Corona SME helpdesk for non-Dutch enterprises2022-02-08T15:00:36+00:00

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Corona SME helpdesk for non-Dutch enterprises

The Corona pandemic has reached the Netherlands and has a huge impact on the economy and affect all enterprises and its workers. For this reason LVH Advocaten has compiled a special Corona helpdesk for SME enterprises.

The Dutch government has imposed an Emergency Package which include many measures as a result of the instructions the Dutch government has issued in order to manage the Corona virus. These instructions has an enormous impact on the economy and the measures contained in the Emergency Page should help all business enterprises, from small to large, to keep their head above water due to corona virus restricting movement and has initiated great financial and fiscal support measures for enterprises during this difficult time. The measures taken by the Dutch government will be addressed item by item as the situation develops. Click here which will take you to the latest development on the measures offered by the Dutch government.

This summary page will be updated as time develops and is specifically aimed at international business enterprises trading in the Netherlands and Dutch business enterprises trading internationally. On a daily basis and discuss any developments relevant to international firms operating in the Netherlands. Consulting this page frequently ensures you staying updated around coronavirus developments in the Netherlands affecting employers and employees.

Legal assistance in the Netherlands during Corona virus outbreak

We would be pleased to discuss with you which measures can help you further and how we can support you in doing so. For questions please contact our office on +31 (0)10 209 2777.

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Relevant information about Corona virus for SME enterprises operating in the Netherlands

The LVH Corona help desk legal team acts primarily for SME business enterprises that are also registered here in the Netherlands or active in the Dutch market. This sector has been hit very hard, as it simply just does not have the financial buffers that larger companies may have or companies that are more established.

Our approach

The LVH Corona help desk legal team is aware of this changing need in the market and please find below our approach and vision in how we can help you best.

  1. The LVH Corona help desk legal team keeps focus on the commercial goal of the business – and that is to stay alive. This means a different approach to advising clients what their rights are in a healthy business environment. We provide legal advice that your business enterprise needs now, in this crisis situation. The courts in the Netherlands are operating primarily remotely and are limited to addressing only urgent cases. Furthermore, once the courts are fully operational again, there will be a substantial backlog. With this in mind, it may be advisable to explore other options in the event that you are confronted with a breach of contract for example. Communication is key here and the LVH Corona help desk legal team is available to discuss with you which alternative routes are open to you.  We think in terms of a win-win situation and not in terms of win-lose situation.
  2. The LVH Corona help desk legal team can help you to build bridges with the other party and find ways to keep a dialogue going. The key word here again is communication, and this is what the legal team can do for you. Communicate to help you build bridges.
  3. The LVH Corona help desk legal team is very transparent when it comes to rates. The legal team is used to working with a fixed fee quote and will gladly provide you with one.
  4. Many business enterprises may not in a strong bargaining position as a result of the Corona Crisis and this may invite other companies to abuse this. The legal team can help you turn this weakness into a strength. Each business enterprise has something, whether it is knowledge, service and/or product that is useful for other business enterprises to have to make them more competitive for example. A company in financial trouble needs to protect itself from these kind of actions and in some cases needs to take legal steps in order to secure these rights. These rights can be secured by registrations or amending certain policies and processes within your company. Examples of this includes registration of your intellectual property rights and changing your payment policies within the company. This protection will put your company in a better bargaining position during the Corona crisis and gives your company the freedom to exercise these rights in the future.

Our people

The LVH Corona help desk legal team is fully up to speed with the emergency package measures that the Dutch government has offered and is updating on a daily basis. These are largely financial and fiscal measures, and there are also legal issues that your company needs to address. If you need advice on legal issues that you are confronted with, please click on this link for further information and contact details of our legal team.

What next?

The situation changes on a daily basis and the legal team takes pride in keeping up with these changes in the same pace in order to help you. We are in business as usual and use all digital means in order to address the changing needs of our clients and relations.

Legal assistance during corona crisis

Would you as employer like to know whether you qualify for this ruling and/or how you can apply for it? Please contact our Corona SME helpdesk for non-Dutch enterprises.

The Dutch government has announced an Emergency Package that contains measures that are developing and changing on a daily basis. These measures are aimed at supporting companies and freelancers in this difficult time. They include measures to maintain employment on the one hand and to ensure companies not going bankrupt, and measures ensuring that self-employed people can maintain an income on the other hand.

As the emergency package of the Dutch government changes so fast, we have prepared an overview of all present measures, which we will update as the world changes. This overview will give you an insight of all the measures contained in the emergency package of the Dutch government as well as the relevant website in order to apply for the measure.

The Dutch fiscal support package for companies during the Corona crisis

The package of fiscal measures in order to support companies and employees during the Corona crisis includes the following elements:

  • A reduction in employers’ wage costs to avoid redundancies;
  • Temporary income support for the self-employed;
  • Relaxation of tax deferrals;
  • Increase in the guarantee for business financing;
  • Interest rebates for loans contracted with Credits;
  • Widening the guarantee for SMEs – Agricultural Credits;
  • Extension BMKB scheme;
  • Open emergency counter for entrepreneurs in affected sectors.

What can LVH’s lawyers help you with during the Corona crisis?

LVH has a team of specialised lawyers who can advise you on all fiscal support measures imposed by Dutch government. Ultimately, most fiscal measures have an effect and offer support in the somewhat longer term.

Fiscal support Corona-measures that may have an immediate effect

Below, we listed the fiscal support measures that are effective for companies operating in the Netherlands, immediately.

Postponement of payment for companies affected by Corona

In the short term, the measure of requesting deferral of payment of the various taxes in particular has a direct effect. This measure makes it possible for companies affected by Corona to request deferral directly. It frees up resources that can be spent on keeping the company afloat.

Reduction of provisional assessment of income tax

At the beginning of the year, a large number of companies were subject to a provisional assessment of income tax (for IB entrepreneurs) or corporate income tax. This assessment relates to the tax year 2020 and is based on an expected profit for the year 2020. For a large number of the companies operating in the Netherlands that have received such an assessment, it now appears that, as a result of the corona crisis, they will make no or significantly less profit than previously estimated. On this basis, the provisional assessment can be reduced.

If the amount of the provisional assessment has already been paid, the reduction will result in a refund.

Extending the dead-lines for payment of Dutch taxes and reducing the rent on tax payments to 0,01 % due to Corona crisis

The Dutch Tax Authorities have also taken some steps to help business enterprises during the Corona crisis. The following measures are available to business enterprises.

Delay the payment date of your tax returns

This applies to all taxes such as income tax, company tax, turnover tax and payroll tax. The business enterprise can apply directly to the Dutch Tax Authorities for this.

No penalty payment for late payment of taxes due to Corona crisis

The Dutch Tax Authorities will also not charge any penalty payment for late payment of taxes.

Reduced debt collection interest

The usual debt collection interest of 4% that is payable in the event that a business enterprise does not pay its taxes is reduced to 0,01% as from 23 March 2020.

Reduced rent on tax payments due to Corona Pandemic

Tax interest rate of 8% is normally charged by the Dutch Tax Authorities in the event that the tax assessment cannot be made within the set period of time or where incorrect amount has been submitted. This interest rate of 8% is reduced to 0,01%.

Lawyers specialised in Dutch fiscal law

We would be pleased to discuss with you which corona related measures can help you and your company further, and how we can support you in doing so. For questions and/or advice you can contact David Harreman.

