The consequences of the corona crisis raise many uncertainties for companies. In this Q&A several practice area groups answer the most frequently asked questions. This page will be regularly updated as more information about COVID-19 and its implications becomes available.
Table of content
Administrative Law
What if I receive an order subject to penalty or an (other) administrative enforcement order whilst - because of COVID-19 - it is difficult or impossible to comply with the order (on time)?
Under Dutch law, a general duty to enforce law by means of remedial sanctions applies. A common remedial sanction is an order subject to penalty to remediate a violation within a specific period of time (the compliance period). Exceptions can be made in case of extraordinary circumstances.
The General Administrative Act offers the violator the possibility to request the competent authority to extend the compliance period of a remedial sanction, so that penalties will (temporarily) not be incurred. This can offer a good solution if it is temporarily impossible to comply with an order subject to a penalty.
Also, the violator can request the competent authority to completely or partly withdraw the order. This possibility mainly applies to situations of force majeure. Enterprises could therefore successfully invoke this possibility during the COVID-19 crisis.
For both solutions it is important that the (temporal) impossibility to comply with the order is timely announced to the competent authority. If the announcement is made after the compliance period has expired, it will generally be too late.
Can an administrative fine be reduced or revoked because it was impossible to comply with the law during the COVID-19 crisis?
The General Administrative Act determines that the competent authority cannot impose a fine if the violator is not to blame. If an enterprise can (temporarily) not comply with certain regulations because of COVID-19, it could state it is not to blame. Also, the principle of proportionality applies to public enforcement. This means the competent authority has to consider the proportionality of enforcement in all specific cases.
When does a situation of administrative force majeure exist and what should the administrative authority do in case of force majeure?
Administrative force majeure exists in case a decision cannot be made due to abnormal and unforeseen circumstances, for which the administrative authority cannot be blamed and which are beyond the control of the authority. According to consistent case law, it is unlikely to be assumed that there is a case of force majeure. This is also counts for absence of public servants due to sickness and administrative or organisational problems. This is because the administrative authority is considered to be able to influence these circumstances. However, we can imagine that the COVID-19 virus, and the measures taken to combat the virus which have the whole society on lockdown, constitute a force majeure situation.
If the administrative authority believes there is a matter of force majeure, it has to notify the applicant as soon as possible that the decision-making period is suspended, and it has to state the period in which the applicant can expect a decision. If the authority doesn’t make mention of the suspension, the deadline cannot be met and the applicant can use the legal options of notice of default, incremental penalty and application for judicial review, mentioned below.
What can the applicant do in case the authority exceeds the decision-making term?
If the administrative authority fails to reach a decision within the time limit, the applicant can send them a written notice of default. The administrative authority will then incur an incremental penalty payment as of two weeks after the receipt of the notice of default, for every day the default continues. Furthermore, the applicant can appeal immediately to the administrative court. That way they can try to force the administrative authority (subject to an incremental penalty payment set by the judge) to make a decision as soon as possible.
Real Estate & Construction
Can I, as a contractor, invoke a force majeure clause, so that I have the right to be compensated for cost-increasing circumstances and/or my construction time being prolonged?
This entirely depends on the agreement between the parties and whether the parties, for example, have put the UAV 2012, UAV-GC 2005 or FIDIC into effect.
Can I, as a client, terminate a contract in the event of the construction time being prolonged or cost-increasing circumstances due to the corona-pandemic?
This entirely depends on the agreement between the parties and whether the parties, for example, have put the UAV 2012, UAV-GC 2005 or FIDIC into effect.
Real Estate - Impact on lease agreements
Is a lessee eligible for rent reduction due to a significant decline in footfall and consequently its turnover as a result of COVID-19?
On the basis of Dutch case law, a decline in footfall and turnover as a result of unforeseen circumstances, such as COVID-19 and the lockdown measures, was/is commonly considered (naar verkeersopvattingen) to be part of the entrepreneurial risk of a lessee and which do not constitute a defect (and therefore cannot lead to a claim for rent reduction).
Having said this, the COVID-19 situation is unprecedented in scope, impact and duration and affects the communis opinio (de verkeersopvattingen). One may argue that the concept of generally prevailing opinion (de verkeersopvatting) changes in such way that the impact of COVID-19 crisis and the consequences of the guidelines on social distancing and governmental lockdown measures, are (no longer) an entrepreneurial/commercial risk for lessees only. The abovementioned Dutch case law may no longer apply or not apply in full.
On the basis of the principles of reasonableness and fairness and the doctrine of unforeseen circumstances, the lessor may be obliged to offer a rent reduction of rental payments. The specific facts and circumstances of the case, such as the capacity of lessee, type of lease and asset play an important role in determining if and to what extent the lessee is entitled to a rent reduction.
Is a lessee eligible to temporarily close its leased space - on its own initiative – and opt for rent reduction as a result of COVID-19?
As to the rent reduction, see our comments above.
When closing on its own initiative (without an order by the Government), it should be noted that most lease agreements include an obligation to operate and that consultation with the lessor is advisable before such closing.
Is a lessee eligible for rent reduction in the event its leased space is closed following an order by the Government as a result of COVID-19?
In addition to our comments under 1, a governmental order in connection with COVID-19 may constitute force majeure and may be one of the circumstances which cannot be brought for the sole risk of the lessee (please be also referred to the question about force majeure below).
Is there any (binding) COVID-19 regulation applicable to commercial lease agreements?
