THE RIGHT OF PLEDGES IN THE EVENT OF A BANKRUPTCY UNDER DUTCH CARIBBEAN LAW
Pledgee may exercise rights as if there is no bankruptcy
Article 53 paragraph 1 of the Bankruptcy Act of the Netherlands Antilles states that a pledgee can exercise its rights as if there is no bankruptcy. Permission or co-operation of the trustee in bankruptcy is not required.
Article 53 paragraph 2 of the Bankruptcy Act, however, provides that if it concerns claims of which it is uncertain when they are due and payable (‘opeisbaarheid onzeker is’) or which contain a right to periodical payment or a condition precedent or subsequent, the pledgee can only execute its pledge after verification of his claim.
It should be noted that under article 54 of the Bankruptcy Act a pledgee must execute its rights within one month after the bankruptcy has started. On request, the bankruptcy judge of the Netherlands Antilles can extend this term. If the pledgee fails to execute its rights, the bankruptcy trustee will, in due course, claim back the pledged objects and have them sold, without prejudice to the rights of the pledgee to the sale proceeds.
The pledgee does not have to contribute to the costs of the bankruptcy, though in practice pledgees, mortgagees and/or fiduciary owners sometimes pay a contribution to the bankrupt estate (in Dutch ‘boedelbijdrage’). The Court of First Instance has issued certain guidelines on these contributions.
The net proceeds generated by foreclosure of the pledged assets will not have to be shared with other creditors in the bankruptcy. Should the net proceeds exceed the claim of the pledgee, then the bankrupt estate is entitled to the surplus. Article 55 of the Bankruptcy Act stipulates the obligation of a pledgee to account for the proceeds of the execution sale to the trustee. Should the net proceeds not cover the pledgee’s claim, the remaining claim will have to be filed with the trustee in bankruptcy and will rank pari passu (thus equal) with the other (unsecured and unprivileged) creditors.
Karel Frielink
Attorney (Lawyer) / Partner
