Creditor’s agreement

Sometimes, businesses still encounter financial problems due to old debts. But these businesses don’t always have to go bankrupt.

A good alternative

In these cases, a creditor’s agreement can offer a solution. A successful restructuring of the debts will enable the business to continue running and become profitable again. Although the creditors are only paid part of their claim, this method enables them to retain the client. Furthermore, in the case of a bankruptcy, creditors often end up with even less, since the liquidator must be paid first. Therefore these agreements can be a good solution for all parties involved.

How does this work?

In a creditor’s agreement, the debtor offers to pay all his creditors a certain percentage of the claim.

In principle a creditor’s agreement is no more than an agreement between the debtor and the creditors. If one or more creditors does not wish to cooperate it is not possible to create an agreement. The bill for the Continuity of Enterprises Act II is a bill which is aimed at providing a legal basis for these sorts of peremptory agreements.

How do you ensure a good chance of success?

Creditors will obviously never be happy when offered an agreement. It is often necessary to convince them to get them on board. In addition, it is important that the offer is better than bankruptcy.

Seeking advice is a good idea, both for the debtor who wants to offer an agreement and for a creditor who is asked to cooperate.

Further information?

If you would like to know more about creditor’s agreement or a related subject, please contact our Company & Insolvency law team.

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