The Dutch government has not adopted any (binding) regulation at the moment regarding commercial leases (yet). With regard to retail properties, please be also referred to the question below.
Are there any guidelines/agreements applicable to retail properties?
On 10 April 2020, several relevant market players (Association of Institutional Property Investors in the Netherlands (IVBM), Netherlands Bankers' Association (NVB) representing ABN AMRO, Deutsche Bank, ING and Rabobank, Ministry of Economic Affairs and Climate Policy (EZK) and multiple retail sector organizations) issued a joint press release. Pursuant to this press release, the parties agreed on guidelines/a “gentlemen’s agreement” which support the retail market and clarify how the relevant market players on the retail market should interact with each other during the current COVID-19 crisis. The guidelines are not binding. For details we refer to www.ivba.nl/actueel-artikel-detail/steun-akkoord
Could a lessee consider other legal options, such as a lease termination, or other options as a result of COVID-19?
Save for specific contractual arrangements and specific individual circumstances, we believe that terminating the lease is an uphill battle for a lessee.
We see current market initiatives arise in which the lessors and lessees jointly agree on (temporary) settlements or adjustments regarding their lease agreements, such as rental payments in arrears, partial rent reductions, extensions of the payment term and rental payment arrangements. However, mutual consent by both lessor and lessee is required.
Does the outbreak of COVID-19 justifies invoking force majeure by lessee?
Most leases do not contain a force majeure clause. Usually parties rely on the statutory provision regarding force majeure are set out in the Dutch civil code.
It depends very much on the specific lease circumstances of the case and the conditions in the lease agreement, whether there is a situation of force majeure.
A governmental order to close down in connection with COVID-19, such as the temporary closure of restaurants or retail locations, may under circumstances, may qualify as force majeure.
Commercial
Is COVID-19 a case of force majeure?
It is possible that COVID-19 might lead to a force majeure situation. This could be the case, for example, if a company is shut down by the government or an event has to be cancelled because of a prohibition. However, this also depends on possible terms that have been agreed upon. Not every case can be considered force majeure. If it is still possible to fulfil the terms, whether or not this is at higher costs, then initially this cannot be considered a force majeure situation. It is important to first consider the terms the parties involved agreed on.
What obligations do I have in a force majeure situation?
Generally, in this situation a party is obligated to limit potential damage as much as possible (including for the other party). It is advisable to consult together to reach a solution. Furthermore, it is important to check possible written terms in order to determine if there are any other obligations or consequences in case of force majeure.
Am I obligated to fulfil my contractual agreements in a force majeure situation?
When a contractor cannot fulfil the agreements for the client due to force majeure, the client cannot expect the contractor to fulfil the agreements at that moment. The client can however expect the party to potentially later fulfil the terms, for example by delivering the goods and/or services at a different point in time, when force majeure is no longer the case.
Should the contractor no longer be capable to deliver goods or services due to force majeure, the client can postpone the obligation to pay. This again depends on the terms the parties agreed on.
Do I owe compensation in case of non-performance due to force majeure?
In case of force majeure, the other party is not initially owed any compensation. The agreements could however contain different terms.
Am I liable for a potential contractual fine in case of non-performance due to force majeure?
Initially, there is no case of liability for contractual fines due to force majeure. The agreements could however contain different terms.
Can I alter the agreement because of COVID-19?
As a general principle, the agreement cannot be unilaterally altered, unless the parties came to terms about this prior. Under unforeseen circumstances – which we believe COVID-19 initially is – parties can renegotiate. Should parties be unable to come to new terms, a party may ask the judge to alter the agreement. However, it is required that continuation of the agreements is unacceptable due to the unforeseen circumstances according to rules of reasonableness and fairness. This will not typically be the case. Generally, a judge will be hesitant to alter agreements.
Employment
When is an employer entitled to a subsidy under the Temporary Emergency Measure Bridging for Employment (NOW)?
If you expect a loss of turnover of at least 20% during three consecutive months in the period from the 1st of March until the 31st of July 2020. The employer determines which three consecutive months are used for this calculation:
- March, April, May; or
- April, May, June; or
- May, June, July.
Loss of turnover is calculated by first determining the ‘reference-turnover’. This is done by dividing the net-turnover of 2019 by 4. The reference-turnover is compared with your estimate of the turnover over the three-month period as described above. If the loss is higher than 20%, you can apply for the subsidy. If you are part of a group of companies, different rules apply, we will be happy to assist you with that.
The subsidy will be paid by the UWV in three instalments within 2 weeks after the application. The subsidy is always intended to cover the wage bill for March, April and May 2020. This is a separate matter from the measurement period chosen by you.
How much subsidy do I receive under the NOW?
The subsidy is based on the wage bill (the ‘SV-loon’, the wage for the purposes of wage tax/national insurance contributions with a maximum of € 9,538 gross per individual employee) for January 2020. The amount of the subsidy depends on the percentage of loss of turnover and is calculated on the basis of the graduated scale (100% loss of turnover leads to 90% subsidy over the wage bill). In the application form the payroll tax number is filled in on the basis of which the UWV determines the wage bill for your calculation.
Until when can I claim NOW?
Applications for the NOW subsidy can be submitted up to and including 31 May 2020. Plans are being made for an extension of the NOW after this date. In any case, it is clear that an extension will impose additional conditions on obtaining a subsidy. Examples include conditions that limit the payment of dividends and bonuses and the obligation to make agreements with trade unions/works councils about continued employment.
