What is Suspension of Payments?

Suspension of payments is applied for by the debtor itself at the court. The court grants the suspension if there is a prospect of recovery. An administrator is simultaneously appointed to supervise operations. Payments to unsecured creditors require the administrator's approval.

For contractual counterparties, the consequences are far-reaching. Amounts owed by the debtor to unsecured creditors are suspended: collection is impossible during the moratorium. Creditors may not execute against the estate during the suspension period.

New obligations incurred during the suspension (rent, new deliveries, payroll) rank as estate debts and are paid. Historical debts do not. This distinction enables continued operations while historical liabilities are restructured.

Suspension of payments ends in three ways: homologation of a composition agreement (creditors accept partial payment), withdrawal when recovery is achievable without a composition, or conversion to bankruptcy when recovery fails to materialise. In Dutch practice, suspension of payments converts to bankruptcy in the majority of cases.

Include an explicit clause in contracts that suspension of payments constitutes grounds for immediate termination. Without such a clause, you are bound by the administrator's timeline.

Suspension of payments is the earliest official signal of serious financial distress. Once the moratorium is granted, payments to unsecured creditors cease. For a supplier that continues delivering on credit after the moratorium is granted, the risk increases rapidly.

Recognising suspension of payments as a critical event (and acting immediately by stopping credit deliveries or demanding advance payment) is essential to limit losses. Publications in the official gazette typically provide swift confirmation.