Where the rubber meets the road

A customer who does not pay rarely starts with a single missed invoice. First, payments are pushed back. Then a payment plan is not honoured and reminders go unanswered. And then you hear that business assets are being sold, or that the company is suddenly being split up or moved into another company.

At that point, the question is no longer just whether you will be proved right, but whether there will be anything left to recover. Proceedings can easily take months, and a judgment against a company without money is of little use to you. Attaching assets can prevent that. But if you go about it the wrong way, you run a risk yourself.

The legal point

Under Dutch law, you can ask the court for leave to attach your customer’s assets even without a judgment (prejudgment attachment, in Dutch: conservatoir beslag). Leave is often granted within a few days, without your customer being heard first. The bailiff can then, among other things, freeze your customer’s bank accounts, or attach money that others owe your customer, stock, vehicles, property or shares.

This option is in some cases also available to foreign businesses, such as a US company doing business with a Dutch party.

The attachment freezes your customer’s assets; you do not yet receive any payment. That only happens once you have obtained a judgment. The attachment then automatically converts into an enforcement attachment that does allow you to collect, without having to attach the assets again. Against this, there are three things to bear in mind:

• You must start proceedings quickly. The court sets a deadline for this, usually fourteen days after the first attachment. If you miss it, the attachment lapses.
• The court takes a critical look. You must substantiate your claim properly, state honestly what your customer has argued against it and explain why the attachment is proportionate to your claim. Sometimes you must also make it plausible that your customer intends to make assets disappear, or provide security yourself, for example in the form of a bank guarantee.
• You bear the risk if things go wrong. If your claim later turns out to be unfounded, you must compensate the loss your customer has suffered as a result of the attachment, even if you acted in good faith.

What does this mean for business owners?

Attachment is particularly worthwhile if your customer persistently fails to pay and there are signs that money or assets are disappearing, if you can prove your claim with documents (quotation or contract, general terms and conditions, invoices, delivery notes, reminders) and if you know where there is something to recover, such as your customer’s bank or its largest customers.

Think twice if your customer disputes the invoice on its merits and you cannot properly refute that, if the costs and the damage to the relationship do not outweigh what you can recover, or if your customer is heading for bankruptcy: attachments lapse when a company is declared bankrupt.

If you opt for attachment, calculate your claim carefully (principal, interest and costs, no more than you can substantiate) and make sure the writ of summons is largely ready before the attachment is levied. Bear in mind that your customer can challenge the attachment in summary proceedings (kort geding). Keep a proper record of settlement discussions, therefore: a reasonable stance on your part will then count in your favour.

Questions for business owners

Consider whether you can answer ‘yes’ to the following questions for your most important customers:

• Do I know for which customers the risk is high that there will soon be nothing left to recover?
• Do I know which bank these customers use and who their largest customers are?
• Can I substantiate an outstanding claim with documents within a few days?
• Do my general terms and conditions contain clear provisions on interest, collection costs and the competent court?
• Is it clear within my company who decides to have assets attached, and when?

If the answer to any of these is ‘no’, now is the time to address it, not once things have already gone wrong.

Final thoughts

Attachment is fast and effective, but it is not a step to take lightly. Well prepared, it protects your position; used carelessly, it increases your own risk.

Contact

Unsure whether attachment is advisable in your situation, or would you like to know whether your contracts and records are set up for it? Please feel free to contact us on +31 20 800 64 00 or at info@acginter.com.