Pledge Prohibition Act: What you need to know and how to prepare

Key takeaways

• After the Act comes into force, assignment and pledging prohibitions for commercial monetary claims in contracts or general terms and conditions will no longer be possible.
• Clauses that prevent the assignment of commercial monetary claims, such as the inclusion of a consent requirement or a penalty clause, are also null and void.
• This nullity applies to all new clauses from 1 July 2025.
• This nullity applies to existing clauses from 1 October 2025.
• Assignment and/or pledging prohibitions will remain possible for claims other than commercial monetary claims.
• It is uncertain what the consequences are if an existing contractual provision or clause in general terms and conditions is formulated far too broadly: is the entire provision affected by nullity or is it converted into an admissible provision? In case of nullity, there is the risk that rights other than commercial monetary claims will also suddenly be assignable.

Introduction of the Act on the abolition of pledge prohibitions: what changes?

Monetary claims are, from now on, always assignable and pledgeable. Any stipulations to the contrary are null and void.  From 1 October 2025, this also applies to provisions in existing contracts and general terms and conditions. It is therefore time to quickly take action.

What exactly does the new Act entail?

On 4 March 2025, the Dutch Senate adopted the Act on the Abolition of Pledge Prohibitions (hereinafter: the “Act”). The Act will enter into force on 1 July 2025 and will have important consequences for commercial parties where it concerns the contracts they have entered or will enter into, as well as  their general terms and conditions.

Why was the Act on the abolition of pledge prohibitions introduced?

The purpose of the Act is to prohibit clauses that exclude or restrict the assignment or pledging of monetary claims arising from professional or commercial activities (hereinafter: “commercial monetary claims”). Under the current legal system, it is possible to exclude the assignability and pledging of claims (including commercial monetary claims) by incorporating a specific stipulation for this purpose.

How does the Act affect existing contracts and general terms and conditions?

In practice, these prohibitions are often applied. Such a clause is, for example, often standardly included in general terms and conditions and is also often found in different types of contracts (such as in supply agreements, distribution contracts, but also in takeover contracts (SPAs)). The reason for including such a provision is that the company has an interest having clarity on the payment address and such a clause prevents the company from being confronted with a party other than its original contracting party (its business/trading partner) against its wishes.

What are the consequences of the Act for businesses?

As a result of the Act, contractual provisions that exclude or prevent (prevention for example ensuing from a consent requirement or a penalty clause) the assignment or pledging of commercial monetary claims  will be null and void. It is important to note that  from 1 October 2025 this nullity will also apply to existing contractual provisions and provisions in existing general terms and conditions. The intention of the Act is to ensure that commercial monetary claims become more widely available as security for financing. This should then lead to an increase in the credit facilities for SMEs. However, a disadvantage of the Act is that it will become more difficult for companies to protect themselves against the consequences of the assignment or encumbrance of a monetary claim by their creditor.

What are the implications of the Act?

• The possibility of including assignment or pledging prohibitions in contracts or general terms and conditions is restricted.
• Existing clauses based on which your counterparty cannot or may not assign (for example to a factoring company) or pledge (for example to a financier) monetary claims on your company are no longer valid.
• Clauses that ‘prevent’ assignment or pledging of commercial monetary claims are also null and void. This includes provisions that only allow assignment or pledging under certain conditions, such as a consent requirement with a penalty clause.
• As of 1 July 2025, such clauses can no longer be validly agreed. As of 1 October 2025, existing clauses will also be null and void.

Why is it essential to take action before 1 October 2025?

There is a very good chance that your general terms and conditions and/or commercial contracts contain such a clause that will (partially) lose its legal effect after the Act comes into effect.

The question is what happens if the existing provision is formulated far too broadly (and we consider this will apply to virtually all contractual provisions and provisions in general terms and conditions). Is the entire provision then automatically null and void? Or does conversion take place on the basis of Section 3:42 of the Dutch Civil Code, as a result of which an admissible and binding provision remains? Looking at the text of the law and the legislative history, conversion is not immediately obvious. The Courts will have the final say. For that reason, we advise to anticipate and have existing contracts and general terms and conditions amended before 1 October 2025, so that the intended assignment and pledging restrictions of rights and obligations within a legal relationship – to the extent permitted by law – simply remain in place and are not affected by nullity.

How to prepare your company for the new regulations?

Prepare your company and administration for the Act’s coming into force. Creditors must inform debtors in writing of the assignment or pledging of claims (see the new Sections 3:94(5) and 3:239(5) of the Dutch Civil Code). This may result in additional administration.

Finally, but no less important: you will probably (perhaps against your will) have to deal more often with a party other than your trading partner/counterparty, because all commercial monetary claims can be freely assigned and/or pledged. This may have negative consequences for your settlement position with a permanent trading partner/your counterparty, because you are no longer each other’s mutual creditor and debtor (Section 6:127 of the Dutch Civil Code).

What can we do for your business?

We can help you amend your general terms and conditions and existing contracts in a timely manner, i.e. before 1 October 2025. In addition, we can advise on drafting new standard provisions for future trade relations.

Furthermore, we can help you in finding ways to mitigate the negative effects of the Act. This could include limiting the adverse consequences of having to deal with another party or pledgee with whom you have no trade relationship, which negatively affects your settlement position.

Questions? Contact us

Do you have any questions about how this Act will specifically affect your company with regard to contracts and general terms and conditions and what you can do to continue to protect your interests (which amendments in general terms and conditions and contracts must be made in any case and what are further options)? We would be happy to discuss with you what you need to do and which considerations are (or could be) relevant to your company.