[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN THE NETHERLANDS] 65
KEY FACTS OF BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS UNDER DUTCH LAW
I. Insolvency proceedings in The Netherlands There are four law-regulated insolvency proceedings in The Netherlands: bankruptcy ( faillissement ), suspensions of payment ( surseance van betaling ), debt adjustment for natural persons ( schuldsanering natuurlijke personen) and the confirmation of private plans ( homologatie onderhands akkoord (WHOA)) . Since the scope of this paper focusses on corporate entities, the debt adjustment for natural persons will not be discussed here. Where a bankruptcy is generally described as a liquidation of the debtor’s assets , a suspension of payments is – or at least theoretically – designed for the continuation of the activities of the corporation after a period of moratorium. In theory, the suspension of payment should be ended after restructuring, after which the debtor can commence his business as usual. In practice a suspension of payments often ends in a bankruptcy after which reorganization will proceed in bankruptcy. The reason for this lies with the absence of certain restructuring rules regarding employees (especially with regard to the transfer of a going concern business) in bankruptcy. Obviously, it should be noted that under Dutch law pursuing a bankruptcy with the sole object to get rid of employees, results in abuse of (bankruptcy) law. Both bankruptcy and suspension of payment are proceedings in which the debtor loses its power of disposition and capacity in relation to its assets. Contrary to a bankruptcy procedure or a suspension of payment, the WHOA, also known as the Dutch Scheme , is a debtor in possession- procedure. It resembles the American Chapter 11-procedure and the UK Scheme. In recent years, we have seen an increase in the use of the WHOA procedure in international restructurings.
The WHOA is a pre-insolvency procedure and allows a debtor to restructure its debts and/or costs outside of the above-mentioned formal insolvency procedures and prevent such procedures (and the destruction of capital that comes with it). The WHOA is a fast and informal procedure meant for companies that are in core profitable but have come into dire straits due to issues of over indebtedness and/or recurring costs. Those companies are enabled by means of debt- and/or cost restructuring to enforce a private plan on their creditors and/or shareholders to prevent the loss in value that occurs in bankruptcy. The WHOA is quick, flexible, and free of form. It is a debtor-in-possession procedure and has minimum judicial involvement. A WHOA-plan can be enforced on dissenting creditors or shareholders (cram down). Consent of the debtor is required in the case of a small or medium enterprise debtor. Both bankruptcy, suspension of payments and the WHOA are opened by a district court. Bankruptcy can be filed either by the debtor itself or requested by a creditor. Suspension of payments can only be filed by the debtor. A WHOA-procedure can be filed by the debtor, a creditor, a shareholder, the debtor’s work council or the debtor’s workplace representation.
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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