1. A reduction in salary in the event of a fall in turnover of the business enterprise

In the Netherlands shareholders of small medium enterprises who have a substantial interest in the enterprise, are under a duty to pay certain payroll taxes on income relating to the work that they do. This tax is due and payable in the event that the turnover reduces substantially or even if the turnover is zero. The tax authority is now giving these shareholders the right to lower their income in line with the reduction of turnover.

2. Freelancers threshold of 1225 working hours a year

In order for a freelancer to qualify for certain income tax relief in the event that they spend at least 1225 hours per year (which is 24 hours a week) on their business. Due to the Corona crisis, many freelancers can no longer meet this requirement and the Dutch Tax Authorities have included a new ruling whereby the freelancer is deemed to have worked 24 hours a week on its business during the period from 1st  March 2020 to 31st May 2020. This means that these freelancers will still qualify for the income tax relief during this period even if the freelancer does not meet this requirement.

3. Tax free expenses scheme

Employers are permitted to give an amount to its employees for general expenses which is tax-free. The current percentage is 1.7% and the Dutch Government announced that this amount is to be increased to 3% for the first € 400,000 of the salaries paid by the employer. This is a very generous gesture of the Dutch Government as this will enable employers to reward their employees during these hard times.

4. Compensation of losses incurred in previous financial year

There is a tax rule that enables business enterprises to compensate losses from the previous financial year with the next financial year. As this compensation cannot be claimed until the next financial year, it means from a practical point of view that this this compensation can only be claimed in the tax relief application of 2020 is filed in 2021 at the earliest. Therefore the benefit will only be felt by the business enterprise some years later. The Dutch tax authorities have temporarily changed this ruling so that business enterprises can benefit from this ruling now. It will now be possible for these business enterprises to charge the expected loss for the year 2020 due to the corona crisis to the profit for the year 2019 as a tax “Corona reservation” for corporate income tax purposes, provided that this reservation does not exceed the profits of the business enterprise for 2019.

5. Excessive lending by management of business enterprises

The Dutch Government has stepped in as a result of the trend that many company directors that hold a substantial interest in the business enterprise borrows money from the business enterprise. The Dutch Government has passed an Act on such excessive lending which was to enter into force on 1 January 2022. The implementation of this Act has now been postponed by another year which means that the company directors with a substantial interest in the business enterprise can borrow money from the business enterprise in order to obtain certain tax benefits from such a structure. This means that these company directors are given more time to repay these loans, which loan must exceed € 500,000 in order to qualify for this tax ruling.

6. Mortgage repayments

Borrowers that have a mortgage and are having difficulties in making their mortgage repayments are being given the right by the relevant lenders to stop mortgage repayments for a maximum period of 6 months.

Generally, it these borrowers also qualify for a tax return on part of these mortgage repayments. The current tax relief ruling enables borrowers to still obtain the benefit of this tax return during the period that repayments are not made provided that these mortgage repayments are paid to the lender no later than the end of 2021.

The Dutch government has relaxed this deadline of 31 December 2021 whereby the unpaid mortgage repayments can be spread over the remaining period of the remaining term of the mortgage or the borrower can opt for repayment of this amount by way of a separate loan agreement.

Lawyers specialised in Dutch fiscal law

We would be pleased to discuss with you which corona related measures can help you and your company further, and how we can support you in doing so. For questions and/or advice you can contact David Harreman.

Our country is gripped by the evolving crisis of Corona virus. Not in the last place because it brings a lot of uncertainty for companies, business enterprises and employees. LVH Advocaten understands that many enterprises s are dealing with uncertainties around the Corona crisis and the possibilities of the package of (fiscal) measures imposed by the Dutch government. For this reason, LVH Advocaten has introduced the Corona helpdesk aimed to help and advise international business enterprises operating in the Netherlands.

This page lists the measures that the Dutch government is offering to employers in the Netherlands that are hit by the Corona virus. Our legal Corona helpdesk for non-Dutch business enterprises is available to advise and help you with any legal matters around Corona virus.

As the emergency package of the Dutch government changes so fast, we have prepared an overview of all present measures, which we will update as the world changes. This overview will give you an insight of all the measures contained in the emergency package of the Dutch government as well as the relevant website in order to apply for the measure.

Instructions for employers in the Netherlands for a safe and healthy working environment during Corona Pandemic

The government has issued instructions with regard to creating a safe and healthy working environment during the Corona Pandemic. The instructions are issued by the RIVM.

Procedure for employees that are health carers

If any of your employees is a health carer then the following procedure should be followed. This procedure applies to any employee that works outside of a hospital, for example a GP, health carer for the elderly etc. Please press here for the most up-to-date measures to follow as a resident in the Netherlands.

When employees show symptoms of influenza or Corona virus

The employer cannot take preventative measures and have its employees tested on Corona. However, the employer can send the employee home in the event that the employee has symptoms similar to that of influenza.

Employees traveling to countries affected by the Corona virus

The employer cannot prevent an employee from travelling to a Corona country or area. However, if the employee does chose to do this and he or she does become sick, then under certain circumstances his or her right to receive payment of salary during sickness may be restricted.

Can I register information on employees having Corona?

If an employee does have Corona, then this cannot be registered internally or externally. This kind of information cannot be registered under the GDPR. The employee should contact his or her GP directly.

Paying salaries when employees have Corona

The employer is under a duty to continue paying salary in the event that the employee does become sick.

Emergency leave for employees dealing with Corona virus

The employee may have a right to emergency leave under certain circumstances such as;

1. to care for a person in the household who is poorly, and

2. to care for their children that go to primary school.

Salary compensation for employers to avoid dismissal of employees during Corona crisis

Are you an employer in the Netherlands and are you confronted with the situation that your working capital has reduced due to the Corona situation to the extent that you are having difficulty in paying the salaries of your staff? Then read this article carefully as the Dutch government has offered some financial assistance to help you as international employer in the Netherlands.

What requirements does the employer need to meet in order to quality for the employers compensation?

  1. All enterprises of all sizes make and application for this ruling.
  2. Employer must be confronted with a reduction of turnover of at least 20% which may need to be supported with an accountants statement.
  3. Employer has contracts of employment in place with the employee in question, and does not intend to apply for dismissal of that employee during the period of the employers compensation.
  4. Duration of the compensation is three months which may be extended once more for another three months.
  5. The employer still pays the employee as usual and is compensated directly by the government.
  6. This ruling may also apply to flex workers and also employees employed by a recruitment agency.
  7. The amount of compensation is a minimum of 80% with a maximum of 90%.

Unemployment contribution payable by employers affected by the Corona crisis in the Netherlands

The Dutch government is also in the process of amending the current unemployment benefit contribution of the employer (WW-premiedifferentatie). At present there is a ruling whereby these contributions are lower for fixed term contracts of employment and higher if the employee works overtime that exceeds 30% of hours on an annual basis. As some employees will need to do a lot of overtime, the Dutch government is now developing measures to address this. Watch this space for updates.

Legal assistance during corona crisis

Would you as employer like to know whether you qualify for this ruling and/or how you can apply for it? Please contact our Corona SME helpdesk for non-Dutch enterprises.

Temporary financial support for freelancers and independent business enterprises in the Netherlands during Corona pandemic

Are you a freelancer and/or independent business enterprise in the Netherlands? The Dutch government has also included some measures in its Emergency Package especially for freelancers in order for you and/or your independent business enterprise to survive the Corona storm, whereby the government grants welfare benefits and/or loans for working capital. Please find below the details of these Corona measures for freelancers in the Netherlands.

Benefits and special loan for freelancers and independent business enterprises during corona virus outbreak

A freelancer and/or independent business enterprise in the Netherlands can apply and receive benefit and/or a special loan for the business enterprise in the event that you are in financial trouble.