Can I amend employment conditions because my employees do not (or cannot) work or because my turnover is heavily decreasing, whether or not in combination with the NOW subsidy?
The amendment of employment conditions is determined by the agreements in a collective labour agreement, the applicable employment conditions, support from the works council and, above all, the consent of individual employees. As of the start of the corona crisis, various employers have been able to make agreements that relate to the (suspended) timing and payment of bonuses, holiday allowance, salary indexation, part-time work when the work supply is decreasing, taking leave, etc. It is important to bear in mind that one of the conditions for the NOW subsidy is to ensure as much as possible that the wage bill for March, April and May 2020 is kept at the same level as in January 2020. A lowering of this wage bill will lead to an obligation to repayment of part of the subsidy afterwards. We will be happy to help you to ensure that temporary amendments to employment conditions do not affect the subsidy.
In order to safeguard the health and safety of employees as much as possible, I want to prevent employees from unintentionally infecting others with the coronavirus. What kind of questions can I ask about the health of my employees?
Despite the potentially major health consequences of COVID-19, it is not allowed to ask employees whether they have the virus, nor to have them tested and share the results with you. You are also not allowed to measure the temperature of employees yourself. According to the Dutch Data Protection Authority (Autoriteit Persoonsgegevens (‘AP’)) an employer may require an employee to keep a close eye on his or her own health, especially when the employee is not working at home, in view of the special circumstances surrounding COVID-19. According to the AP, this means that it may be an appropriate measure to have your employees monitor their own temperature during working hours. In practice, we see that the GDPR and Corona in the workplace mainly lead to practical questions that can often be well resolved in cooperation with the company doctor. We are happy to share our experiences with you.
Insurance
Do insurance policies provide cover for losses caused resulting from the current COVID-19 outbreak?
The outbreak could affect the risk under several insurance policies: liability, travel, (marine) cargo and business interruption policies. Whether such policies provide cover for loss related to the COVID-19 outbreak, depends on the policy conditions. Relevant is whether a policy provides cover for loss resulting from a contagious disease (or on the other hand excludes such loss). If the policy provides cover, the calculation of loss becomes relevant and whether e.g. all loss can be linked to one and the same cause, event or occurrence.
Whether an insurance policy provides cover needs to be determined on a case by case basis.
Corporate
Is it possible to hold a general meeting fully digitally?
General meeting
Yes, on 24 April, the law which contains new temporary facilities on holding annual general meetings because of COVID-19 came into force.
In the article that you can find here, the requirements for such a fully digitally held general meeting are described.
Regardless of the possibilities that this law offers, please note that there are also other options for taking resolutions in the general meeting in a flexible way.
Alternative 1. Exercise the voting rights through electronic means of communication
Dutch law provides for the possibility, that – if the articles of association allow so – each shareholder, in person or represented by a proxy- holder authorised in writing, is authorised to attend the general meeting, address the general meeting and exercise voting rights through electronic means of communication.
In this scenario, it is important to realise that a physical meeting is also to take place, in which in any event the chairman of the meeting and (in principle) the managing directors and supervisory directors (if any) are present.
The shareholders must be identifiable through the electronic means of communication and must be able to directly observe the proceedings at the meeting and exercise the voting rights. The articles of association may provide that it is required that the shareholders can participate in the deliberation via electronic means of communication.
By or pursuant to the articles of association, conditions may be imposed on the use of the electronic means of communication. If these conditions are set by virtue of the articles of association, they have to be announced in the notice.
The articles of association may provide that votes cast through electronic means of communication prior to the general meeting, but no earlier than the thirtieth day before the meeting, are equated to votes cast at the time of the meeting.
Alternative 2. Power of attorney
Dutch law states that each shareholder is authorised to grant a power of attorney to exercise his voting rights in the general meeting. The articles of association may limit this authority. The authority to be represented by a lawyer, civil-law notary, assigned civil-law notary, candidate civil-law notary or accountant cannot be excluded.
If a shareholder wishes to attend the meeting by a proxy -holder authorised in writing, the requirement of written form for the power of attorney will be met if the power of attorney has been recorded electronically.
Notice
In both scenarios, a physical meeting is held whereby the rules regarding convening the general meeting are to be followed. Notice of a general meeting will be given through letters, sent to the addresses of the shareholders as mentioned in the shareholders register. Unless the articles of association state otherwise, with the consent of a shareholder, notice may be given through a readable and reproducible electronic form of communication to the address given by him to the company for the purposes of such communication. If the notice period was shorter or if no notice was sent, no valid resolutions can be adopted, unless all persons with meeting rights have consented to the adoption of resolutions and the managing directors and the supervisory directors (if any) have been given the opportunity to advise prior to the adoption of the resolutions.
Alternative 3. Resolutions outside of a meeting
If the group of shareholders is not too big, it could be considered to adopt resolutions in writing outside a meeting, provided that all persons with meeting rights have consented to this manner of adopting resolutions.
Valid resolutions
It is of the essence that the resolutions are taken in accordance with the articles of association. In any scenario, majorities and quora are to be taken into account and the managing directors and supervisory directors (if any) have an advisory vote prior to the adoption of the resolutions.
What are the different ways for members of a cooperative or an association to adopt resolutions?
Generally, member meetings of a cooperative or an association are held in the same way as meetings of a BV, like discussed above.
A difference is that a power of attorney to attend a general meeting can only be granted to any other person with voting rights, unless the articles of association state otherwise. The power of attorney can not be granted to a third party. Furthermore, a member can only personally attend a general meeting by electronic means of communication, a proxy-holder cannot do this.
