CreditHub: Netherlands

• Unincorporated business with one owner.
• Owner pays personal income tax on profits earned.
• Unlimited liability.

Often referred to as a sole trader, a sole proprietorship is an unincorporated business with just one owner who pays personal income tax on profits earned. Any debts or losses incurred cannot be shared with other individuals. It is the cheapest and easiest business structure to establish with the individual legally responsible for all aspects of the business.

Cheapest and easiest to establish but high personal financial risk.

• Two or more individuals share responsibilities and liabilities.
• Unlimited liability.

A general partnership is a business arrangement whereby two or more individuals agree to share responsibilities, assets, profits, financial and legal liabilities of a jointly owned business, granting unlimited liability.

Shared responsibilities but unlimited liability.

• Some partners provide capital and have limited liability.
• Managing partners have unlimited liability.

In a limited partnership, some partners are not entitled to manage its affairs but provide all or part of the partnership’s capital. These partners have limited liability. Additionally, one or more other partners are nominated as managing or general partners and have unlimited liability for the partnership’s debt and losses.

Capital partners have limited liability; managing partners have unlimited liability.

• Owned by a small number of shareholders.
• Liability limited to investment.

A Private Limited Company is owned by a relatively small number of shareholders, and the sale of company shares is handled privately. An individual/owner is only responsible for the business’s financial liabilities to the extent that they invested in the company. Company information and proof of incorporation in a foreign country (if applicable) must be filed annually with the Chamber of Commerce (Kamer van Koophandel, KvK).

Limited liability and private share handling.

• Ownership open to the public.
• Shares can be bought by anyone.
• Minimum capital of EUR 45,000.

A public company is a corporation whose ownership is open to the public. Anyone can buy shares in the company’s stocks. A limited company is a corporation in which an individual’s financial liability for the company is restricted to the capital investment of which a minimum of EUR 45,000 is required.

Public ownership with limited liability.

• Available at the Trade Register (www.kvk.nl).
• Subscription Required.

Corporate information is available at the Trade Register: www.kvk.nl (in Dutch).

Access corporate information online with a subscription.

• Financial state information available at the Trade Register.
• Private reporting agencies offer credit checks.

You can obtain information on the financial state of affairs for companies and industry at the Trade Register. Numerous private reporting agencies also offer credit checks.

Utilise credit checks to assess financial health of potential clients.

• Credit reports provide judgment information.

Judgment information can typically be obtained as part of a credit report from private reporting agencies.

Check for any legal judgments against potential business partners.

• Contract, invoices, statement of account

For effective contracting, the following documents are necessary:

• The contract
• Invoices
• A clear statement of account

Keep all relevant documents readily available to support legal proceedings.

• Complete documentation necessary for dispute resolution

In the case of lawsuit procedures, particularly related to disputed cases, ensure comprehensive documentation is available, including:

• Written agreements
• Order confirmations
• Purchase conditions
• Invoices
• Delivery notes
• Correspondence
• Other relevant information or evidence to rebut the dispute
• Information about the witnesses (names, residences)
• A description of the dispute
• Counterarguments from the creditor regarding the dispute

Comprehensive documentation is crucial for resolving disputes legally.

• Goods remain the supplier's property until full payment.
• Supplier can reclaim goods in case of payment default.

Basic Retention of Title (ROT) allows the supplier to retain ownership of the goods supplied until the debtor has made full payment. In case of payment default, the supplier is entitled to reclaim the goods.

Use Basic ROT to secure payments and reclaim goods if necessary.

• Goods remain supplier's property until all outstanding amounts are paid.
• Applies to ongoing business relations.

Increased Retention of Title, also known as open account retention, extends the supplier's legal ownership of the goods until all outstanding amounts from open accounts or ongoing business relations have been fully settled. This form of ROT is common in continuous supply arrangements.

Leverage Increased ROT for broader security on multiple transactions.

• Legal action may be necessary for non-cooperative debtors.

If a debtor is not cooperative in returning goods under the ROT terms, legal action may be necessary. The supplier must seek court approval to enforce the ROT clause, typically involving a bailiff to physically reclaim the goods.

Prepare to take legal steps to enforce ROT terms if the debtor fails to comply.

• Warning notice to the debtor is not mandatory.
• Courts demand evidence of efforts to reach an amicable settlement.

A warning notice to the debtor is not mandatory before filing any enforcement claims. Courts do, however, demand evidence of prior efforts to reach an amicable settlement. Good practice dictates that a notice should still be given, containing:

• Creditor name and overview of the claim
• The total amount of the claim, including penalties (interest)
• Payment method required
• A warning that the claim will be enforced through the enforcement authority in case the claim is not settled by the required date
• Information on how to dispute the claim

Send a mandatory warning notice before taking legal action.