  1. This benefit addresses the need for freelancers in the areas that have been hit hard, such as café’s, restaurants, sport clubs, personal trainers, artists etc. It generally addresses the freelancers that work in the sectors that have been closed by the Dutch government.
  2. The freelancers can apply for support benefit at the local authority for a maximum amount of € 1500 per month (net).
  3. The freelancers will receive, if they qualify, support benefit for a maximum period of 3 months. The first payment should be with you within four weeks. In some cases, you can also apply for payments in advance.
  4. The business enterprise can, in addition, apply for a loan to use as working capital. This amount is capped at € 10.157,– in total. The interest rate is extremely low and the business enterprise can also delay repayment of the loan to a certain extent. In addition, the independent business enterprise can apply for a loan with a bank for example.
  5. Please ensure that all outstanding invoices of  the independent business enterprise or freelancer are paid. If need be, instruct a debt collection company to collect the outstanding amounts.
  6. Any support benefit received from the Dutch government by the freelancer does not need to be repaid.
  7. The contractor has the right to  terminate the contract with the freelancer. This is generally regulated in the contract, if not the Dutch Civil Code rules apply. Please consult your contract and note that both parties need to act reasonably. The notice period for example has to be a reasonable notice period, and also depends on the formulation and applicability of a termination clause in the contract.

Legal assistance during corona crisis

Would you as employer like to know whether you qualify for this ruling and/or how you can apply for it? Please contact our Corona SME helpdesk for non-Dutch enterprises.

Additional financial measures offered by the Dutch government to support business enterprises affected by the Corona crisis

The Dutch government Emergency Package of measures also contain some in order to support business enterprises, and therefore the Dutch economy, that are affected by the Corona crisis. Below you will find which other measures you as a business enterprise may be able to apply for.

In this summary you will find the financial measures offered by the Dutch government to companies and business enterprises as a response to economic impact of the Corona crisis.

Measures taken by the Dutch government for SME enterprises affected by the Corona crisis

Below you will find a summary of the financial measures offered by the Dutch government to companies and business enterprises as a response to economic impact of the Corona crisis.

Qredits loan repayments for small businesses and start-ups in the Corona crisis

Qredits is a credit provider that supports small enterprises with micro credits. This scheme is specifically for start-ups and small business enterprises, which is a vulnerable group in the Corona crisis. The Dutch government has amended this scheme whereby the start-up or small business enterprise does not need to make repayments on the loan for a period up to six months and whereby the interest rate is reduced to 2%. The Dutch government has made an extra amount of € 6 million available for this scheme.

Increased maximum GO (business loan guarantee scheme) facility

The business loan guarantee scheme, referred to as the GO scheme, has been available since 2009 and enables business enterprises or companies to secure guarantees of loans from the Dutch government. The Dutch government may guarantee the loan for 50% , being € 1,5 million with a maximum of € 50 million per business enterprise. The GO scheme budget has been increased by the Dutch government from € 400 million to € 1,5 billion. The maximum GO facility per business enterprise will increase from € 50 million to € 150 million.

Government support for the Dutch agricultural and horticultural sector during Corona crisis

Temporary credit facility guarantees for working capital for the agricultural and horticultural sector, referred to as BL Scheme. This is to support these sectors that are confronted with a reduction of sale of their products. It takes time to adjust the (type of) products in this sector as the cultivation of these products takes some time, which means that this sector cannot act quickly on the change in demand in the market due to the Corona virus. This has an effect on their working capital and the Dutch government has offered this measure just to address this need.

Dutch government support & tax cuts for tourism and accommodation sector

Reducing or stopping tourist taxes and made to measure solutions for the accommodation sector, which is hit hard by the Corona crisis. These taxes are charged to business enterprises by the local authorities based on a provisional tax assessment, which is based on a projection. The local authorities are contemplating how to address this change in demand in this sector and adjusting the provision tax assessments to reflect a steep reduction in the turnover in this sector.

Temporary financial support from Dutch government for hospitality, travel and event sectors

Emergency help desk has been set up especially for business enterprises in the sectors that have been hit hard, especially hospitality, travel, event organisation sectors and other sectors that may not qualify for the other measures. The emergency fund available at the emergency help desk has now also been extended to retailers. Your company or business enterprise can apply for temporary financial support for an amount with a maximum of € 4.000 for a period of three months. Further details of the conditions and terms will crystalize shortly and communicated to the Chamber of Commerce that your company and/or enterprise is registered with. As the emergency help desk is being overloaded with applications, the government has asked companies wanting to apply for this measure when they need it in order the relieve the system and also enables the companies that are in deep trouble to apply first. The facility is available until 26th June 2020. Furthermore, the government is urging consumers to visit their local shops in order to give them the support they so badly need during this Corona crisis.

Extension SME credit guarantee scheme (BMKB scheme) during Corona crisis

Extension the SME credit guarantee scheme, referred to as the BMKB scheme, which applies until 1st April 2021 and enables SME business enterprises or companies to secure bank guarantees and bridge financing. This extended scheme is referred to as BMKB-C. This BMKB applies, inter alia, when:

a. The business enterprise has been in business for at least 3 years,

b. No more than 250 members of staff, and

c. with an annual turnover of € 50 mio.

Please note that there is also a special ruling for start-up SME businesses. Please consult the following page for further information.

Legal assistance during corona crisis

Would you as employer like to know whether you qualify for this ruling and/or how you can apply for it? Please contact our Corona SME helpdesk for non-Dutch enterprises.

Which issues can de SME Corona help desk, set up by LVH Advocaten for non-Dutch speaking business enterprises, address to help your company through this Corona crisis?

1. What measures offered by the Dutch government are available to non-Dutch SME business enterprises operating in the Netherlands?

The Dutch government has acted quickly and has produced a set of emergency measures for the working nation, including employees, freelancers, business enterprises active in all sectors hit by the Corona crisis. This measures are updated on a very regular basis. Examples are:

  • An employer can, for example, receive compensation for the salaries it has to pay to its employees,
  • freelancers can receive support for loss of income,
  • a business enterprise can receive support to soften the blow for loss of turnover,
  • many tax measures are available to business enterprises, etc.

Please contact one of our Corona helpdesk attorney’s to assist you further and help you with advice on what is available and how you can apply for it.

2. What are the consequences of the Corona crisis for the Dutch commercial trade that has drastically reduced?

This depends on the facts. Can your business still perform and meet the demands of your customers or has your business performance been reduced drastically due to the Corona crisis?

  • If your business enterprise can still perform business but then in a different way, then you may need to address your current legal processes the business enterprise has in its place to ensure that you have the protection that you need. This may mean that the Dutch Civil Code (DCC)is triggered and/or specific clauses in any contracts that you may have, which will need to be updated in accordance with the changes your company is implementing. This should be discussed further with your attorney to ensure that these changes are protected from a legal point of view.
  • The DCC does have a certain rights that may apply to your situation in addition or instead of the commercial contracts. This all depends on the circumstances and the facts. Is there a commercial contract in place, and what is regulated in that contract. This needs to be interpreted as well as the relevant provisions of the DCC, which may also apply.
  • The commercial contracts that you have in place may give your company certain rights when it comes to changing certain elements of your services and/or products, primary terms of delivery, remedies in the event that your enterprise cannot perform the contract etc. As everyone is in the same situation, your business enterprise should address a number of questions first together with the attorney from the Corona Helpdesk before acting. In order to advise you on the most appropriate legal steps to take, your business enterprise should ask itself the following questions:
  1. Is there a form of reliance on the other party? Can you still do business if the other party falls away?
  2. What will be the effect on the other party if you exercise the rights that your company has? This is relevant for example if the other party is heavily reliant on your turnover.
  3. Does your business enterprise want to do business with them again post Corona Crisis?
  4. What is the business enterprise most afraid of?

