Finance and collateral

If a borrower becomes bankrupt or is granted a suspension of payments, this has significant consequences for its lender. In the event of insolvency, the relationship between borrower and lender will generally shift from seeking business continuity to recovery through enforcement of the security that has been granted. This process begins with termination of the credit facility provided by the lender.

Termination of credit facilities

Experience shows that termination of credit facilities increasingly gives rise to disputes about the grounds on which a facility may be terminated and the length of the notice period. This area is particularly complex because, depending on the circumstances, a lender may be accused not only of irregular or unlawful termination; continuing a credit relationship for too long may also be unlawful towards creditors. In addition, there is a risk that continuing a credit relationship by entering into new credit or loan agreements and obtaining additional security from the borrower may result in those legal acts being set aside by the bankruptcy trustee in a subsequent bankruptcy on the basis of the actio pauliana.

To avoid being left empty-handed as a lender in the event of bankruptcy, it is advisable to obtain security. Common examples include rights of mortgage and rights of pledge. Other options include a guarantee or retention of title. For all security rights, it is crucial that they are validly created and perfected in accordance with the applicable legal requirements. If this is not done properly, the lender may still be left without effective security.

How can our insolvency lawyers assist you?

The specialists at RWV Advocaten advise and assist clients in protecting their interests as lenders in cases of actual or threatened borrower insolvency.