Introduction
On 4 March 2025 the Dutch Senate adopted the Proposal Act on the Abolition of Assignment Prohibitions (Wet opheffing verpandingsverboden), following adoption by the House of Representatives on 11 June 2024. Although the proposal still needs to be signed into law, it can be expected to enter into force on a date to be announced.
The Act renders ineffective contractual provisions prohibiting or restricting assignment (i.e. outright transfer) or the granting of a security interest in respect of receivables. The aim of the Act is to improve access to receivables-based finance for small and medium sized businesses. The practice whereby larger businesses, using their negotiating power, effectively impose their general terms and conditions including assignment prohibitions on their suppliers was deemed to hinder access by suppliers of goods and services to receivables-based finance.
With this change, the Netherlands will follow in the footsteps of other jurisdictions that have implemented similar legislation previously, such as England and Wales and Northern Ireland with the Business Contract Terms (Assignment of Receivables) Regulations 2018.
Current Dutch law
Under current Dutch law, a contractual prohibition on assignment renders any purported assignment or grant of a security interest in respect of receivables ineffective (if the prohibition is properly drafted to such effect). Case law protects purported assignees and beneficiaries of security interests against the effects of provisions which are ambiguous as to whether they are intended to render any purported assignment or grant of security void, or whether they are merely intended to create a remedy for breach of contract between the contracting parties.
In practice, until the Act comes into effect, this means that, for receivables-based finance, due diligence needs to be performed on any Dutch law governed contract under which receivables arise to determine whether it is permitted and possible to assign or pledge such receivables.
The current rules as well as the new Act apply to both prohibitions precluding assignment and pledging altogether as well as to restrictions subject to conditions, such as consent from the counterparty.
Impact of the new Act
Pursuant to the new Act, the current rule under Dutch law (i.e. that parties to a contract can exclude or limit assignability or the ability to grant a security interest in respect of receivables thereunder) will be partially abolished. This will apply to claims for the payment of an amount of money arising from the exercise of a profession or business. Any contractual provision aiming to exclude entirely or limit (e.g. by providing for a requirement for consent) assignability or the ability to grant a security interest in respect of such receivables will be void and have no effect.
The proposal will not only restrict the possibility to exclude or limit the assignability of receivables as a matter of property law so as to render a purported assignment or grant of security interest void, but will also ensure that the counterparty cannot invoke a prohibition to claim damages for breach of contract where the assignment or grant would be in contravention thereof.
Accordingly this should remove all relevant inhibitions to access receivables-based finance for suppliers of goods and services. Not only should this make it possible for businesses to access financing which they would previously have been unable to attract, the Act should also significantly reduce, if not eliminate, the need for due diligence into the terms and conditions applicable to Dutch law governed receivables. Financing parties will be able to assume that, regardless of whether such terms contain an assignment prohibition, this will not stand in the way of taking security in respect of the receivables or having them transferred outright (pursuant to factoring, discounting and other receivables-based financing structures based on purchase and outright transfer of the receivables).
Written notice only
One measure for the benefit of the debtors in respect of the receivables is to prescribe that, where the law requires notice of assignment or pledge in respect of monetary claims arising out of the exercise of a profession or business, such notice must be given in writing. For receivables of a different nature, notice given verbally will continue to be sufficient. In the context of receivables finance, notice should already always be given in writing.
Scope and exclusions
The scope of the Act is limited to receivables arising from the exercise of a profession or business. The Act leaves intact the possibility to contractually exclude assignability in respect of receivables of a different nature (whether with effect in property law or not). Furthermore, the Act contains a number of explicit exclusions to clarify that it does not apply to certain specific cases where it was considered that maintaining the possibility to exclude assignment is desirable.
- Deposit accounts. The Act expressly excludes its application to claims arising under deposit or saving accounts. As rights to amounts standing to the credit of a bank account are analysed as receivables in the Netherlands, security in respect of bank accounts is ineffective without the cooperation of the account bank if its terms provide that the accounts may not be made subject to security without its consent (which is typically the case). For receivables-based finance, this is relevant as security in respect of a collection account on which relevant receivables are collected will in practice still require cooperation from the account bank, in the absence of which any purported grant of security has no effect.
- Sub-contractors and temporary staffing. Also protected are assignment prohibitions in respect of receivables which are part of sub-contracting and temporary staffing arrangements payable on bank accounts used for payment of payroll tax, sales tax or social insurance premiums. These already formed part of a special regime to protect sub-contractors and employees against failure by contractors and employment agencies to on-pay amounts in respect of tax liabilities.
- Clearing and settlement systems. Another exclusion is for assignment prohibitions in respect of claims of or against clearing institutions, central counterparties, settling institutions, netting institutions and central banks in the context of payment and securities settlement systems. The possibility to exclude assignment or ability to pledge such claims was considered important to ensure uninterrupted settlement of payment and securities transactions.
- Syndicated loans. The last, but no less noteworthy exclusion, is of assignment and transfer restrictions in respect of claims arising under credit and loan agreements “having or which will have” multiple parties as creditors. The background is that in multi-lender credit agreements (e.g. syndicated loan facilities) mechanisms are usually included to facilitate the transfer of participations in the loans made thereunder. The borrower may negotiate provisions to the effect that lenders may not transfer their loans to certain parties, or include certain conditions or consent requirements. It was deemed that such provisions protecting borrowers should remain enforceable and would, without the exclusion, be at risk of being rendered ineffective. The chosen wording of “having or which will have” multiple parties as creditors (waarbij aan de kant van de kredietgever meerdere partijen betrokken zijn of zullen zijn) is understandable against that background but may be somewhat too ambiguous to serve as a clear criterium to determine whether the exclusion applies to a certain credit or loan agreement. Furthermore, it might be questioned why a restriction negotiated by a borrower under a bilateral financing should not be worthy of protection. These are matters which may be cleared up in case law in the future but which should not impede the intended effect of the Act on enabling receivables-based financing.
Transition
Once the Act has entered into effect, it will apply to any contract whether entered into before or after such effectiveness, provided that for contracts entered into prior to effectiveness there will be a three month period until any assignment provision contained therein loses its enforceability. Accordingly once the Act has been in force for three months no distinction will need to be made as to when the contract under which relevant receivables arise was entered into. For now, we must wait for publication of the Act and its effective date, which should be expected shortly.