Based on the above, the Corona helpdesk attorney’s of LVH Advocaten can advise you on the most practicable, effective and clear legal steps to take based on the rights that you have a business enterprise.

3. The Dutch civil courts have shut down due to the Corona crisis. What does this mean for the civil procedure your company is involved in at the moment?

The business enterprise can initiate proceedings with the court but once the Dutch civil code will resume business, there will be an enormous backlog. In the event that you are already involved in a civil procedure, it may well be that the courts, once they start up again after the Corona crisis, will have a huge backlog. This means delay and if you need an urgent decision, then other alternative should be discussed with your attorney to address the company’s specific needs. Furthermore, there may be other alternatives that you use instead such as mediation or arbitration. If this option is not available in the commercial contract that you have entered into, then both parties need to agree on this solution. There are many advantages to going into mediation and also arbitration. The biggest advantage of arbitration is that the specialization level of the arbitrators in the field of the dispute is very high which means that arbitrators can be brought up to speed more quickly, which reduces the costs. Mediation also has its advantages over and above going to court. Mediation is quicker and generally speaking also more practicable. Furthermore in mediation you can dictate the language of the proceedings, which is a huge advantage. Furthermore, the mediation hearings are behind closed doors. Generally speaking it is not in anyone’s interest to wash their laundry in public. Then finally, enforcement of arbitration judgments may in some instances easier to enforce than a regular court judgment. The New York Convention on arbitration may be useful in this instance if both parties are registered in countries that are party to this convention. As the Corona crisis affects everyone, this is well worth considering. Please contact one of the Corona helpdesk attorney’s to assist you further.

4. What happens if there are certain tax bills that the company can no longer pay due to the Corona crisis?

The Dutch government has addressed many tax related issues for business enterprises that have been affected by the Corona crisis, and please consult our Corona help desk to which lists out all the measures and updates them from time to time. Furthermore, please consult our tax advocate, who can be more specific on addressing your tax needs.

5. What happens if your business enterprise is confronted with a substantial reduction in turnover due to the Corona crisis which means that the rent can no longer be paid? What are the rights of the tenant?

Generally speaking, there must be a “defect” in order for the tenant to postpone the payment of rent of obtain rent reduction. The Corona crisis is generally not considered to be a “defect” which means that your business enterprise will just have to pay. Please contact one of the attorney’s at the Corona helpdesk of LVH Advocaten to assist you further.

6. What is the position for the tenant and landlord when it comes to their duty to act as “a good tenant or landlord” during the Corona crisis?

The DCC does not provide for this situation and the conditions of your contract will need to be consulted. It is also quite likely that the contract does not cover a situation like this pandemic either. This means that the reasonableness norm will apply where the key is what the landlord and tenant, considering the fact and circumstances, can reasonably expect from each other. Please contact one of the Corona helpdesk attorney’s to assist you further.

7. Which insurance covers of the business enterprise may cover the damages caused as a result of the Corona crisis?

It is worthwhile to consult the terms and conditions of these policies as it may well be that you are covered. If you need advice on the interpretation of the terms and conditions of the insurance cover or if your insurance company refuses to consider your claim regardless of whether you are covered or not, please contact one of the Corona helpdesk attorney’s to assist you further.

8. Which preventative measures can the business enterprise take in order to mitigate the damage or reduce the likelihood of becoming insolvent due to the Corona crisis?

There are range of preventative measures that the business enterprise can take such as dismissals, not extending fixed-term contracts, closing down part of the business or even selling certain parts to ensure the viability of the company. Please consult one of the Corona helpdesk attorney’s to advise you which measures are most appropriate.

The emergency package announced by the Dutch government over the past few weeks changes almost on a daily basis and a number of websites for the application of these measures are now available. As the information flow is so vast, a summary has been made for your convenience of all the measures offered by the Dutch government to date for business enterprises. Please feel free to contact us, who will be happy to assist you further.

Summary of emergency package and information for jobs and economy

This white paper sets out what your rights may be from an international perspective under Dutch national and international law. These rights are generally formulated based on the assumption of a commercial business world as we have known it prior to the Corona crisis. However, the world has changed and is forcing us all to start to think differently. We are all affected, whether you are the seller or whether you are the buyer. But both of you have a common denominator, which is to keep afloat during this crisis! With that in mind, I can explore the different options to hand and create a win-win situation instead of a win-lose situation.

Under the Dutch Civil Code (DCC), there are many requirements on how to convene certain general meetings of business enterprises. The one that causes the biggest obstacle is the fact that the DCC requires in some instances that such general meetings require the physical presence of the parties concerned. And this may not be possible or practicable during the period of the “intelligent” lock-down imposed by the Dutch Government.

The Government has come to the rescue again and has just drafted a new draft Emergency Act enabling business enterprises to conduct formal meetings on-line during the Corona crisis. This draft Emergency Act was submitted by the House of Commons on the 8th of April 2020, and considering the urgency of the matter, this draft Emergency Act will be implemented sooner than later. Once it has been implemented it will have retro-active effect to 23rd March 2020 to a certain date and will lapse on 1 September 2020. Thereafter the normal provisions in the DCC will apply again.

Please rest assured that this draft Emergency Act covers all sorts of business enterprises ranging from publicly quoted companies to owner associations that are required to hold a general meetings.

The draft Emergency Act does set out some conditions that need to be met for the above-mentioned business enterprises to make use of the rights set out therein to conduct general meetings that require physical presence. These are:

  1. The members of the general meetings must be able to follow the general meeting by way of a livestream, this can be by video or by audio.
  2. The members of the general meeting must be able to submit questions to be addressed during the meeting no later than 72 hours before the general meeting takes place. Furthermore, these questions will need to be shared with all the members and specifically dealt with during the meeting itself. This right must be communicated expressly to the members in the invitation to attend the general meeting.
  3. The resolutions adopted during these general meetings are valid in the event that the above requirements are met and remain valid even in the situation where one or more of the members have not be able to adequately follow the general meeting.

As there are very specific time-limits in the Dutch Civil Code for conducting general meetings for the preparation of the annual accounts, the Dutch Government has facilitated business enterprises by enabling that these general meetings can be conducted within a window of 10 months in total from the date of the end of the financial year. This means that an additional extension of 4 months is available on top of the normal 6 months period. Furthermore, the Dutch Government has extended the period within which the management board needs to hold an annual meeting.

Furthermore, the Dutch Civil Code sets out that the management can, under certain circumstances, be held personally liable in the event that the strict procedures for conducting these general meetings are not met. Given the fact that the Corona Crisis has turned the world upside down, the Dutch Government included a provision in this draft Emergency Act that non-compliance of the publication requirement does, under certain circumstances, not result in a formal breach if such non-compliance is due to the Corona Crisis.Such circumstance is in the event that a company is declared insolvent and where its management has not complied with the publication requirements in relation to the most recent annual accounts. In the event that such failure to meet this requirement is due to the Corona crisis, the management will not be deemed to be personally liable.

Specific rights for Associations

The draft Emergency Act has made it possible for Associations to hold an annual meeting by video or by audio. Furthermore, the draft Emergency Act enables the Association to apply for an extension of time of an additional 4 months to approve the Annual Accounts period after the end of the relevant book year.

In relation to inviting members to an annual meeting through electronic means, there are a number of formalities that need to be complied with. These formalities must be complied with and in the event that certain specific formalities are not complied with, this could under certain circumstances render the resolution null and void.