In addition, a unanimous decision of all members or delegates, even if they are not convened in a meeting, provided that the management board has knowledge about the matter, has the same effect as a resolution of the general meeting.
Banking & Finance
Which financial short-term compensation schemes for immediate losses due to COVID-19 have been implemented for entrepreneurs?
On 17 March 2020 the Dutch government had announced extensive economic and financial measures the purpose of which was to help and assist Dutch companies in the context of the COVID 19 crisis. These measures were an extension of the ones announced previously on 12 March 2020. As time has progressed, new more stringent measures have taken effect. From 1 June 2020 a set of amended and new measures applied until 1 October 2020, as announced by the Dutch government on 20 May 2020. Further, on 28 Augustus, the Dutch government has announced that the financial support measures were also extended after 1 October 2020, ending on 30 June 2021. However, the conditions under which companies will qualify to benefit under these new measures have been further amended. In view of the most recent developments of the COVID 19 crisis, on 27 October 2020 the Dutch government has also reshaped certain conditions and extended certain financial support measures to additional affected economic sectors. The recent amendments focus on the applications of the support measures on a longer term and envisage supporting companies and entrepreneurs to adjust to the new (post-)pandemic economic situation and to enable new investments.
The measures now in place are the following:
The SME guarantee scheme (Borgstelling MKB Kredieten (BMKB)) has been extended (BMKB-C)
This extension enables small and medium-size enterprises in the Netherlands to attract additional financing. This scheme applies to small and medium-size enterprises in the Netherlands having less than EUR 50 million revenue; less than 250 employees (FTEs); less than EUR 43 million balance sheet total and that have been incorporated for less than 3 years. This measure applies until 1 April 2021.
The Business loan guarantee scheme (Garantie Ondernemersfinanciering (GO)) has been extended (GO-C)
This scheme allows the Dutch government to guarantee half of any new funds which banks make available to Dutch borrowers. The extended GO-scheme (GO-C) applies to new Euro loans, including refinancings, with a term of less than 8 years and to guarantee facilities. Applicants must have substantial business activities in the Netherlands. Certain industries are excluded from the GO-scheme. The GO-scheme was originally meant to end on 31 May 2020. However, the Dutch government has further prolonged the GO-C scheme: financing parties may apply for the GO-C guarantee until 30 June 2021.
The Suretyship Agriculture (Borgstellingskrediet voor de Landbouw (BL)) has been extended (BL-C)
Agricultural companies are facilitated in order to attract financings. The extension includes bridge financing under the existing scheme. This measure applies until 31 March 2021.
Interest rebate for small entrepreneurs on microcredits "Qredits"
This measure supports microcredit provider Qredits with an amount of up to EUR 6 million to allow Qredits to extend credits by up to six months and to allow a decrease of interest rates to 2%. On 27 October 2020, the Dutch government announced that the financial support under the Qredits-scheme will apply until 1 July 2021.
Temporary Emergency Bridging Measure for Sustained Employment (Noodfonds Overbrugging Werkgelegenheid; NOW 1.0, NOW 2.0 and NOW 3.0)
This measure financially supports employers with the payment of their employees' wages. The NOW-subsidy is meant for employers that estimate a turnover loss of at least 20% over a certain reference period and of at least 30% as from January 2021.
An employer can apply for an advance payment with the Employee Insurance Agency (UWV, Uitvoeringsinstituut Werknemersverzekeringen) of the compensation for the employees' wages costs. The purpose of the NOW support which is a state subsidy, is to keep the wages of the employees as much as possible unchanged, to enable employers to continue payment of these wages and to avoid redundancies. The NOW measure which was introduced in April 2020, has been prolonged as from 1 October 2020 and is now called the 'NOW 3'.
The duration of the NOW 3.1 is from 1 October 2020 until 1 January 2021 (to be applied for between 16 October and 13 December 2020); the NOW 3.2 applies from 1 January until 1 April 2021 (to be applied for between 15 February and 14 March 2021 (target dates)) and the NOW 3.3 applies from 1 April until 1 July 2021 (to be applied for between 17 May and 13 June 2021 (target dates)). Under the NOW 3 amended and more austere terms and conditions apply.
See also https://cms.law/nl/nld/publication/now-3-wijzigingen-per-1-oktober-2020 (Dutch only).
In the first term of the NOW 3, until 1 January 2021, an employer may receive a maximum of 80% of the wage sum. In case of a loss percentage of 100% the subsidy will thus amount 80% of the wage sum. Under the NOW 3.2 the compensation amounts to a maximum of 70% of the wage sum and under the NOW 3.3 to a maximum of 60% thereof.
The NOW subsidy will not be lowered if the employer is able to agree with their employees upon a 10% reduction of the wages (under the NOW 3.2 and NOW 3.3 this will respectively be 15% and 20%). The NOW subsidy will also not be lowered in case an employer files for dismissal on economic grounds (bedrijfseconomisch ontslag) at the Employees Insurance Agency (UWV in Dutch) during the NOW 3 term, provided that the employer ensures to contact the UWV helpdesk that has specifically been established to support employers with educational advice for redundant employees. Under the NOW 3, the employer has to commit to actively inform and encourage employees about undertaking re-education and schooling and to actively offer employees such schooling.
