)).
Release from seizures
- If the debtor is confronted with one or more creditors who are not filing for bankruptcy, but who are seizing or executing a security right or an attachment, he can ask the preliminary relief judge to suspend the execution or to lift the attachment (article 3). An appeal does not require that a bankruptcy petition is already adjourned in accordance with Article 2. The grounds for allowance of this petition are the same as those for allowing the petition to adjourn the handling of a bankruptcy petition.
Legislative process
Previous temporary legislation was enacted in a few weeks and came in effect immediately thereafter. If this also happens with this bill, the bill will enter into force shortly. It is intended that the law will expire on October 1, 2020, but the effect can always be extended by royal decree for periods of up to two months.
Further information
You can, of course, contact us by email or telephone and submit your question about the Temporary Suspension of Payment Act. We are happy to help you. It is not without reason that our motto is: "Your problem, our concern."
More information?
Hein Kernkamp will gladly help you further.