  1. The management board of the Assocation can call for an annual meeting to be conducted on-line provided the general meeting can be attended by its members through electronic means.
  2. The members also need to be given, 72 hours prior to the annual meeting, the right to ask questions regarding the agenda items, which questions can be communicated either in writing or by electronic means.
  3. These questions and answers are to be made available to all members during the annual meeting by electronic means.
  4. During the annual meeting all questions raised by the members should be reasonably dealt with.

In the event that the annual meeting cannot be attended by all members because of the connection or for a technical reason, then validity of the resolutions will not be affected. Furthermore, the votes of the members can be conducted by electronic means through this draft Emergency Act.

All in all, this is good news for all business enterprises and must be relief for many of them that the Dutch Government is proving to be so flexible and practicable. Please contact our office for further information or advice.

SPECIALIZED LAWYERS

These are our lawyers who are specialized in this area.

Directors and officers liability towards third parties: The Beklamel-Standard

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The corona crisis can cause difficulties for your company. It may not be able to supply all its customers with products, pay all its suppliers on time or otherwise fail to meet its obligations towards its contracting parties and other third parties. As a director of such a company, you may wonder which agreements you can still enter into and which risks you can still take with a view to the continuity of the company you manage.

On top of this, the question may arise as to whether the decision you take may have consequences for your private situation. Can a situation arise in which you are held personally liable for debts of the company?

As a director of a legal entity, you are in principle protected against liability for the company’s debts towards a contracting party or other third parties. However, this protection is not absolute. In some cases, the liability of the company may be transferred to you as a director, so that you are personally liable.

Director’s liability towards third parties

As a director, you may be held liable by the company itself, by the receiver in the company’s bankruptcy estate, but also by creditors of the company. This article discusses this third form of directors’ and officers’ liability.

What is the Beklamel standard?

In principle, directors’ and officers’ liability always requires that the director himself or herself is personally and seriously at fault. The Supreme Court has ruled that there can be such a serious personal accusation if the director is accused by a creditor of having entered into obligations in the name of the company towards the creditor when he knew or should have known that the company would not be able to meet its obligations and would not be able to recover the damage suffered by the creditor as a result. The Beklamel standard is this standard formulated by the Supreme Court for the acceptance of a personal serious accusation, on the basis of which directors’ liability can be established.

The application of the Beklamel standard

As a director, it is therefore important that you do not enter into such obligations on behalf of the company. It is understandable that, especially at a time like this, this can cause a director concern. As a director, are you still allowed to make risky decisions? When will you know, or should you know, that the company will no longer be able to meet the obligations you enter into? In some cases, difficult decisions have to be made, but if this can lead to personal liability, you as a director may be deterred from doing so. The following are therefore some examples of the application of the Beklamel standard in legal practice. The aim is to show how the Beklamel standard is applied in practice so that the somewhat cryptic description of the Supreme Court becomes more tangible.

1. Hopeless situation and insufficient continuity perspective in the case of directors’ and officers’ liability

In the case of a company which, clearly for the director, was in dire straits and placed new orders while in the meantime older invoices were left unpaid, the judge ruled that the Beklamel standard had not yet been met. There was no serious personal accusation to be made against the director. The judge ruled that personal liability requires that the company is in a hopeless situation at the time of entering into the obligation and actually has insufficient prospects of continuity.

The latter criterion was also used in a judgment from 2006, in which the court ruled that the circumstance that the company on whose behalf the commitment was entered into had negative equity capital and the parent companies and subsidiaries associated with this company also had negative equity capital does not yet mean that there was a hopeless situation and an insufficient continuity perspective. This required additional circumstances, which were lacking here. The director was not personally to blame.

2. Complaint standard and serious personal blame

A ruling from October 2019 concerned a case concerning directors who had already been involved in several bankruptcies. They always made use of several interconnected companies that at first sight looked alike, with one company being used to win orders and collect amounts of money while the obligations were entered into by another company and subsequently not complied with. In this situation, the court logically ruled that the directors were personally to blame and personally liable for the debts.

3. Complaint standard and obligations towards creditors

The court ruled in 2008 that the fact that the liquidity position of the company in question was precarious and the tax authorities had seized the ground does not necessarily mean that the director should know that the company will not be able to fulfil the obligations it has entered into, at least not within a reasonable period of time. However, at the time when the company no longer complied with the settlement with the tax authorities, this company (and also its director) had to assume that the tax authorities would proceed with the enforceable sale of the goods affected by the seizure of the land and that, as a result, it would have to discontinue its business operations. From that moment on, the court ruled, the director should reasonably have known that the company would no longer be able to fulfil its obligations towards its creditors entered into after that date. The director was personally liable for the damage suffered by the creditors in question.

Taking entrepreneurial risk does not lead to personal liability

The text of the Beklamel standard is sharper than its application in practice. Moreover, it is not always the case that where there is smoke, there is also fire. At least, that is difficult for creditors to prove. As a director, you therefore need not fear that taking a – not even negligible – entrepreneurial risk may lead to your personal liability. According to case law, restraint is required in deciding whether the director knew or should have known that the company would not be able to fulfil the obligations entered into. The mere knowledge of a risk is not sufficient for directors’ and officers’ liability. However, if at the time of entering into the obligations the management board member knew or should have known that the risk would turn out incorrectly and the company would not be able to recoup the damage suffered as a result, he can be blamed personally and severely. In that case, the director should not have taken the decision and should not have entered into any obligations. If a company is in a critical phase, the dividing line is thin and it is wise to obtain legal advice on whether you still have to conclude a certain agreement and to what extent there is a risk of private liability.

Lawyer director’s liability

Do you have questions about your director’s liability or your risk as an entrepreneur? Please feel free to contact Justin de Vries for further advice.

You can find more corona information in our helpdesk.

Peter Verheijden

+31 (0)10 209 27 76
verheijden@lvh-advocaten.nl
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Fiscal support measures during Corona crisis

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On the 17th March 2020, the Cabinet announced a large number of measures. These measures are aimed at supporting companies and freelancers. The measures include measures to maintain employment on the one hand and measures to ensure that companies do not go bankrupt and that self-employed people can maintain an income on the other hand.

The package of measures includes the following elements:

– A reduction in employers’ wage costs to avoid redundancies

– Temporary income support for the self-employed

– Relaxation of tax deferrals

– Increase in the guarantee for business financing

– Interest rebates for loans contracted with Qredits

– Widening the guarantee for SMEs – Agricultural Credits

– Extension BMKB scheme

– Open emergency counter for entrepreneurs in affected sectors.

What can LVH’s lawyers help you with?

We can advise you on all measures. Ultimately, most measures are measures that have an effect and offer support in the somewhat longer term.

Measures that may have an immediate effect

Postponement of payment
In the short term, the measure of requesting deferral of payment of the various taxes in particular has a direct effect. This measure makes it possible to request deferral directly. It frees up resources that can be spent on keeping the company afloat.

Reduction of provisional assessment
At the beginning of the year, a large number of companies were subject to a provisional assessment of income tax (for IB entrepreneurs) or corporate income tax. This assessment relates to the tax year 2020 and is based on an expected profit for the year 2020. For a large number of the companies that have received such an assessment, it now appears that, as a result of the corona crisis, they will make no or significantly less profit than previously estimated. On this basis, the provisional assessment can be reduced.

If the amount of the provisional assessment has already been paid, the reduction will result in a refund.

We would be pleased to discuss with you which measures can help you further and how we can support you in doing so. For questions and/or advice you can contact David Harreman via harreman@lvh-advocaten.nl or 010-2092756.