Under NOW 1 a prohibition was introduced to pay any bonus over 2020 (or dividend 2020 or buy back of own shares) if the group that an employer is part of could not present a loss of turnover of 20% or more and if an employer of such a group applied for NOW based on the loss percentage of the individual company. Such a prohibition applied for both the applying entity as its ultimate parent company. The latter has become part of a political debate as to whether a non-Dutch parent company can be ordered to comply with Dutch state subsidy rules. It is important to bear in mind that for all applying entities under the NOW 2 and NOW 3 the prohibition on bonus as described above applies. The prohibition applies to members of the board of directors/management/board of the applying entity which includes appointed board members but also others who have a decision-making role within the company.
When preparing the application for the definitive NOW subsidy, for employers it is essential to provide for due written recording of the financial data that account for the entitlement to the NOW subsidy. The accountant who has to provide for a declaration for applications exceeding EUR 100.000, expects an overview showing which companies belong to the corporate group structure, on the grounds of which assumptions and figures the application for the NOW subsidy has been made, whether the wages sum has been kept as much as possible the same and how the prohibition on bonus payment has been fulfilled. The latter may for example be accounted for by confirming to the director(s) that, under referral to and application of the NOW, no bonus or other profit sharing will be paid over 2020, irrespectively of what the parties may have agreed thereon in the employment contract. If application is made for the NOW 3.2 and NOW 3.3, then the prohibition on bonus payment will also apply over 2021.
Temporary extra benefit for self-employed professionals (TOZO, Tijdelijke overbruggingsregeling zelfstandig ondernemers), TOZO 2, TOZO 3 and TOZO 4
This measure eases the requirements for self-employed professionals to apply for an extra, temporary benefit. This support can be applied for as an additional financial support for maintenance and/or a loan for business capital. The TOZO measure is based on the financial support for self-employed professionals (Besluit bijstandverlening zelfstandigen (Bbz)) and temporarily eases certain terms and conditions thereof. At first, the Tozo-scheme applied until 1 June 2020 but the Dutch government has implemented an extension of the Tozo-compensation scheme for a period of 4 months from 1 June up to 30 September 2020 (Tozo 2-scheme). On 28 August 2020 the Dutch government announced a further extension of the Tozo financial support measure applying from 1 October 2020 until 1 April 2021 (Tozo 3-scheme). Under the Tozo 3-scheme amended conditions apply. Subsequently, a further amended scheme will apply from 1 April 2021 up to 1 June 2021 (Tozo 4-scheme).
Compensation for fixed costs (TVL, Tegemoetkoming vaste lasten MKB ) and Proposal for compensation for entrepreneurs in Affected sectors COVID-19 (TOGS, Tegemoetkoming Ondernemers Getroffen Sectoren COVID-19)
Under this measure, at first the Dutch government awarded entrepreneurs in a number of specific sectors that have been affected by the COVID-19 measures a fixed reimbursement of €4,000 per company. Applications could be made until 26 June 2020. On 20 May 2020 the Dutch Government has announced that the TOGS-scheme was to end on 15 June 2020 (although applications could be made until 26 June 2020) and that the TOGS-scheme was to be replaced by a new support scheme compensating fixed costs: the TVL-scheme (Tegemoetkoming Vaste Lasten). This new financial support measure applies from 1 June 2020 and replaces the TOGS-scheme. This measure is intended to help small- and medium size enterprises to pay a part of their fixed costs, exclusive of labour costs, as for instance rent, subscriptions and insurance costs. Entrepreneurs experiencing more than 30% loss of revenue due to the Covid-19 crisis, may benefit from this measure for a maximum amount of EUR 50.000 free of taxes and over 4 months. The first TVL-scheme applied from 1 June 2020 until 1 October 2020. However, on 28 August 2020 and on 27 October 2020 the Dutch government announced further extensions, amendments and phased implementation of the TVL financial support measure that applies from 1 October 2020 until 1 July 2021. The Dutch government is presently also working op extensions of the TVL-scheme for certain affected economic sectors in particular.
Corona Bridging Loan (KKC, Klein Krediet Corona)
This financial support measure benefits small enterprises. The Dutch government will guarantee 95% of bridging loans for a maximum amount of EUR 750 million. This scheme will be available to small entrepreneurs with relatively limited financing needs (EUR 10.000 to 50.000). Micro-, small and medium size enterprises are eligible for this financial support provided that they have a revenue higher than EUR 50.000 and were financially healthy prior to the Covid-19 crisis. Also, qualifying enterprises must have been registered in the Netherlands (Kamer van Koophandel) prior to 1 January 2019. The scheme has been approved by the European Commission under the Temporary Framework for State aid measures to support the economy in the current Covid-19. Application for the KCC-scheme may be made until 1 July 2021.
Postponement of phasing-out of the Growth Facility Scheme (GF, Groeifaciliteit)
The intended phasing-out of the Growth Facility Scheme will be extended by one year, until 1 July 2021. This postponement ensures that eligible entrepreneurs will be able to raise capital also in during the Covid-19 crisis. Entrepreneurs in need of venture capital may benefit from this supporting measure. Under the Growth Facility Scheme the financing of venture capital is 50% guaranteed by the Dutch government, for instance for losses incurred on subordinated loans and shares in financial holding companies.
Bridge funding for startups and scale-ups (COL, Corona Overbruggingslening)
Until 1 October 2020, bridge financing could also be applied for by startups, scale-ups and other innovative entrepreneurs affected by the Covid-19 crisis. These entrepreneurs usually do not yet have banking relationships. Therefore, the Dutch government has appointed the regional development agencies to provide the announced bridge financings. The Dutch government makes available EUR 200 million to support this measure. This amount is additional to the initial financial support of EUR 100 million. Although the COL-scheme was meant to end on 1 October 2020, in view of the prolonged economic circumstances due the COVID-19 crisis, on 27 October 2020 the Dutch government has extended this measure until 1 July 2021.
