27 July 2020
Many entrepreneurs are experiencing a drop in their turnover due to the corona crisis.
This can lead to entrepreneurs having to pay themselves a lower salary or that a profit distribution is no longer possible. The result may be that the previously determined maintenance contribution can no longer be paid. In an earlier blog, my colleague Susan Meijler wrote about whether the corona crisis gives cause to revise an established contribution.
Meanwhile, the Court of Appeal of The Hague has issued a hopeful decision for entrepreneurs who are faced with a loss of turnover. The court considers that it is generally known that the corona crisis will have far-reaching consequences for a large number of companies. A reasonably acting director may therefore be required to be very cautious regarding the distribution of dividends under the given circumstances.
When calculating the capacity of an entrepreneur, we look at the income that the entrepreneur can “reasonably earn” without jeopardising the continuity of the company. Not only the paid salary, but also the profit achieved can play a role in calculating the ability to pay.
In the case before the court, the entrepreneur (director and major shareholder) claimed that his turnover had stalled due to the corona crisis. As a result, no dividend could be paid and he had to reduce the salary he paid to himself. The court found that the VAT returns submitted showed that there was a significant loss of turnover.
The Court of Appeal considered it plausible that, partly in view of the distribution test, no dividend could be paid and that this had a significant effect on the man’s income. With regard to the reduction of the salary, however, the entrepreneur had not provided sufficient insight into the financial need to reduce the salary. The court therefore did not take into account the reduced salary in the calculation of the financial capacity. It follows from the capacity calculation that the entrepreneur – without the dividend payments – did not have the capacity to pay the previously determined contribution to the woman’s living expenses.
The court’s decision offers entrepreneurs with a (significant) loss of turnover the opportunity to (temporarily) adjust an established maintenance contribution. Whether this is the case will depend on whether the drop in turnover has a significant impact on the entrepreneur’s income. It is necessary for the entrepreneur to demonstrate that no (or a much lower) dividend payment is possible and / or makes it clear that the company is no longer able to pay the director and major shareholder’s salary.
It should be noted that the procedure concerns a provisional provision. It is therefore possible that the court will reach a different judgment in the final decision.
The calculation of maintenance remains custom-made. If you have any questions about adjusting the maintenance, you can of course contact me.