Is it possible to stop paying the rent of business premises?

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In recent weeks, Leeman Verheijden Huntjens Advocaten received many questions from both tenants and landlords of business premises about rent payment and other rights and obligations in these special times. Rent costs are one of the largest cost items in the retail and hospitality sector, so in order to get through these difficult times, tenants are investigating whether they are (temporarily) not allowed to pay rent or whether they are allowed to pay less rent.

The closure of shops and other business premises has rent law consequences. For example, what can you do as a landlord if the tenant (temporarily) no longer pays the rent? And what risks do you run as a tenant of business premises if you can no longer (fully) meet the payment of the rent or an operating obligation due to reduced turnover?

This article answers the most frequently asked questions regarding the payment of rent for retail premises, cafes, restaurants and other business premises during the corona crisis. The answers relate to both leases within the meaning of Section 7:290 of the Dutch Civil Code (shops and catering industry) and leases for (other) business premises within the meaning of Section 7:230a of the Dutch Civil Code (office premises).

Is the tenant of business premises allowed to (partially) suspend payment of the rent?

The main rule is that a tenant must continue to pay the rent of a retail space, catering or other business premises. This is only different if the tenant and the landlord jointly agree that the rent may be paid later or agree that the rent does not have to be paid (in part) for a certain period of time. Postponement of the rent payment or (partial) remission can prevent the tenant from going bankrupt, which is also in the landlord’s interest. On the other hand, a lessor also has financial obligations to fulfil.

The purpose of suspending the rent payment is to persuade the lessor to fulfil his obligations under the lease agreement. This is the case, for example, when there is a defect that the lessor has to remedy and, despite a reminder to do so, he does not remedy it. Moreover, the defect must be sufficiently serious and there must be a sufficient link between the suspension of the rental payment and the lessor’s failure to fulfil his obligation.

Claiming suspension of the rent payment is not possible due to closure of the business premises or reduced turnover. After all, suspension does not achieve the aforementioned objective.

Incidentally, many lease agreements exclude the right to suspend payment of the rent for the business premises.

What if the lessee of business premises no longer pays the rent due to the corona crisis?

Failure to pay the rent on time can be a ground for termination of the lease by the lessor. The lessor may also terminate the lease in the event of force majeure, for example due to a drop in turnover due to the corona virus. For this, the lessor must always go to court. A judicial dissolution usually only comes into play in the event of payment arrears of at least three months or if payment has repeatedly not been made on time in the past. If the court agrees with the lessor, he will dissolve the lease agreement and issue an eviction order.

After the proceedings have started, a tenant can still ‘stop’ the dissolution by paying the rent arrears or a large part thereof.

Tenants of business premises who foresee that they will not be able to pay the rent (on time) are advised to inform their landlord about this. In doing so, it is important that they provide an insight into their financial situation and make an estimate or a proposal as to when the rent can be paid and any rent arrears can be made good. If a tenant has the means, it is wise to at least pay (part of) the rent. Avoid a rent arrears of three months or more.

Most rental agreements contain a penalty clause for not paying the rent on time, even in case of force majeure. If a lessor of a shop, restaurant or other business premises claims this penalty, the lessee may ask the court to mitigate the penalty. It is expected that judges will honor a claim for mitigation if the late payment is the result of a (mandatory) closure and/or reduced turnover due to the corona virus.

Does it make sense for a tenant to invoke force majeure because of the corona crisis?

A successful invocation of force majeure (e.g. by corona) does not mean that the tenant no longer has to pay rent for the business premises. A landlord can demand payment from the tenant as soon as this is possible again. Force majeure does not stand in the way of this.

It is not possible for the landlord to claim compensation for failure to pay the rent on time in the event of force majeure.

It is not yet clear whether the Lessee can successfully invoke force majeure due to the corona virus and its consequences. Whether there is force majeure must be determined on the basis of the law, the agreement or generally accepted views. It will therefore depend on the circumstances of the case. When a business premises is closed down, it also plays a role whether this is voluntary or the result of a government measure relating to the coronavirus.

In the event of an obligatory closure of the catering establishment or shop, the lessee must comply with the government measure imposed. In that case, there is most likely a situation of force majeure. If the closure is not compulsory by the government, but due to a shortage of staff or reduced visitor numbers, for example, the position may be taken that there is simply an entrepreneurial risk. In general, tenants of business premises must take such entrepreneurial risks (such as an economic crisis or natural disaster) into account when concluding the lease. If the consequences of the corona virus are regarded as an entrepreneurial risk, invoking force majeure is unlikely to succeed. Clarity about this will ultimately have to follow from case law.

What if the lessee no longer complies with the obligation to operate?

Many leases for business premises include an operating obligation for the lessee. The leased property must then be used in accordance with the agreed purpose, such as clothing shop, café, restaurant or storage space. Such an operating obligation is usually combined with a penalty clause. If the lessee does not comply with the obligation to operate, he is liable to pay a fine and may claim damages from the lessor.

In this case, too, it is important whether the lessee can successfully invoke force majeure. If the closure of the catering facility or shop is the result of a government measure, the lessee cannot be blamed for not meeting his operating obligation. The lessee can then invoke force majeure. In that case, the lessor cannot claim a (contractual) fine or damages. If the closure is on a voluntary basis, there may be a violation of the obligation to operate. The reasons for the closure then fall under the normal entrepreneurial risk (see above). However, a tenant can ask the court for mitigation of the fine.

Can the tenant claim a rent reduction for the business premises?

A tenant can only claim a reduction in rent if there is a reduction in rental enjoyment as a result of a defect. A defect exists when the tenant does not have the rental enjoyment that he could expect when entering into the tenancy agreement as a result of a state or property of the rented property or any other circumstance that cannot be attributed to the tenant. The coronavirus and its consequences can most probably not be regarded as a defect. This means that the renter cannot claim a reduction in the rent. In case law it will ultimately have to be decided whether the consequences of the corona virus (e.g. closure) can be regarded as a defect and whether a lessee can claim a rent reduction as a result.

In most business premises leases, the right to rent reduction is limited to defects that the lessor knew or should have known when entering into the agreement. If such a provision is included in the lease, reliance on rent reduction will not succeed.

Can the lessee invoke unforeseen circumstances due to the corona virus?

After entering into a rental agreement for business premises, there may be unforeseen circumstances. If this is the case, one of the parties (i.e. the renter or lessor) can ask the court to change the rental agreement or dissolve it in whole or in part. This can only be claimed if, according to standards of reasonableness and fairness, it cannot be expected that the tenancy agreement for business premises will remain unchanged.

Unforeseen does not mean unforeseen, but it must be circumstances that have not been taken into account in the rental agreement. If, for example, the lease contains a provision stating that the rent must also be paid in the event of force majeure, this is no longer an ‘unforeseen’ circumstance.

An appeal to unforeseen circumstances is seldom honoured by the court, but if there ever could be a reason to do so, it is now. Thought can be given to dissolution of the tenancy agreement for the future or (temporary) alteration of the rent.

Tenancy law lawyer

As you have been able to read, not all questions can be answered unequivocally. A number of things are still uncertain. The advice is therefore to try to reach a settlement first. Also make sure you have a good record in writing of the agreements made. If this does not work out, please contact the tenancy lawyers of Leeman Verheijden Huntjens Advocaten for legal advice. They can advise you in your specific situation about which steps to take or which risks you run. If necessary, we will start court proceedings for you. The Tenancy Lawyers assist both tenants and landlords.

You can find more corona information in our helpdesk.

