In our practice, we usually see commercial contracts in which receivables arising from these contracts are not assignable and/or cannot be pledged. The rationale is that parties do not want to be faced with a creditor other than the party they have contracted with. The consequence of a restriction clause is that the relevant receivables cannot be used as collateral in a financing transaction or transferred in the context of a financing transaction (such as factoring). For many companies, this makes raising (alternative) financing more difficult.
The Act on the Abolishment of transfer and pledge restrictions (Wet opheffing verpandingsverboden)aims to expand credit opportunities for companies. This Act stipulates that receivables resulting from the conduct of a profession or business can no longer be made subject to transfer and pledge restrictions (subject to a number of exceptions, as listed below). Such restriction will be null and void after the Act comes into force. The Act will most likely enter into force on 1 July 2025.
Main rule
The Act provides for the amendment of Book 3 of the Dutch Civil Code. First, a new third and fourth section will be inserted in article 3:83 of the Dutch Civil Code. Based on the wording of the new third section the following can be said in relation to the abolishment of transfer and pledge restrictions:
- applies only to receivables resulting from the conduct of a profession or business. Receivables that do not fall within this scope can therefore still be part of a restriction clause;
- relates only to clauses between creditor and debtor. A so-called ‘negative pledge’ clause, where the lender and the borrower agree that the borrower may not pledge its assets (such as a receivable against a third party) to other parties, is not affected by the new Act. Reason is that such agreement is made between the creditor of a receivable (the borrower) and a third party (the lender) and not between the creditor of a receivable and its debtor. The same applies to so-called ‘pari passu’ clauses, where the lender and the borrower agree that if the borrower provides security to a third party, the lender will receive from the borrower at least equivalent security; and
- includes not only clauses that restrict the possibility to transfer or pledge receivables in whole or in part, but also clauses that otherwise aim to prevent transfer or security, such as a clause that provides for a penalty in case of a transfer of or a pledge on receivables.
Exceptions
The new section 4 to article 3:83 of the Dutch Civil Code lists the receivables which are excluded from the new third section:
- receivables from a checking or savings account;
- receivables under a credit or money loan agreement where several parties are or will be involved on the lender’s side (such as in so-called ‘syndicated loans’);
- receivables by or on a clearing house, as referred to in article 1:1 Financial Supervision Act, or a central counterparty, settlement agent, clearing house or central bank, as referred to in articles 212a, sections c, d, e and g Bankruptcy Act; and
- receivables that will be paid pursuant to an agreement as referred to in article 34, section 3; article 35, section 5; or article 35a, section 4 of the Collection of State Taxes Act 1990 to a bank account held for the purpose of paying income tax, turnover tax and social insurance contributions (such as the G-account).
Notification
Article 3:94 and article 3:239 of the Dutch Civil Code, which contain the conditions for assignment and pledging of receivables, are also amended with regard to the notification requirement. Currently notification has no requirements (e.g. can be done verbally). Pursuant to the new Act, notification to the debtor must be made in writing (can also be made electronically, such as by email).
Transition period
Finally, the new Act provides for a 3-month transition period for existing clauses with transfer and pledge restrictions. Only after this period has elapsed will those clauses, insofar as they fall within the scope of the new Act, be null and void. Clauses that are entered into after the Act comes into force and do not comply with article 3:83, section 3 of the Dutch Civil Code are immediately null and void.
Take-away
The Act on Abolition of transfer and pledge restrictions may affect existing contracts and commercial relationships. Contract parties will have to take this into account.