• Interest up to 12% can be charged if specified in terms & conditions.
• If no specific conditions, European Directive and Dutch legal business interest rate apply.

It is common practice to apply interest to overdue invoices. If a seller can prove that terms & conditions are applicable to the purchase, then interest can be charged up to 12%. If no specific conditions were agreed, it is possible to request interest according to the European Directive and the Dutch legal business interest rate, which is variable.

Ensure terms specify interest and collection costs.

• General limitation period is five years from the debt due date.
• Shorter limitations for the transport sector under CMR Treaty.

Dutch law dictates that the general limitation period is five years from the date on which a debt falls due. Exceptions include shorter limitations imposed on the transport sector as per the Convention on the contract for the international carriage of goods by road (CMR) Treaty.

File claims within the stipulated timeframes to avoid limitations.

• Encouraged to explore mediation and arbitration.
• Binding advice from jointly appointed experts.
• Arbitration excludes ordinary court jurisdiction.

Although neither obligatory nor popular, parties may be encouraged to explore ADR methods of mediation and arbitration. Exploring such methods is found to be cheaper, quicker, and private in comparison to the pursuit of any debt through court. Apart from mediation, disputes can also be resolved based on binding advice, in which case the parties jointly appoint an expert who will deliver a (binding) judgment. Agreeing to arbitration also means excluding the jurisdiction of the ordinary courts.

Consider ADR methods for quicker and private resolutions.

• Different courts handle cases based on overall case and value.
• County court handles claims up to EUR 25,000.
• District court handles larger value cases.

The Dutch judicial organisation recognises several kinds of courts which may undertake a case subject to the overall case and its value. Such courts include:

• County court, one judge tribunal (“kantongerecht”)
• Tribunal or district court (“rechtbank”)
• Court of appeal (“gerechtshof”)
• Supreme Court (“Hoge Raad”)

County courts may oversee legal collection agencies handling disputed civil claims up to a value of EUR 25,000. For any larger value cases, the district court is required to oversee proceedings. In county court, the debtor can defend themselves, whereas in proceedings before the district court and beyond, the debtor must be represented by a lawyer.

Be aware of the appropriate court for your case and the need for legal representation.

• Simple cases may take up to 18 months or longer.

Depending on the complexity of the case and the availability of the parties involved, a case could take up to 18 months or longer.

Plan for potential delays in obtaining a judgment.

• Costs vary; some remain with the prosecuting party.

A legislative tariff dictates the overall costs of the court, which is based upon the outstanding debt amount. Whichever party is unsuccessful in the court procedure must bear the costs of legal procedures, including a legislative fee for procedural assistance. The way the legislative fee is calculated makes it difficult to predict the total costs, besides the complexity of the case, the number of court appearances, the eventual hearing of the witnesses, and the appointments of the experts. "No-win no-fee" agreements are prohibited in the Netherlands. However, it is possible to agree with a lawyer on a contingency or success fee combined with another method of remuneration (such as hourly rates or task-based fees).

Budget for the costs associated with court proceedings.

• Judgment must be notified to the unsuccessful party and its lawyers.

For any enforcement claims, judgment must be notified both to the unsuccessful party and its lawyers. Once complete and notified to the debtor, the debtor reserves the right to appeal for a one-month period. Without an appeal, the judgement is declared executive, permitting bailiff execution. The debtor is forced to pay or declare bankruptcy.

Ensure proper notification of judgments for enforcement.

• Allows debtor to continue operations and pay creditors through dividends.

Receivership may be converted into bankruptcy with 90% of cases doing so. Creditors are likely to receive a payment of dividends as the activities of the debtor are permitted to continue.

Receivership allows for continued operations and creditor payments through dividends.

• Assets are liquidated, often resulting in little-to-no payment to creditors.

Bankruptcy results in the liquidation of the debtor's assets, often providing little-to-no payment to creditors through dividends.

Understand the process and implications of bankruptcy.

• Claims must be lodged within two months for French creditors, four months for foreign creditors.

Claims may be lodged two months from the date of the publication in the official journal (BODACC) for French creditors. However, the timeframe is four months for foreign creditors.

Ensure timely filing of claims within the stipulated timeframes.

• Credit institution and supplier committees provide input on insolvency recovery plans.

Committees containing credit institutions (e.g. banks) and suppliers (often non-preferential creditors) are required to give their input on an insolvency recovery plan, offering their declarations to the judge handling the case. They alone are empowered to perform acts in the collective interests of the creditors.

Understand the role of committees in insolvency recovery plans.