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Record additional redemption loan agreements in addendum!


When entering into a loan agreement The agreement that one party allows a third party to use an item without financial consideration under the condition that that party will return the item.
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loan agreement
, it is important to carefully record in writing the agreements about the manner and the instalments of the redemption. Different interpretations of the loan agreement can result in legal disputes. In a recent debt collection dispute the court had to intervene between the parties. This case centred around the issue of whether the loan had become due and payable or not. Dutch debt collection lawyer Thomas van Vugt explains.

Loan agreement

In this case the respondent had entered into a loan agreement with the two claimants. She had borrowed €25,000 from each of the claimants to purchase part of the claimants’ share The portion of registered capital of a private or public limited company
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in a private limited company ( Ltd.) A legal person of which the registered capital is divided in shares
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private limited company
. The loan agreement included, among others, the stipulation that the loans had to be redeemed no later than 1 April 2015. Another stipulation was that the respondent would use the dividend payments from the private company first of all to redeem the loan.

Redeeming loan with management fee?

After purchasing the shares, the respondent was appointed as director of the private company. The claimants were also directors. The parties were all directors and major shareholders in the private company. All directors were entitled to a management fee. In 2014 and 2015 the respondent received €15,000 in management fees. However, in 2015 she was dismissed as director. The loans were never redeemed.

Demand payment of due and payable claim

The claimants demanded that the court sentence the respondent to redeem the entire loan. They argue that since the respondent failed to redeem the loan before 1 April 2015, the entire loan has become due and payable. However, the respondent argues that it had been agreed that she would use 20% of her management fee to redeem the loan. As she does not (any more) receive this management fee, she is no longer obliged to redeem the loan.

Management fee condition for payment obligation?

The court finds that neither the loan agreement not any other documents show that payment of the management fee was a precondition for the respondent’s payment obligation. Although text messages show that the respondent would use 20% of her management fee to redeem the loan, this does not automatically mean that if she – for whatever reason – no longer receives the management fee, she is released from her redemption obligation.

Loan immediately due and payable due payment default

In this context it is also important that the management fee was paid by a third party (Aventura BV) and not by the claimants. Furthermore, the respondent also failed to comply with this additional agreement as she also did not use the management fee she did receive for redemption. The loan is therefore immediately due and payable since 1 April 2015, as agreed by the parties in the contract.

Dutch lawyer in drawing up a loan agreement

Most loan agreements include a redemption schedule for the monthly or annual amounts, increased by interest or not, that have to be paid. There is also often a stipulation about the consequences of overdue payment or default of payment. For example, the credit provider can terminate the loan agreement in case of default by the borrower. In that case the entire loan is immediately due and payable. Also, in case of non-payment, the credit provider can enforce securities provided by the borrower, such as a bank guarantee, a mortgage A mortgage is a limited right given by a debtor on an asset intended as a security for the creditor that performances are fulfilled.
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or a right of pledge A right of pledge (the debtor) gives the pledgee (the creditor) a security until payment above other creditors by giving possession of assets
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right of pledge
. If there are additional (redemption) agreements, please recorded these in writing. Especially after the agreement has already been concluded, parties often forget to further record additional agreements, for example in an addendum.

Thomas van Vugt

Thomas van Vugt

Thomas specializes in contract law and media law cases. He advises, litigates and negotiates. Thomas' work style is characterised by a strong commitment to his clients, the ability to act quickly and decisively and cut through red tape. He speaks fluent English and regularly advises international clients. View his track record here. Follow Thomas on LinkedIn.

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