In case of financial problems, a company has the option to apply for a suspension of payments (deferral of payment). In that case, certain financial obligations will be deferred for a period. A company may find itself in a situation where it temporarily lacks the financial resources to make necessary payments. If there are real prospects for better times, the company can take measures to avert bankruptcy. In practice, entrepreneurs sound the alarm too late. Once the financial position has become hopeless, suspension of payments no longer makes sense. It is important to see problems coming at an early stage and to take action.
What is suspension of payments?
In certain cases, payment can be deferred. Postponing payments often covers a period of one and a half years. After this period, deferral of payment can be requested again for a period of one and a half years. During this period, the company can put its affairs in order and ensure that it becomes financially healthy again. For example, deferral of payment is not possible for mortgage payment arrears and tax debts.
When is a suspension of payments justified?
In case of temporary financial shortages it is possible to request a postponement. The expectation must be that the company can be saved through the suspension of payments. On the other hand, the company must also demonstrate that it makes sense to grant this deferment. Why will it be possible to bear the financial burden in the future but not now?
How should a moratorium be applied for?
To request a deferral of payment, it is necessary that you engage a lawyer. This person submits the application to the court. The court will appoint an administrator based on that request. The administrator’s interest is to continue the company and will enter into discussions with the creditors. Initially, the court gives a provisional agreement for the first necessary postponement, after which the final decision is made. Creditors then no longer have the option to file for bankruptcy of the company or enforce payment of the outstanding invoices.
In the event of a suspension of payments, the company is under supervision
The administrator is a party that must approve financial decisions before they can be implemented. The company and the entrepreneur can no longer make important financial decisions on their own. For the outside world, suspension of payments is a reason to no longer do business with the company in question. The suspension of payments will be registered in public registers that the company’s customers can consult.
Trying to reach an agreement with creditors
Bankruptcy can be prevented in this situation by making payment arrangements with creditors. If the majority of creditors agree, the creditors will settle for a partial payment. After an agreement, they cannot later enforce the remainder of the payment. Each creditor receives an equal percentage of their claim.
Company still bankrupt
As soon as the administrator is of the opinion that a grace period will not help the company financially, a suspension of payments can be converted into bankruptcy. Moratorium is aimed at pulling a company through a difficult period. If that doesn’t work, bankruptcy is still the only way out.