Restructuring and insolvency
Suspension of payments
Temporary deferral of payment to prevent bankruptcy
Is your company experiencing temporary payment difficulties? A suspension of payments provides you with a breathing space to restructure. Our lawyers and in-house counsel guide you through the application and the process, from international corporations to the baker on the corner.
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Suspension of payments
An organization experiencing temporary financial difficulties can apply for a suspension of payments. Applying for a suspension of payments is often done in an attempt to prevent bankruptcy. The application must be filed by a lawyer. If a suspension of payments is granted by the court, an organization can receive a deferment of payments for a maximum of 1.5 years.
The court grants a suspension of payments only if the organization's financial problems are temporary in nature and, in the court's opinion, the organization is viable. Our lawyers can provide support with the application for a suspension of payments.
Questions regarding suspension of payments? Contact us.
Suspension of payments within restructuring and insolvency
Suspension of payments is regulated in the Bankruptcy Act and is, alongside bankruptcy and the Act on the Approval of Private Agreements (WHOA), one of the instruments by which a company in severe financial distress can be saved. The suspension is intended for a company with a temporary liquidity problem: there is an acute payment difficulty, but there is a realistic prospect of recovery. For structural problems with no prospect of recovery, a suspension is not the right remedy; in such cases, a reorganization, a restart , or ultimately filing for bankruptcy is more appropriate. Within our Restructuring and Insolvency , our lawyers and in-house counsel assess which instrument suits your situation, whether you are an international group or the baker on the corner.
The suspension of payments procedure step by step
Pursuant to Article 214 of the Bankruptcy Act, a debtor who anticipates being unable to continue paying their due debts may apply for a suspension of payments. This request must be submitted to the court by a lawyer. As a rule, the court grants a provisional suspension of payments on the same day, without a hearing, and appoints one or more administrators and a supervisory judge (Article 215 of the Bankruptcy Act). Within a few months, a hearing follows at which the creditors are heard and the court decides on the definitive granting. The definitive suspension applies for a maximum of one and a half years and may be extended upon request (Article 223 of the Bankruptcy Act). A lawyer from MKB Juristen drafts the application, substantiates its viability, and guides you throughout the entire procedure.
The role of the administrator and the consequences
From the moment of provisional granting, the position of the Board of Directors changes drastically. The Board is no longer authorized to act independently: for acts of management and disposal, the cooperation, authorization, or assistance of the administrator is required. The administrator manages the company together with the Board. For creditors, unsecured creditors can no longer recover their debts during the suspension of payments; their collection measures and attachments are frozen. Importantly, the suspension of payments only applies to unsecured (ordinary) creditors. Preferential creditors (such as the Tax Authorities) and pledgees and mortgagees are not affected and can continue to exercise their rights. For employees, little changes in principle: the ordinary rules regarding dismissal under labor law continue to apply, unlike in bankruptcy.
The suspension of payments agreement
Suspension of payments is not an end in itself, but a breathing space to reach a solution. A frequently used way out is a ' agreement. Pursuant to Article 252 of the Bankruptcy Act, the debtor can offer his creditors an agreement. If this agreement is adopted by the required majority of the unsecured creditors and homologated by the court, dissenting unsecured creditors are also bound. Because a suspension of payments agreement only binds unsecured creditors, the WHOA is often a more powerful alternative for a broader restructuring—in which preferred creditors and secured creditors must also cooperate. Our legal experts assess which route yields the highest return.
Termination and conversion into bankruptcy
The court may revoke the suspension of payments upon request, inter alia when the debtor is acting in bad faith, prejudices creditors, or when there is no longer any prospect that the company will be able to satisfy its creditors in the long term (Article 242 of the Bankruptcy Act). Upon revocation, the court may simultaneously declare bankruptcy. Consequently, a suspension of payments frequently results in bankruptcy or in a restart of the viable business units. Precisely for this reason, timely and careful guidance is crucial: the choice between a suspension of payments, the WHOA, or a controlled liquidation partly determines whether value is preserved.
