Suspension of payments

Definition

Suspension of payments is a temporary moratorium granted by the court to a debtor who foresees being unable to continue paying. It provides breathing space to restructure and continue as a going concern. Governed by the Bankruptcy Act, it suspends enforcement by ordinary (unsecured) creditors but does not bind secured or preferential creditors. Where restructuring fails, it frequently converts into bankruptcy.

Example

A manufacturer hit by a temporary cash crunch obtains suspension of payments to negotiate with creditors and avoid immediate bankruptcy.

Why this is a business risk

When a counterparty is granted suspension of payments, ordinary creditors cannot enforce existing claims during the moratorium, which can disrupt your cash flow and delay recoveries indefinitely. The debtor remains in control of the business alongside a court-appointed administrator, and the outcome is uncertain: restructuring may succeed, but the moratorium often converts to bankruptcy. Businesses without a clear picture of their outstanding receivables and contract rights with the debtor are poorly positioned to protect their interests during the process.

How to manage it

• As soon as a counterparty enters surseance, identify all outstanding claims and contracts with that party so you can assess your position quickly.
• Check whether your contracts contain ipso facto termination or suspension clauses triggered by insolvency proceedings, and whether those clauses will hold up under Dutch law.
• Retain independent legal advice early: creditor committees, proof of claim deadlines and restructuring votes require prompt action.
• Avoid supplying further credit or goods on open account to a debtor in surseance without securing additional protection such as prepayment or security.

Legal references

• Fw art. 214 Bankruptcy Act: suspension of payments

Unless marked otherwise, references are to Dutch law (Burgerlijk Wetboek, the Dutch Civil Code); EU instruments such as the GDPR apply across the EU. This is general information, not legal advice. Other jurisdictions treat these concepts differently. Verify the current text and your situation with a qualified lawyer.