Commercial debt collection for non-payment is a common problem for entrepreneurs and foreign companies.
When a business customer does not pay invoices, this can have direct consequences for liquidity, continuity
and growth of your company. In this comprehensive article you will learn what you can legally do in the event of commercial non-payment,
which steps are effective and when litigating or seizing assets makes sense.
What is meant by commercial debt collection for non-payment?
From commercial debt collection for non-payment occurs when a business has to deal with another
company that does not pay a due and payable invoice (on time). In contrast to consumer debt collection,
in business collections there are fewer protective rules for the debtor, which makes legal action possible more quickly.
Commercial non-payment occurs, among other things, in:
- delivery of goods or services without payment;
- consistently late payments;
- disputes over the performance of a contract;
- financial problems of the debtor.
When is a commercial claim legally enforceable?
Not every outstanding invoice automatically leads to a successful collection of a commercial claim.
For enforceability, it is required, among other things, that:
- a valid agreement exists;
- the agreed performance has been delivered;
- the invoice is correct and verifiable;
- the payment term has expired;
- there is no legally valid defense against payment.
In practice, we see that unclear agreements or inadequate documentation an effective commercial collection
in the event of non-payment can complicate. A legal review in advance prevents unnecessary costs.
Business debt collection in case of non-payment: the legal step-by-step plan
Step 1: Check the contract and general terms and conditions
A successful business debt collection in case of non-payment starts with the contract. Check whether agreements have been
made about payment terms, interest, collection costs, competent court and applicable law.
Step 2: Formal reminder
Although a statutory fourteen-day letter is not required for business collection, a written reminder
is advisable. This formally puts the debtor in default and creates entitlement to interest and costs.
Step 3: Extrajudicial collection
If payment is not made, the extrajudicial collection phase follows. This phase is intended to compel payment
without immediately litigating. This can be effective, provided it is executed correctly from a legal standpoint.
Step 4: Court proceedings
When extrajudicial collection yields no result, proceedings can be initiated. Depending on the
importance and urgency, one may opt for proceedings on the merits or summary proceedings.
Step 5: Seizure and enforcement
After a favorable judgment, seizure can be imposed on the debtor’s bank accounts, inventory, or receivables.
In many cases, this makes commercial debt collection in the event of non-payment still successful.
When is litigation in commercial debt collection pointless?
Litigation is not always the best solution. In practice, we see that commercial debt collection in cases of non-payment
is less likely to succeed when:
- the debtor has no recoverable assets;
- the claim is (almost) time-barred;
- proof of delivery is missing;
- the costs do not outweigh the value at stake.
A realistic feasibility analysis prevents you from investing money in proceedings without a real result.
Limitation of commercial claims
Commercial claims generally become time-barred after five years. However, this period can be tolled, so the
the limitation period starts running again. In commercial debt collection in case of non-payment therefore, timely action is essential.
International commercial debt collection
Business non-payment is also common in international trade. Foreign suppliers who have to deal
with a Dutch debtor can often bring proceedings in the Netherlands. Dutch law and the Dutch courts
often have jurisdiction.
The European Union provides general information on this via
Your Europe – Debt recovery.
Common mistakes in commercial debt collection
- waiting too long to take action;
- unclear or incomplete invoices;
- no proof of delivery or performance;
- litigating without prospects of recovery;
- not defining a legal strategy.
What can Arslan Advocaten do for you?
Arslan Advocaten assists entrepreneurs and foreign companies in commercial debt collection in cases of non-payment.
We assess the legal feasibility, determine the right strategy, and guide you in out-of-court
debt collection, legal proceedings and seizure.
Also read more about our services for debt collection and payment disputes.
Costs and litigation funding in business disputes
In business disputes, we generally work not on a no cure no pay basis. Commercial proceedings
require a careful and strategic approach, with clear agreements made in advance about costs
and litigation.
In certain cases however, it is possible to have the case (in effect) on a no cure no pay basis
handled. We work with an independent litigation funder who – after assessing the case –
may be willing to finance (part of) the attorney’s fees.
If litigation funding is granted, the attorney’s fees are borne by the litigation funder. For the client
this means that litigation is possible without direct financial risk.
About the author
This article was written by Onur Arslan, lawyer and founder of Arslan Advocaten. He specializes
in commercial disputes, including commercial debt collection, shareholder disputes and international
trade disputes.
Would you like to discuss whether your case is suitable for legal action or litigation funding?