Why MKB Juristen for a suspension of payments?
At MKB Juristen, lawyers and in-house counsel work together in mixed teams. Since the application for a suspension of payments must be filed by a lawyer by law, we have that expertise in-house, while our in-house counsel contributes to the commercial and financial restructuring. We assist both international corporations and smaller entrepreneurs with a decisive approach and extensive experience in a wide range of insolvency and restructuring issues. Please feel free to contact us for an initial assessment of your situation.
Mr. Jaime Boogaers
Corporate Law · Lawyer
In specialized legal cases, it is not just about the legal rule. It is also about evidence, timing, negotiating position, and the business implications of every step.
How we help you with a suspension of payments
From the initial assessment to the agreement: our mixed teams guide the entire process.
- Assessment of viability and the appropriate course of action (suspension of payments, WHOA, or bankruptcy)
- Drafting and filing the petition for suspension of payments
- Guidance during the administration and consultation with the administrator
- Preparing and presenting a creditors' agreement
- Guidance on business restart or controlled liquidation
Risks associated with suspension of payments
Suspension of payments is a temporary instrument and not a solution for structural problems. Anyone who acts too late or chooses the wrong path risks revocation and subsequent bankruptcy.
- Suspension of payments does not bind preferential creditors, the tax authorities, or pledgees and mortgagees
- In the event of prejudice to creditors or a lack of prospect of restoration, revocation follows (Art. 242 Bankruptcy Act)
- Withdrawal can result directly in bankruptcy
- The board loses its independent decision-making authority to the administrator
- Applying too late reduces the chance of a successful restructuring
Our strategy
We first assess whether your problems are truly temporary and whether the company is viable. Next, we select the instrument with the highest return: suspension of payments with a creditors' agreement, a WHOA process, or a controlled restart. Lawyers and in-house counsel collaborate in this process to ensure that both the legal petition and the financial restructuring are sound.
The suspension of payments procedure
In broad outline, a suspension of payments proceeds as follows:
01
Intake and initial assessment
We will briefly discuss the situation, the available documents, and your primary interests.
02
Analysis of position and risks
We assess your legal position, supporting documents, deadlines, and possible next steps.
03
Strategic advice
You will receive concrete advice on the best course of action: responding, negotiating, settling, or litigating.
04
Execution
We assist with correspondence, negotiation, litigation strategy, or further legal assistance.
Specialists for entrepreneurs
We combine legal analysis with practical experience in cases for entrepreneurs, directors, and organizations.
Our team of corporate counsel and lawyers within the insolvency and restructuring team are specialists. We assist organizations, shareholders, directors, and creditors with legal issues within an insolvency or restructuring process. We have extensive experience at the negotiating table, are decisive, and can make sound assessments of opportunities and risks. We understand both the legal world and the business world, enabling us to effectively switch between them. Clear and understandable language is paramount in this regard.
Frequently asked questions about suspension of payments
The most important questions about suspension of payments listed.
When is legal advice advisable?
Legal advice is wise as soon as pressure arises, deadlines are running, an opposing party takes a position, or when the financial or strategic interests are significant.
Can MKB Juristen also help if there is already a conflict?
Yes. We assess your legal position, advise on strategy, and can assist with correspondence, negotiation, defense, or further legal steps.
How much does specialist legal advice cost?
Specialist advice is provided on an hourly basis in principle. Where possible, we provide clarity in advance regarding the expected approach, costs, and next steps.
Can I have a no-obligation consultation first?
Yes. You can request a free consultation. We will briefly discuss your situation and indicate which course of action is likely the sensible one.
Apply for a suspension of payments?
Are you unsure whether a suspension of payments is the right step? Contact MKB Juristen for an initial assessment by our lawyers and in-house counsel.
More expertise within this team
Also view the other sections within this area of law.
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