A dividend was paid and the company cannot meet its debts with a private equity sponsor on the cap table

# A dividend was paid and the company cannot meet its debts with a private equity sponsor on the cap table

You are at a fork between three routes: a negotiated return of the distribution agreed directly with the sponsor, a court-supervised restructuring under Dutch law, or a bankruptcy filing that hands the dividend and the board's conduct to a trustee. Waiting does not shift the exposure toward the sponsor. The sponsor's liability behind the portfolio company shield stays narrow unless it acted as a de facto director, while the board's exposure grows with every week the distribution is not addressed.

What happens if you do nothing

The company's liquidity gap does not close itself once a dividend has left the balance sheet. Creditors who are not paid on time can petition a Dutch court for bankruptcy, and once a bankruptcy is opened a trustee reviews every distribution made in the period before the filing as a matter of routine. A distribution paid while the board knew, or ought to have known, that the company could not continue to pay its debts as they fell due is the first thing a trustee tests. Inaction does not remove that test. It only moves the decision from the board to the trustee, and from a negotiated outcome to a litigated one.

The routes

Route	What it takes	Time	Cost driver	What it gives you
Negotiated repayment	A board resolution and the sponsor's agreement to return the distribution, in cash or by subordinating a shareholder loan in its place	Weeks	Negotiation and drafting time; no court fee	Closes the liquidity gap without a public procedure or a formal finding of wrongdoing
Court-supervised restructuring	A restructuring plan offered to affected creditors, with court confirmation sought if consent is not unanimous	Months	A court fee for the confirmation request, plus the cost of the restructuring expert where one is appointed	A binding plan that can bind dissenting creditors, including a sponsor loan that ranks behind trade creditors
Bankruptcy filing and trustee action	A petition by the company, a creditor, or the public prosecutor, followed by the trustee's own investigation into the dividend and the board's decision to pay it	The petition is usually decided within days; the trustee's investigation typically runs for months	A court fee for the petition; the trustee's own fee is paid from the estate, not by the board directly	A formal ruling on whether the dividend must be returned and who carries the shortfall

This is a question of corporate law and governance before it is a question of restructuring practice, because the first decision the board makes determines which of the three routes is still open.

What decides between them

The sponsor's willingness to negotiate is the single largest variable, and it is driven by reputational and fund-level considerations that sit outside Dutch law entirely. A sponsor managing several portfolio companies under the same fund has more to lose from a contested clawback than the amount at stake in this one company. Whether the underlying business is still viable matters almost as much: a restructuring plan is worth pursuing only where there is something left to restructure. Where creditors are already close to petitioning, the choice narrows fast, because a company cannot control the timing of a third-party bankruptcy petition once one is filed.

The size of the dividend relative to the current deficit, and whether the sponsor's control rights over an exit are already contested on other grounds, both push toward a formal procedure rather than a private conversation. A structure report mapping who actually holds each claim in the group, including any shareholder loan the sponsor extended alongside its equity, is the document that lets you make this choice on facts rather than assumption.

The deadline that runs

Under the applicable Dutch rules, the board must stop making distributions once it knows, or ought to know, that the company cannot continue to pay its due and payable debts. There is no fixed number of days to cure the position once that point is reached: delay itself becomes evidence against the board in a later claim, not a defence to one. Separately, the period during which a trustee or a creditor can reach back to unwind a completed distribution is time-limited under the applicable Dutch rules, and that limit is under active professional attention at present. Check the current position before assuming a distribution made some time ago is beyond reach, and do not treat silence from creditors so far as a sign that the window has closed.

Evidence to secure now

Assemble the board minutes recording the decision to distribute, together with whatever distributable-reserves and liquidity calculations were prepared at the time, not reconstructed afterward. A cash flow forecast dated to the decision, showing what the board believed about the company's ability to pay debts as they fell due, carries more weight than a forecast produced once the dispute has started. Keep the correspondence between the board and the sponsor around the distribution decision, including any pressure to distribute that came from the sponsor's side of the table. Set out the exact terms of any shareholder loan the sponsor holds alongside its equity, since its ranking affects every route above. Finally, pull the shareholders' agreement provisions on board composition: a sponsor with appointed board seats is judged differently from one with none.

Cost drivers

A court fee applies to both a bankruptcy petition and a scheme confirmation request; the current published tariff is not reproduced here and should be checked before filing. Beyond the fee itself, cost is driven by the number of creditors affected, the complexity of tracing the distribution through a multi-entity group, and whether service on a non-Dutch sponsor entity is needed. A negotiated repayment carries the lowest direct cost but the highest dependence on goodwill that may not be there. None of the figures involved are a specialist rate, and none should be reconstructed from one.

What we would do in the first week

Convene the board and record a formal resolution to halt any further distributions, dated and minuted, before anything else. Retain Dutch-qualified counsel of record to assess the clawback exposure on the specific numbers, rather than on the general position set out here. Notify the sponsor under the information rights in the shareholders' agreement, since a sponsor informed early behaves differently from one that learns of the problem from a trustee's letter. Commission a structure report to fix, on paper, exactly who holds what claim across the group and where the sponsor's loan ranks. Hold off on any further payment to any shareholder, including routine management fees to the sponsor, until the liquidity position is re-tested.

What this does not cover

• Enforcement of a Dutch judgment or clawback order against a sponsor entity incorporated outside the Netherlands.
• The tax treatment of a dividend that is later repaid or restructured.
• Personal criminal liability of individual directors, which follows a separate track from the civil clawback described here.
• Employment law consequences of a restructuring or bankruptcy for the company's staff.
• The position of a sponsor that also sits as a lender under a separate facility agreement with cross-default terms; that requires its own review.

Questions

Can the sponsor be forced to repay a dividend it received through a portfolio company structure?

The sponsor can be reached where it received the distribution directly or through an entity it controls, and a Dutch court can order its return where the payment left the company unable to meet its debts. Reaching a sponsor holding through a foreign fund vehicle is a separate, cross-border question and is not covered by the routes described above.

Does giving the sponsor board seats under the shareholders' agreement change director liability exposure?

It can. A sponsor nominee who sits on the board and takes part in the distribution decision is exposed on the same basis as any other director under Dutch law, rather than shielded by its status as a shareholder. A sponsor with observer rights only, and no vote on the distribution, is judged differently.

What happens to the dividend if the company enters bankruptcy after it has been paid?

The trustee reviews the distribution as part of the standard investigation into the company's affairs before a Dutch court, and can bring a claim to have it returned if the statutory conditions are met. Whether that claim succeeds turns on what the board knew at the time it approved the payment, not on what happened afterward.

Who wrote this

Sanne de Wit, structures, holding and tax. This note covers the routes open once a distribution has already been paid and the company's liquidity has turned; it does not cover the structuring decision that led to the distribution in the first place.

A structure report showing the current cap table, the ranking of every shareholder loan and the group's distribution history is described on the structure report page. For the related question of what a director's own exposure costs to defend, see the costs and fees of a wrongful-act liability claim against a director. Where the dispute instead concerns a VAT position on an earlier exit from the same group, see VAT recovered on a share sale and then challenged. The wider service this sits under is described on the holding formation page.

If you want a written route recommendation rather than the general fork above, the next step is a route note addressed to your facts. For a related governance conflict with the same sponsor on the cap table, see a drag-along triggered with the minority resisting. A director and officer structure report for a related jurisdiction is described at directors and officers, Ireland.

Last legal review: 2026-10-01