In the last months, quite a lot Dutch retail chains went bankrupt. To name a few: Ted Baker, Blokker, Scotch & Soda, The Body Shop and Vanilia. Recently, by court order of 2 April 2025, the fashion brand Gerry Weber has been declared bankrupt.
This bankruptcy has consequences for everybody involved, like vendors that have sold clothing and/or other fashion items to Gerry Weber and have not been paid in full. In this alert, we will highlight seven ways for such vendors to mitigate their damages in retail insolvencies.
1. Retention of title
(eigendomsvoorbehoud)
Vendors may transfer sold goods subject to a retention of title.
This means that the ownership of such goods is retained by the
vendor until the purchase price has been paid in full. Until this
full payment has been made, the purchaser is not the legal owner of
these goods. Important is that the vendor needs to demonstrate that
the retention of title has been agreed upon with the purchaser
(such retention of title is often part of the general terms and
conditions of the vendor).
Also, it may be wise to dissolve the sale and purchase agreement and to demand that the retained goods will be separated from the other goods of the bankrupt estate. This may be a good strategy, in particular when there is a cooling down period. By doing so, a bankruptcy trustee is not entitled to sell and transfer the retained goods other than to hold the relevant vendor harmless.
2. Right of reclamation (recht van
reclame)
Another and not well-known way to mitigate damages for a vendor is
to invoke the right of reclamation. This right differs from the
retention of title in that the right of reclamation does not need
to be agreed upon with the purchaser. The right of reclamation has
a statutory basis in Dutch law. However, a vendor must invoke this
right of reclamation as soon as possible. This right will expire
when two conditions have been fulfilled: (i) six weeks have passed
since the expiration of the related invoice and (ii) sixty days
have passed since the delivery of the goods to the purchaser.
Also, it may be wise to demand that the reclaimed goods will be separated from the other goods of the bankrupt estate. This may be a good strategy, in particular when there is a cooling down period. By doing so, a bankruptcy trustee is not entitled to sell and transfer the reclaimed goods other than to hold the relevant vendor harmless.
3. Right of retention
(retentierecht)
If the vendor of the unpaid goods has actual control over these
goods (for instance when repairs need to be done), also the right
of retention may be invoked. The right of retention means that the
specific good is not delivered by the vendor until the vendor's
claim is paid in full.
The right of retention is not affected by the bankruptcy of the debtor who owns the specific good on which the right of retention is exercised. A bankruptcy trustee, however, has, when confronted with a right of retention, two options in principle. He may claim the good(s) involved and sell these goods (please note that the party invoking the right of retention has priority over the proceeds of such sale). The other option for the bankruptcy trustee is to pay the outstanding claim of the party with the right of retention.
4. Liability of the management of the
purchaser
Another way to mitigate any damages is to hold the management
liable for the damages. This liability claim may be strengthened
when the management has confirmed the creditworthiness of the
purchaser on request of the vendor before the relevant transfers of
sold goods have been made.
Furthermore, the management of a corporate debtor may be held personally liable if they allow the debtor to conclude an agreement while they knew or reasonably should have known that the debtor would not – within a reasonable time period – be able to meet its obligations arising from that agreement and that the other party would not have recourse against the debtor's estate for damages incurred. Also, management may be held personally liable when procuring or permitting the debtor to default on its statutory and contractual obligations. Crucial is that the management may be hold personally liable when their behavior is negligent towards the relevant creditor and if this can be considered a sufficiently serious personal wrongdoing (voldoende persoonlijk ernstig verwijt).
5. Guarantee or 403 declaration of
liability
Affiliated companies of the bankrupt debtor may have issued
guarantees, by which the such affiliated company declares itself
jointly and severally liable for certain outstanding debts arising
from legal relationships that the bankrupt debtor has entered into.
A vendor may then choose which of the jointly liable co-debtors to
hold accountable for the payment of the claim. In the event of
bankruptcy, this can provide a solution, as the company that has
provided the guarantee can be held liable for the debts of the
insolvent debtor, allowing the vendor to still collect their
claim.
It may also be that the parent company of the bankrupt debtor has issued a so-called 403 declaration of liability. With such declaration the parent company declares that it will be jointly and severally liable for the debts of the (exempted) bankrupt debtor. Under Dutch law, in principle every legal person must prepare, adopt and file financial statements. This requirement may can be waived. A group company does not have to meet such requirements regarding separate financial statements if the parent company has included the financial information in its consolidated financial statements for the entire group. The parent company must then also issue a 403 declaration of liability.
When the bankrupt debtor can no longer fulfil its obligations, a vendor may claim payment from the parent company on the basis of the 403 declaration of liability. However, please note that this only applies to claims arising from legal acts (such as agreements) of the bankrupt and exempted company
6. Set off (verrekening)
Furthermore, in bankruptcy, a creditor is entitled to set off if
the claim and the debt already existed prior to such proceedings or
resulted from legal acts performed prior to such proceedings.
However, this is not permitted where the creditor acquired the
claim or debt against the debtor at a time the creditor knew or
should have known the debtor could go bankrupt or would file for a
suspension of payments or bankruptcy. Creditors are no longer
required to perform their obligations nor be able to force payment
or settlement of the relevant claim.
Therefore, it is worthwhile for a vendor to check whether it has also accounts payable to the bankrupt person. If this is the case, set off could offer a solution.
Furthermore, an existing contractual limitation, extension, or exclusion of the right to set off will also remain in effect in the event of bankruptcy.
7. Recover VAT amounts
Finally, VAT on uncollectible receivables can be reclaimed from the
Dutch Tax Authorities in the tax return for the period in which it
becomes clear that payment will not be made. The VAT must be
reclaimed no later than in the tax return for the reporting period
one year after the final payment due date. If the VAT has not been
reclaimed on time, this can, in principle, be corrected through a
supplementary tax return, but this will cause a delay. It is
therefore advisable to take care of this in a timely manner.
Please note that this is a general alert for general information purposes only. This information is not adapted to personal or specific circumstances and can therefore not be considered as being a personal or professional advice. No rights can be derived from the information.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
