Tuesday, March 21, 2023
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Doing business with companies in financial difficulties? 3 hints!

Due to the relaxation of the corona measures, the situation in our country is almost back to normal. Although this will have positive consequences for the economy, experts still expect a wave of bankruptcies at the end of this year. This raises the question of how suppliers can arm themselves against the bankruptcy of a customer. How do they make sure their bills are paid? In this blog I give some tips for that.

Read more: jpost

#1 Good preparation and organization

Good preparation is half the job. It is therefore important to check in advance who has what authority at your customer and whether your customer can also meet its payment obligations in the longer term. This can be done in the trade register of the Chamber of Commerce or via a company that can determine the creditworthiness of your customer.  Is your customer reliable and good value for money? Then make clear agreements and record them properly.

#2 Payment arrangements

What are good agreements now? It may sound obvious, but with advance payment or payment on delivery (the butter with the fish) you avoid being left with unpaid invoices. Is this unrealistic in practice, for example because you are not in a position to ask for payment in advance or payment on delivery? Then consider one or more of the following options.

#3 Certainties

Retention of title

By law, your customer becomes the direct owner of the products you supply, regardless of whether or not the customer has paid for the products to you. This means that in the event of non-payment you cannot simply reclaim the products, unless you invoke the right of recovery (see below). An undesirable situation, which you can prevent by agreeing in advance that you deliver under retention of title.

With a retention of title, you remain the owner of the delivered products until your customer has paid all invoices. This gives you a strong position in the event of default or bankruptcy. As long as you are the owner of the products, you can retrieve them. This requires that you agree the retention of title in writing in advance. You do this by including it in your general terms and conditions or in contracts with your customers.

Right of advertising

Somewhat comparable to the retention of title is the right of recovery. With the right of recovery, you can also request a refund of your products if your invoice has not been paid. Even if your customer has gone bankrupt. However, there are two important differences with the retention of title:

  1. The right of recovery is a legal right that you do not have to agree to.
  2. The right of recovery can only be invoked for a limited period, namely:
    • within 6 weeks after your claim has become due and payable, or
    • within 60 days after the products have been stored with the buyer.

After this you can no longer request the products back.

Bail / several liability

Another form of security is that another party, for example a wealthy shareholder/director, personally guarantees the payment of the delivery. This can be in the form of a suretyship or joint and several liability. In the event of non-payment by the customer, you can hold the guarantor or joint and several co-debtor liable for payment of the outstanding invoice, even if your customer has been declared bankrupt.

It is best to agree on a suretyship or joint and several liability in writing. Consider the rules that apply to this, in particular if the guarantor or joint and several co-debtor is a private individual.

Bank guarantee

You can also ask your customer for a bank guarantee. This is issued by your customer’s bank. If your customer does not pay, the bank guarantees the amount that your customer should have paid, up to the amount stated in the bank guarantee. You can also claim the bank guarantee in the event of the bankruptcy of your customer.

Pledge/mortgage law

Pledge and mortgage rights offer you the opportunity to recover your customer’s property with priority over other creditors. For example, a right of pledge can be established on movable property, debtors and shares. A mortgage right on immovable property (home, business premises, ship). A notarial deed is required for a mortgage right and a right of pledge on shares.

If your customer does not pay, you can sell the pledged / mortgaged property publicly and use the sales proceeds to pay your invoices and additional costs. If you have a lien on debtors, you can ask the debtors to pay into your bank account instead of your customer’s bank account. You can also exercise your rights as pledgee/mortgage holder in the event of the bankruptcy of your customer.


With good preparation, good agreements and suitable securities, you can arm yourself against the bankruptcy of a customer. Are you also thinking about good debtor management?


Do you have questions about the establishment of collateral or its enforcement? Please feel free to contact us, we are happy to help you.


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