Privacy and Data Protection: Brexit and third countries

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As we all know the UK left the EU with effect from 1 January 2021. How does this affect the transfer and processing of personal data in the UK. The Withdrawal Agreement entered into by the EU and the UK regarding the withdrawal of the UK from the EU sets out a certain transitionary period. This transitional period expired as from 1st July 2021, meaning that the UK is treated as a third country with respect to the transfer and processing of personal date. What does this mean in practice for privacy and data protection?

When can personal data be transferred to a third country?

The Regulation (EU) 2016/679 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data (GDPR) sets out the rules for the transfer of personal data from controllers or processors in the EU to third countries and international organisations, as set out in Chapter V of the GDPR. The main rule is that personal data may only be transferred to a third country in the event that adequate protection level is available.

The Adequacy Decision of the EC regarding personal data

The good news is that on the 28th June 2021, the EU has passed a Commission Implementation Decision, decision on the adequate protection of personal data by the united kingdom – general data protection regulation (Adequacy Decision). The EU Commission has carefully analysed the law and practice of the UK and concluded that the UK ensures an adequate level of protection for personal data transferred within the scope of Regulation (EU) 2016/679 from the EU to the UK. After a period of 4 years, effective from 1st July 2021, the Adequacy Decision will be reviewed by the EU.

What is the Adequacy Decision?

This Adequacy Decision means that there are no consequences for the transfer and processing of personal data between an EU member state and the UK. There is no need to take action and there is no need to use Standard Contractual Clauses, or to use the Binding Corporate Rules (BCRs).

What are the Standard Contractual Clauses?

The EU has developed so-called standard contractual clauses (SCCs) under the GDPR for data transfers from controllers or processors in the EU/EEA to controllers or processors established outside the EU/EEA. These SCCs have been updated and the EU issued modernised standard contractual clauses on the 4th June 2021. 

What are the Binding Corporate Rules?

The BCRs were developed by the UK to allow multinational corporations, international organisations, and groups of companies to make intra-organisational transfers of personal data across borders in compliance with the GDPR. These companies submit the binding corporate rules for approval to the EU.

When do you use Standard Contractual Clauses or the Binding Corporate Rules?

However, any company within the EU which transfers or processes personal data  country outside EEA (European Economic Area) needs to obtain “adequate” protection. This means that either the SCCs or BCRs will need be used in order to transfer data from controllers or processors in the EU/EEA to controllers or processors established outside the EU/EEA.

Schrems II

The SCCs were updated as a result of the Schrems II judgment of the Court of Justice of 16th July 2020. The court ruled that simply entering into SCCs was not sufficient. Each organisation that exports personal data outside the EEA, needs to assess case-by-case whether the legislation of the receiving country meets the protection requirements that is in line with the SCCs.

What are the innovations of the new Standard Contractual Clauses?

The new SCCs provide businesses with an easy-to-implement template and offer a more legal predictability to European businesses. The new SCCs in particular help SMEs to ensure compliance with requirements for safe data transfers, while allowing data to move freely across borders, without legal barriers. The new SCCs covers all transfers in the entire chain from controller to (sub)processor to controller.

The main innovations of the new SCC include the following:

  1. One single entry-point covering a broad range of transfer scenarios, instead of separate set of clauses;
  2. More flexibility for complex processing chains, through a “modular approach” and by offering the possibility for more than two parties to join and use the clauses;
  3. Practical toolbox to comply with the Schrems II judgments, i.e. an overview of the different steps companies have to take to comply with the Schrems II judgment as well as examples of possible “supplementary measures” such as encryption, that companies may take if necessary.

In the event that an organisation already uses the old SCCs, a transitionary period of 18 months is provided within which the new version of the SCCs need to be used.

Are you looking for an lawyer experienced in the international aspects of privacy law, or if you have any queries or questions relating to the processing or transfer of personal data to a third country, please contact Madelon van Breemen.

Terminating a commercial contract

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This article will explain in which way commercial agreements can be terminated under the Dutch Civil Code (DCC).

The general rule in the Netherlands is that there is substantial freedom of parties to enter into an agreement. There are however specific agreements such as rental agreements, employment agreements, agency agreements and franchise agreements, referred to as specific agreements in the DCC where additional rules are set out. In the event that you are contemplating the cancellation of specific commercial contracts, as referred to above, then there are specific provisions regarding termination that need to be adhered to. Furthermore, the DCC makes a distinction between compulsory law and regulatory law, meaning that if a provision in the DCC states this is compulsory law, the article in the DCC is overriding to anything agreed to between the parties by way of a contract.

In this article I will deal with the non-specific agreements as regulated within the DCC, and how these type of agreements may be ended under the DCC.

Parties may agree to terminate the legally binding commercial agreement by:

  1. Cancelling the agreement in accordance with the terms as set out in the agreement entered into between the parties. For example, this could be by way of an agreed notice period set out in the agreement. Termination is also possible, where both parties agree to terminate the agreement based on mutual consent.
  2. Contracts for a fixed term – with or without an early termination clause – are generally regulatory law, meaning there is substantial freedom to contract. Agreements such as these can be terminated in accordance with the terms of the agreement, provided they are sufficiently clear and also provided the terms are complied with.
  3. Terminating a commercial contract with an indefinite term which does not contain a provision regulating the termination of the agreement is also possible, but only in accordance with the rules set out by the Supreme Court. However, such termination may require a certain notice period based whereby there are sufficient grounds based on reasonableness and fairness that a notice period for termination is required or where damages need to be paid to compensate the non-terminating party for their loss. This can be quite tricky especially as parties need to agree on a reasonable notice period, and each party has a different interest. For example a distributor will have greater interest in a longer termination notice to compensate for the loss than the principal.
  4. Rescission, which is regulated in 6:265 DCC is also a ground for termination. Recission is where the contract is cancelled and parties are placed in the situation where the performance of the commercial contract is reversed. For example where goods have been delivered, and they are returned. However, there are situations where this is not possible and then the other party is awarded damages.  The above-mentioned article dictates that there must be a breach of the agreement, and this breach is such that it justifies recission of the agreement, so it needs to be a material breach.  The breach is such that it cannot be remedied, either temporarily or permanently or where the party is in formal breach as set out in article 6:82 and 6:83 DCC. For example when a fatal deadline has been exceeded or where the party has been notified to be in breach and has not remedied the breach within a certain time-limit. An agreement can be rescinded by obtaining judgment of the court or by way of an extra-judicial declaration of rescission. Rescission is not compulsory law and is therefore often excluded in commercial contracts, so please check the commercial contract.
  5. Revocation, which  is where parties are put in the situation as if the commercial contract had never existed. This is a strict legal principle, where the intent to enter into the agreement was not correct. Under the DCC there are four grounds for revocation of the agreement. These grounds are mistake, threat, deception and abuse of circumstances.

Damages are due and payable in the event that one of the parties is in formal breach. The DCC sets out what is considered to be damages, and this includes material loss and other loss. Contractual damages is regulated in article 6:95 to 6:106 DCC and is not compulsory law, which means that parties can deviate from this by agreement. Material breach under the DCC includes loss and loss of profits. Reasonable costs for mitigating the damages as well as reasonable costs to determine or limit damage and liability and extra-judicial legal costs to determine the damage and extra-judicial costs to exercise your rights. Furthermore, article 6:101 DCC states that in the event that the person suffering damage has contributed  to the damages due to his or her own fault, then the damages awarded may be reduced by this amount.

Legal advice on terminating international commercial agreements

Again, if your business enterprise is contemplating cancelling an existing commercial contract, the above shows you how important it is to do this correctly from a legal point of view.

