By Fred Soers.
Many companies use their accounts receivable as security to obtain financing from the bank. In recent decades, however, more and more, mostly large, companies have started to prohibit this possibility. They do so by including a clause in their purchase conditions (which often take precedence over the SME supplier's sales conditions) that prohibits the supplier from assigning the rights and obligations under the agreement. A variant of this is simply to prohibit pledging ("encumbering") the receivables arising from the agreement.
Why?
Why do these companies do this? The reason is mostly that they do not want to be faced with a new creditor which could create ambiguity as to whom to pay. This with the possible risk of forcing the debtor to pay twice. This in itself is logical, but the consequence is that it severely limits SMEs' financing options. It has sometimes been calculated that this could amount to as much as €1 billion.
Proposal
Therefore, back in 2002, a proposal was made by then-minister Sander Dekker to ban this possibility. In the corridors, this is called the Lifting of Pledge Bans Act. For all sorts of reasons, we will only mention corona, this proposal remained unaddressed for a long time. Until suddenly, in June this year, news appeared that the proposal had been debated in the Lower House and passed with a large majority. Only three minor parties voted against it. In short, their arguments boil down to the fact that, in their view, banks already have sufficient collateral and that the likelihood of unsecured creditors recovering anything of their claim in the event of bankruptcy becomes even smaller. I could say a lot about this position, but that is not what this article is about.
Late September Upper House
To have legal effect, it will also have to pass through the Senate, where it is on the agenda at least at the end of September. The submitter described the importance at the time as follows: this proposal will stimulate lending to small and medium-sized enterprises in particular. This creates more room for investment, innovation and growth. Especially in these economically uncertain times, extending credit possibilities and the liquidity position is of great importance for many SMEs.
Also applies to existing agreements
It is good to know that the law will also apply to already existing agreements, this with a transition period of 3 months. Dutch factoring companies and also many SME entrepreneurs are eagerly awaiting the introduction of this law. Let us therefore keep our fingers crossed that it will still come into force this year.
