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From 1 July 2017, Cloud providers and other IT suppliers are obliged to pass on client records to the receiver in the event of bankruptcy free of charge

From 1 July 2017, Cloud providers and other IT suppliers are obliged to pass on client records to the receiver in the event of bankruptcy free of charge

Over 3 years ago, the government launched a bill to strengthen the position of the receiver. I previously wrote a blog on this bill and the consequences it has for IT suppliers. The bill has in the meantime reached the finishing line virtually unscathed and will come into force on 1 July 2017. IT suppliers managing any records of clients must prepare for this bill and the consequences of bankruptcy of their clients.

Strengthening the position of the receiver

The aim of the Act is to strengthen the position of the receiver during a bankruptcy. It is beyond the scope of this blog to discuss the full content of this bill. I will currently highlight one aspect.

Compulsory provision of information to the receiver by third parties

The final version of the text of the Act includes the following section 105b Bankruptcy:

  1. Third parties, including accountancy organisations and external auditors, who in the performance of their profession or business keep, in any manner whatsoever, the records of the bankrupt in their possession, either wholly or in part, shall make these records and all associated books, documents and other information carriers available to the receiver on request, in full and undamaged, if necessary accompanied by the tools to make the content legible within a reasonable time.
  2. In derogation from section 60, third parties can therefore not rely on a right to retention in respect of the records of the bankrupt party that they have in their possession, in any manner whatsoever, in the performance of their profession or business if the receiver requests such records on the basis of the first paragraph.
  3. Any clause that is contrary to the provisions in the first or second paragraph is void.

Risk for IT entrepreneurs offering online administration packages

IT entrepreneurs who in any way manage the administration of their clients can therefore fall under the scope of this Act. This covers, for example, parties offering software that allows administration to be carried out remotely/online (cloud, Saas, etc).

If a client goes bankrupt, the receiver can therefore request the delivery of the records. The Act is quite far-reaching in its demand that tools to be able to ‘make the records legible within a reasonable time’ must also be provided. Receivers could possibly rely on this section to force conversion of the data. It may then perhaps be cheaper for the IT supplier to continue the original service provision and provide the receiver with a log-in. The question is whether the receiver would agree to this.

Costs can be charged on

The IT entrepreneur will of course incur costs (time) in delivering the data (or continue the service provision). The original bill clearly stated that these costs could be charged on. See the quote in the previous blog.
The explanatory memorandum to the bill contains the following, very condensed, text:
Insofar as the receiver obtains information from third parties, a payment can be requested for this.

But is there any money? Factor in any work into normal prices

There is of course the risk that there is no money at all. After all, the client has not gone bankrupt for no reason. In a later document in the legislative history the government repeats that costs can be charged on, but it also hinted that the supplier may perhaps want to factor in the payment for the work into its regular prices:

Insofar as the receiver obtains information from third parties, a payment can, in principle, be requested for this. Third parties carrying out accounting and associated services for another on a commercial basis are free to factor in the absence of any bankruptcy assets in their business model and pricing.

Failing to comply appears to be punishable

Entrepreneurs would be wise to take the statutory obligations seriously. Failing to comply with a statutory duty obligation to provide information is an offence (section 194 of the Dutch Penal Code). This section appears to have primarily been drafted for the bankrupt party who fails to provide information himself but appears (in any case linguistically) also applicable to managers of third parties obliged to provide information.

Receiver has a strong trump card in civil case

Whether it actually comes to a criminal prosecution is of course highly doubtful. With the change in the law, the receiver has in practice of course a trump card in civil cases. After all, the Bankruptcy Act states from 1 July 2017 that delivery is compulsory and acting contrary to a statutory duty is in principle unlawful (article 6:162 of the Dutch Civil Code).

Entrepreneurs: prepare!

IT entrepreneurs who manage the records of their clients in any way would be wise to prepare for the act. Start thinking about how you are going to respond to a request from a receiver. Also factor in the work you have had to carry out in the past years relating to bankrupt clients into your prices. After all, when it comes to it, you probably are going to have to carry out this work for free in many cases.

If you have any questions relating to this topic, please contact me.

By Mark Jansen

 

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