If you have any questions, please feel free to contact Madelon van Breemen.

When does a commercial agreement become a legally binding agreement?

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It may be that your commercial enterprise was still negotiating the terms of a commercial contract and the negotiations did not result in an agreed written contract. At least that is what you thought until you received an invoice. When does a commercial agreement become legally binding according to the Dutch Civil Code (DCC)?

An agreement is constituted by offer and acceptance, after an offer has been made which has been accepted (article 6:217 – 6:225 DCC).

This seems to be quite straightforward, but a lot of discrepancies can arise between an offer and acceptance, in addition to confusion as to whether the offer was a legally binding offer, or whether the acceptance was a legally binding acceptance. Under the DCC there are 3 requirements that need to be met before an offer or acceptance is legally binding and after which they constitute a legally binding agreement. These relate to the intention of the party making the offer, the manner in which it is declared and the alignment between the offer and the acceptance. Intention, declaration and alignment of the offer/acceptance all need to be in accordance with the legal requirements in the DCC and subsequent case law.

In order to establish whether the offer and the acceptance are aligned, the offer needs to be directed to the party for which it is intended. The offer and acceptance both consist of an intent and of a declaration which has been disclosed and has been understood by the receiving party in the same way as how it was intended by the disclosing party, based on the circumstances that the receiving party could reasonably have understood (3:33 and 3:35 DCC). The declaration is form free (3:37 DCC), so this can be verbally or in writing. 

The alignment of the offer and acceptance is often the reason for a dispute between the parties, because of the parties have understood the offer or acceptance to have been something different. For example, you are contemplating selling your company and a buyer has appeared wanting to buy your company subject to certain terms and conditions to be agreed upon during the discussions. It may be that an agreement is in place already, and negotiations have not started yet or have not started at all. A consequence for the seller may be that he may no longer be permitted to sell the company to another party. A consequence for the buyer may be that he is under a duty to pay the purchase price plus delivery of what is being sold.

In some situations it may happen that the negotiations break down, and then the question is what are the consequences of stopping the negotiations?

There is set case law on this originating from Plas/Valburg where the Supreme court defined three defined pre-contractual stages, being the following:

  1. The negotiations have broken down without any obligation to compensate the costs of the other side.
  2. The negotiations have progressed to such a stage that stopping the negotiations would lead to substantial costs being incurred. In this stage, damages are due and payable by the withdrawing party.
  3. The negotiations are in such an advanced phase that stopping the negotiations would be in breach of good faith. The parties may each rely on the fact that the negotiations would have resulted in an agreement. The withdrawing party is then under an obligation to pay the costs incurred by the other party and in some cases even loss of profit.

This judgment had an enormous impact in the legal world and resulted in a draft amendment in the DCC which was never implemented, but was applied by the Supreme court in VSH/Shell. So, based on case law, it became more and more accepted to apply the above stages.

In the Supreme Court judgment CBB/JPO however, these phases were amended in such a way that the rights to compensation of the non-withdrawing party were reduced.  So the protection for the non-withdrawing party became less. Thereafter the Supreme Court ruled in Greenib/Van Dam that damages were payable for broken down negotiations. So, therefore re-instating the Plas/Valburg stages, whereby compensation for the costs incurred by the non-withdrawing are to be compensated by the withdrawing party.

The facts in this case were that the negotiations regarding a Hyundai dealership were in such a phase that the other party could reasonably have relied on the fact that a legal agreement would have been entered into. The court decided that negotiations could not just stop without any consequences, and therefore order the payment of damages to compensate the other party.

So, as you might understand, the formation of a legally binding agreement is quite complex and there are a lot of issues to take into consideration starting from the point where parties are commencing the negotiations to the point where both parties believe that a legally binding agreement has been entered into.

Are you negotiating the terms of an agreement, and are you concerned about any of the above, then please contact Madelon van Breemen.

Battle of forms: the applicability of General Terms and Conditions

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The battle of forms is where a business enterprise has contracted with another business and both parties claim that their General Terms and Conditions are applicable to the contract that has been entered into. The question is which General Terms and Conditions apply in this instance?

When do General Terms and Conditions apply?

Article 6:217 of the DCC states that agreements are into by offer and acceptance, which also applies to General Terms and Conditions. In order for the General Terms and Conditions to be valid and applicable to the contract, the contract needs to clearly state that the General Terms and Conditions apply. Acceptance of the applicability of the General Terms can also be implied in the event that the other contracting party does not know the content. 

Legal obligation to present the General Terms and Conditions to the other party

Article 6:233 and 6:234 of the DCC does provide for a duty on the party relying on the General Terms and Conditions to inform the other party by presenting the General Terms and Conditions to the other party. If these requirements are met the General Terms and Conditions are applicable to the contract, so the applicability requirement for General Terms and Conditions is less stringent that in relation to the contract itself.

Which General Terms and Conditions apply to the agreement?

In the event that both parties declared their General Terms and Conditions to be applicable, Article 6:225(3) DCC provides for a solution to determine which set of General Terms and Conditions apply. This article is what is referred to as  the “first shot” principle. The “first shot” principle is where one party applies the General Terms and Conditions to be applicable and the other party in turn does the same. In this case the first party declaring their General Terms and Conditions to be applicable goes first provided that the applicability if the other General Terms and Conditions are expressly rejected. Often this wording is included in the General Terms and Conditions themselves, which may not be sufficient.

When are General Terms and Conditions considered to be rejected?

Case law has shown that by merely adding wording to your company’s General Terms and Conditions is not sufficient for the “first shot” principle to apply under Dutch law. This means specific wording needs to be included in the contract or offer. It needs to be very clear to the other side that your company will and is rejecting their General Terms and Conditions.

Battle of forms: UN Convention on International Sale of Goods

In the event that the parties to the agreement are selling commercial goods internationally ,then the United Nations Convention on Contracts for the International Sale of Goods (CISG) United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980) (CISG). United Nations Commission On International Trade Law is applicable to the contract when both parties have their place of business in a nation that have signed CISG: List of Contracting States | Institute of International Commercial Law (pace.edu) the CISG. It is important to note that the CISG is a lex specialis, meaning that this Convention is applicable to the contract in priority of the Netherlands Dutch Civil Code. For example, when one party has their place of business in the Netherlands, and the other party in Germany, then the CISG is applicable to the agreement in priority to the national jurisdiction. The CISG applies to the international sale of goods only to services and does not apply to consumer goods.

The CISG can also be specified by the contracting parties as the choice of law. This means that the contract for the international sale of goods is governed by the CISG even if one of the parties is from a nation that has not signed the CISG. Similarly, parties can also opt out of the CISG in the contract.

Which General Terms and Conditions apply to the international agreement?

Article 19 of the CISG states that the General Terms and Conditions are applicable in accordance with the “last shot” rule. This means the last party declaring their General Terms and Conditions to be applicable is successful, which is different to the relevant provision in the Dutch Civil Code (DCC). The CISG is generally very pro seller, which is something worth taking into consideration when you are the seller of the goods. Especially bearing in mind that you can opt into the CISG even if one of the parties is from a non-signatory nation.

If the CISG is expressly excluded by parties in the contract, and parties have agreed for the contract to be governed by Dutch law, then the provisions of the Dutch Civil Code apply to the applicability of the General Terms and Conditions.

Are you looking for an attorney at law who specialises in the use and applicability of General Terms and Conditions for an international agreement?. Please feel free to contact Madelon van Breemen.

Michelle Reevers

+31 (0)10 209 27 75
reevers@lvh-advocaten.nl
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