Lending focus – December 2020 – 6 / 8 观点
On 2 June 2020, an act to abolish the practice of contractually agreeing prohibitions/restrictions on the transfer or pledging of receivables – insofar as they have been obtained in the exercise of a profession or business – was submitted to the House of Representatives (the Act).
If the Act is passed by the Dutch Parliament and enters into force, any such contractual clauses will be null and void.
The Act aims to stimulate the growth and development of smaller businesses.
Smaller businesses commonly assigned or pledged their receivables to a lender, who might then lend them up to 80% of the value of such receivables. This assisted them with raising capital for growth. However, other parties contracting with SMEs have begun to insist on barring such assignments or pledges, making invoice financing a near-impossibility for smaller traders.
The Act will counter this recent practice, making it easier once more for SMEs to raise capital.
In principle, under Dutch law, the ownership of receivables is transferable, unless the law or the nature of the receivable prevents a transfer. Contracting parties are therefore free to determine the parameters and limitations of such receivables.
Exclusively for receivables, s3:83 paragraph 2 of the Dutch Civil Code (DCC) determines that their transferability can be prohibited contractually. If a contract prohibits the transfer of receivables, then they can neither be transferred nor pledged.
A transfer contrary to such clause will, depending on the exact wording of the clause and its interpretation, result in a default (under contract law) or the non-transferability of the receivable, and thus the invalidity of any attempted transfer or pledge (under property law).
To stimulate the provision of loans to SMEs, the Dutch legislator intends to amend s3:83 of the DCC.
The Act states that the transferability or pledging of a business’s receivables can no longer be contractually excluded. Any such clause will be null and void. The expectation is that this will increase the credit potential of borrowers, enabling them to use these receivables as security for their borrowings.
Any transfer or pledge of receivables arising from a business or profession must be in writing. Furthermore, notification of transfer or pledge to the third party (debtor of the receivable) must also be in writing. These latter requirements are not particularly onerous, since written agreements are the norm in international financing practice.
The amended s3:83 of the DCC will not only apply to new agreements but also to existing ones, as from three months after the Act comes into force.
The legislator intends to include several exceptions to the new rule. The following receivables are excluded and may therefore still be subject to transferability and pledging restrictions:
As noted above, receivables arising in the context of syndicated loans concluded on standard LMA documentation will not fall within the scope of the new rule.
The ability to provide collateral for credit facilities should boost lending sources for SMEs and provide a much-needed stimulus for growth.
To discuss any of the issues raised in this article in more detail, please contact a member of our Banking & Finance team.