Suspension of repayment under the Proof-of-concept Funding Scheme (VVF, Vroege Fase Financiering) and the Innovation Credit Scheme (IK, Innovatiekrediet)
The Dutch government grants funding to innovative startups through the Proof-of-concept Funding Scheme and the Innovation Credit Scheme. If the eligible entrepreneurs were affected by the Covid-19 crisis, they could apply for a suspension of repayments and of interests for a period of 6 months, from 1 April to 1 October 2020. Under the Proof-of-concept Funding Scheme, the interest repayment obligations over these 6 months could also be suspended. The Proof-of-concept Funding Scheme and the Innovation Credit Scheme ended on 1 October 2020. However, the Dutch government is now, in co-operation with Invest-NL, working on a new scale-up facility in order to enable the growth of scale-ups in the Netherlands.
Extra financial support for the cultural sector
The Dutch government also makes available extra financial support to various economic sectors. In particular, the Dutch government has made available to the cultural sector EUR 300 million extra financial support in addition to the other available financial measures. On 28 August 2020, the Dutch government also announced that a further amount of EUR 482 million will be made available for the financial support of the cultural sector. The scope of these extra measures is the support of employment in the cultural sector and ensuring that cultural organisations can keep investing in the next cultural season. The extra financial support is particularly meant to support cultural organisations that are crucial to the whole sector. If these organisations will remain financially healthy, this will sustain the restart of the business flow in this sector, benefitting also self-employed entrepreneurs.
Besides this support of the cultural sector, the Dutch government is presently working on the (extension of) financial support of other sectors. This includes crucial economic sectors like the medical support sector and the economic sectors that have been additionally affected by the new or prolonged restrictive measures. These latter economic sectors include hotels, restaurants and cafes and the sports and events sectors.
Moratorium on bank loans
In addition to the governmental financial support measures for entrepreneurs, during the COVID-19 crisis a number of Dutch banks have granted a 6-months suspension of repayment of loans up to EUR 2,5 million to enterprises that are basically financially healthy. For instance, clients of ABN AMRO, ING, Rabobank, Volksbank and Triodos Bank were able to benefit from this measure. In the meantime, Dutch banks have supported more than 166.000 entrepreneurs and more than 36.000 consumers in addition to the governmental support measures. Suspensions of payment, new loans and/or extended credit facilities presently amount to in total EUR 25,8 billion. The agreement on suspension of payment of bank loans was only binding on the committed banks. Although this moratorium arrangement ended on 31 July 2020, banks now provide individually tailored support to their clients. In addition to the above support measures, lenders are generally expected to act with leniency towards borrowers.
Announced new temporary legislation on suspension of payment
In addition to the financial support measures that are already in place, on 4 June 2020, the Dutch government launched an online consultation aiming at the introduction of new legislation on temporary payment suspension (Tijdelijke wet COVID-19 SZW en Jen V). This draft bill offers debtors the possibility to submit to the court a request for postponement of bankruptcy or for suspension of creditor's claims if the debtor is able to show that prior to the Coronavirus measures being implemented (i.e. 16 March 2020) the debtor was able to pay its debts and since the measures its revenues have declined by 20% or more. Other conditions in order to qualify for suspension of payment under the draft bill are the perspective of debt repayment on expiration of the suspension term as allowed by the court and that the suspension of payment is not unreasonably detrimental to the creditor(s) requesting the bankruptcy. Debtors qualifying as banks, insurers or investment firms under article 1:1 of the Dutch Financial Supervision Act (Wet financieel toezicht) are excluded from the scope of this new draft bill. This new legislation has been adopted on 24 November 2020 and is expected to enter into force on very short term. The provisions of this new act that apply to temporary payment suspension will apply until 1 February 2021 but may be extended by royal decree for a further two-months term.
Commercial retail Agreement
Major parties in the real estate sector, Dutch banks and the Ministry of Dutch Economic Affairs, have reached an agreement on supporting measures for the commercial retail sector. The scope of this Agreement is to support the parties affected by the COVID-19 crisis in the sector and to spread losses over lessees, lessors, banks and the Dutch government. The Agreement has been further extended in June 2020 in order to encourage 50% remittance of lease debts over the months April and May 2020 and a 50% suspension of payment for leases over the month June and until 2021. The Agreement is binding on the participating parties. However, following this Agreement, the Dutch government expects also other lessors and lessees to act with leniency and to reach financial solutions in consultation with each other.
Are there any major factors that may inhibit an applicant from successfully applying for a stabilisation measure?
Each stabilisation measure presents the terms and conditions under which applications can be submitted, whereby the generally applicable principle is that only companies, branches and/or entities incorporated under Dutch law and registered with the Dutch trade register can successfully apply for a stabilisation measure.
Insolvency proceedings
What are the main insolvency proceedings for companies in the Netherlands?
In the Netherlands there are two main insolvency proceedings: suspension of payment (surséance van betaling) and bankruptcy (faillissement). Whilst bankruptcy proceedings primarily focus on the liquidation of the debtor’s assets, the scope of a suspension of payment is the business continuation. Suspension of payment proceedings are intended to give the debtor temporary relief from claims of (only) the unsecured creditors. It is also intended to enable the debtor to propose a composition to creditors. Both the suspension of payment and the bankruptcy are recognized as insolvency proceedings under the EC Insolvency Regulation.
Suspension of payment
A suspension of payment is a court-supervised reorganization. Suspension of payment proceedings essentially offer the debtor two forms of relief: (i) a temporary moratorium for claims of unsecured creditors and (ii) the possibility to implement a restructuring plan with a majority consent of its creditors. Preferential and secured claims are excluded from the suspension of payment proceedings as these claims may be separately and independently enforced, disregarding any suspension of payment proceedings. However, practice shows that it often is difficult to effectively reorganise and restructure through a suspension of payment due to various legal impediments under Dutch law. As a suspension of payment leaves the rights of secured and preferential creditors unaffected, these creditors should be prepared to consent to the restructuring on a voluntarily basis. In addition, it may also be difficult to reduce current business costs during suspension of payment proceedings.
Bankruptcy
In contrast to the suspension of payment, bankruptcy proceedings aim to achieve a (formal) liquidation of the debtor’s assets for the benefit of all creditors.
Act on the confirmation of private plans (Wet homologatie onderhands akkoord or WHOA)
The legislative proposal for the Act on the confirmation of private plans (Wet homologatie onderhands akkoord or WHOA) was submitted to Dutch parliament last year and was adopted on 6 October 2020. It will enter into force on 1 January 2021. Once entered into force, it will introduce a legal basis according to which tailor-made (financial) restructuring plans can be implemented outside formal insolvency proceedings. The WHOA provides for a fast and efficient restructuring procedure outside formal insolvency, which in principle can be completed within a matter of months. The restructuring plan may bind (a selection of) secured, unsecured and preferential creditors as well as shareholders, while at the same time adequately protecting the interests of any dissenting party.
The WHOA enables both the debtor and other important stakeholders the opportunity to – at an early stage and outside the public domain – avoid an uncontrolled insolvency and preserve the debtor’s value. In addition, the WHOA provides for a high level of deal certainty as a result of, amongst others, the various supportive measures. It also offers flexibility on the contents of the restructuring plan and has the option to be (automatically) recognized throughout the EU.
On 26 May 2020 the WHOA was adopted by the Dutch parliamentary House of Representatives (Tweede Kamer) and on 6 October 2020 by the Dutch Senate (Eerste Kamer). The new legislation will enter into force on 1 January 2021. On 24 November 2020 the Dutch courts have already published the first version of the WHOA proceedings regulation (Landelijk procesreglement WHOA zaken rechtbanken).
Consequentially to the COVID-19 crisis, the Dutch government had indicated the WHOA as one of the emergency bills because the restructuring tool introduced by it could positively help enterprises in financial distress to avoid bankruptcy. On 27 October 2020, the Dutch Government has indicated that financial restructuring plans outside formal insolvency proceedings as envisaged by the WHOA may already be prepared prior to 1 January 2021, the date of entry into force of this new legislation. The restructuring plan may then be submitted for confirmation by the court immediately after 1 January 2021.
What are the formal requirements to apply for insolvency proceedings?
Suspension of payment
A debtor can apply for suspension of payment proceedings if he envisages that he will not be able to pay his debts as they fall due. Suspension of payment can only be granted by the court at request of a debtor and is directly granted. The court appoints an administrator and a supervisory judge.
Bankruptcy
The court may declare a bankruptcy on request of the debtor himself or of one or more creditors. An important condition for the court for declaring a party bankrupt is that the debtor has ceased to pay its debts. This is the case if the debtor has left claims of more than one creditors unpaid. Claims of secured creditors may be executed separately and outside bankruptcy proceedings. An important exception to this rule is the court-ordered stay (cooling-off period) that may be imposed by the supervisory-judge. During this cooling-off period, the rights of the secured and preferential creditors remain frozen. Creditors, including secured and preferential creditors, are not allowed to enforce their rights during the cooling-off period (unless so authorized by the supervisory-judge). The scope of a cooling-off period is to allow the bankruptcy trustee to assess the bankrupt estate.
What are the insolvency application deadlines?
If the debtor files for bankruptcy himself, the court will generally decide on the application within a week. If a creditor files for bankruptcy, a court hearing will be scheduled within a few weeks. The court will generally decide on the day of the court hearing.
Have the insolvency rules and timelines been amended due to the COVID-19 crisis?
The Dutch insolvency rules have not been amended. However, due to the Covid-19 crisis, on 26 March 2020 the Dutch administration of justice has implemented a specific temporary regulation for insolvency proceedings. This regulation has been further amended on 29 April 2020 and on 26 June 2020. Under this temporary regulation, bankruptcy requests and requests for suspension of payment are being handled in a defined order of priority, mostly by correspondence and, if necessary, by online (video) connection. In assessing bankruptcy requests, the court takes into account the importance of legal protection and abuse prevention. In judging a bankruptcy request, the court will take into account all relevant circumstances of the case, including the Covid-19 pandemic crisis and the related (economic) situation.
Is there a legal obligation to file for bankruptcy; if so what are the consequences for late filing?
Under Dutch law there is no legal obligation to file for bankruptcy. However, continuation of the business can lead to personal liability of the company directors, although this is an exceptional case as the company itself is liable for not (properly) fulfilling its obligations. Please see also the answer under ‘Directors and Shareholders' Liability’.
Short term relief and corona schemes
Are there any effective (COVID-19) measures in place in the Netherlands that provide (short term) relief against creditors’ actions?
In the Netherlands, no specific measures are in place that provide short term relief against creditors’ action due to the Covid-19 crisis. However, in the context of this crisis, the Dutch government has implemented extensive economic and financial measures to support Dutch companies to maintain and/or increase their liquidity level. Please see also the answer under ‘Which financial short-term compensation schemes for immediate losses due to COVID-19 have been implemented for entrepreneurs?‘.
Does applying for insolvency proceedings have an (negative) impact on any (short-term) COVID-19 compensation schemes offered by the Government?
One of the main Covid-19 measures that has been introduced by the Dutch government is the Temporary Emergency Bridging Measure for Sustained Employment (Tijdelijke Noodmaatregel Overbrugging voor Werkbehoud NOW 1, NOW 2 and NOW 3). This measure provides for financial support for employers to help paying their employees’ wages. Depending on the reduction of the turnover, employers can claim a compensation for their regular salaries up to a maximum of a certain percentage of the wages. Under the extensions of the NOW 1 measure, the NOW 2 and the NOW 3, amended and more austere terms and conditions apply.
The duration of the NOW 3.1 is from 1 October 2020 until 1 January 2021 (to be applied for between 16 October and 13 December 2020); the NOW 3.2 applies from 1 January until 1 April 2021 (to be applied for between 15 February and 14 March 2021 (target dates)) and the NOW 3.3 applies from 1 April until 1 July 2021 (to be applied for between 17 May and 13 June 2021 (target dates)).
See also https://cms.law/nl/nld/publication/now-3-wijzigingen-per-1-oktober-2020 (Dutch only).
Continuation of business
Are there any special rules applicable for continuation of business in a financially distressed situation in the Netherlands?Directors can be held personally liable for the company’s obligations if they allow the debtor to enter into an agreement whilst they know or reasonably should have known that the debtor would not (within a reasonable time) meet his obligations arising from that agreement and that the contracting party would not have any recourse against the debtor’s estate for the damages incurred. Procuring or permitting that a debtor will not fulfill its statutory or contractual obligation is a separate legal ground for directors’ liability. A director could also be held liable for selectively (non-)paying of certain creditors when either bankruptcy is unavoidable or the company ceases its activities. An example in this context may be payment to a party that is affiliated either to the debtor or to its directors.
Can contracts be terminated during insolvency proceedings?
In principle existing contracts at the time of the commencement of insolvency proceedings are not affected by such proceedings. However, a contract may provide that the start of proceedings for insolvency of one of the parties gives the other party the right to terminate the contracts or accelerate other rights. In addition, special provisions apply for contracts that have not been fully performed by both the debtor and the other party. The other party can then request the insolvency trustee to inform him within reasonable time whether the insolvency trustee will fulfill the obligations under the contract. If the insolvency trustee states that he will perform under the contract, he is obliged to grant security for proper performance of the relevant obligations. Should the insolvency trustee declare that he will not fulfill the obligations under the contract (or does not react timely), the insolvency trustee loses his right to demand performance of the other party’s obligations. The Dutch Bankruptcy Act (Faillissementswet) contains some special provision regarding the termination of certain specific contracts (eg. lease and employment agreements).
Directors and Shareholders' Liability
Can a director or parent company be held liable for the debt of an insolvent company in the Netherlands?
No, in general only the debtor is liable for fulfilling its legal obligations, unless the director or shareholder contractually granted security for the performance of the debtor’s obligations. Directors’ personal liability is an exception on this general rule and only applies if directors did not properly perform their legal duties. A person that factually determined the debtor’s policy as if he would have been a director can also be qualified as director. In exceptional situations, also a shareholders may be held liable for damages caused by tort and, for instance, by neglecting a duty of care.
Shareholders' loans and security rights
Are shareholders’ loans treated during insolvency proceedings in a similar way as loans provided by financial institutions in the Netherlands?
Loans provided by shareholders are treated in a similar way as loans provided by financial institutions unless the loans is contractually subordinated to specific debts or to the creditors in general. In addition, security may be granted to shareholders as collateral for the performance of obligations. If a payment is done or a new security right is granted for the benefit of shareholders within one year prior to the commencement of insolvency proceedings without any legal obligation thereto, such payment or security right may be challenged by the bankruptcy trustee.
Performance by the debtor of a due obligation may only be nullified if the insolvency trustee proves that, at that moment in time, the person that has benefitted from the performance of the obligation knew that a bankruptcy request in respect of that debtor had already been submitted or that performance of the obligation in question is the result of consultations between debtor and creditor with the intention to favour that creditor detrimentally to the other creditors.
International
Do insolvency proceedings in the Netherlands have a universal effect and are foreign insolvency proceedings recognized in your jurisdiction?
Insolvency proceedings in the Netherlands have a universal effect. The Dutch insolvency regime aims to benefit both domestic as foreign creditors. The competence of a Dutch insolvency trustee in another jurisdiction may be limited by the respective foreign legal system. In the Dutch legal doctrine the general opinion prevails that the law of the country which the insolvency proceedings are commenced determines the legal consequences of that insolvency. The recognition and the effect of foreign insolvency decisions are based on international treaties. In the absence of such a treaty, foreign insolvency decisions are generally recognized, provided that the competence and the proceedings of the court that has opened such insolvency proceedings are in line with internationally accepted legal standards and that the decision is not in conflict with Dutch public order and not in conflict with a decision given by a court in another jurisdictions in the same matter.
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