Legal 4 June, 2024

Bankruptcy, moratorium, or relaunch anyway?  

accounting
Crowe Peak/ Knowledge Hub/ Legal/

Bankruptcy, moratorium, or relaunch anyway?  

Facts, advice, and roadmaps in the world of Dutch insolvency

When terms like “bankruptcy,” “insolvency,” “moratorium,” or “relaunch” come to mind, business is often no longer simple. Questions about your organization, or the organization of your business partner, creditor, debtor, or competitors, what to do next and how to best strengthen your own position are commonplace. Therefore, you can often use a good guide. Especially in a foreign landscape like the Netherlands. Crowe Peak stands beside you and is happy to give advice to parties facing difficulties with bankrupt business partners. Feel free to contact us for an introduction to Dutch insolvency law. Until that introduction takes place, we are happy to help you with the article below. Here you will read all about insolvency and bankruptcy and all the terms involved. We guide you through the Dutch ranking of creditors, through the powers of the bankruptcy trustee and introduce you to the Dutch law named “WHOA.” Click on the table of contents on the left to move directly to a specific topic or read this article in its entirety for a comprehensive introduction to Dutch bankruptcy law.  

Insolvency in the Netherlands

What is insolvency?

First, what exactly is insolvency? Insolvency means that a company or individual is unable to meet its/their financial obligations. It is a situation in which debt exceeds available assets, so the debtor is unable to pay its/their creditors (in full). Insolvency can have several causes. For example, lack of cash flow, (too) high debts, poor management or adverse effects of a down economy. 

Consequences of insolvency   

When a company (or a natural person – this article focuses primarily on insolvency and bankruptcy of legal entities in the Netherlands) becomes insolvent, it can take several steps to restore its financial position. This can include restructuring debts, selling assets, or entering into an agreement with creditors to facilitate payment arrangements. However, there are also cases where insolvency leads to bankruptcy. Here, a company will (in many cases) be liquidated and the proceeds of that liquidation will be used to pay (joint) creditors. The latter is usually not the best solution for any of the parties involved: It often yields the least for the creditors. Therefore, it makes sense to think carefully about whether there are no other options. You can read more about the legal implications of bankruptcy in the Netherlands in the sections that follow.   

Insolvency (and subsequent bankruptcy) is a subject where many issues come together: Not only is financial knowledge indispensable, but the parties involved often enlist the help of experts such as lawyers, tax specialists and other advisors. On the one hand, this adds complexity to the situation, but on the other hand, it can often limit or even prevent potentially negative consequences of insolvency. Would you like to be prepared to do the right thing in a (looming) situation of insolvency for your organization? Crowe Peak will gladly assist you.  

Suspension of payments/moratorium

Bankruptcy and suspension of payments/moratorium in the Netherlands  

As mentioned, insolvency can eventually lead to the legal consequence of “bankruptcy.” Under Dutch law bankruptcy (faillissement) occurs when an insolvent company can no longer meet its payments and is therefore subjected to a general attachment by the court at the request of itself or a third party. In such a situation, the assets of the company in question are liquidated to pay creditors. This is done by a bankruptcy trustee (curator) who manages the bankrupt entity’s estate and has the legal duty to fairly distribute the proceeds of the bankruptcy among the creditors.  

Bankruptcy is not the only possible legal state a company can be in when facing insolvency. Another option is the so-called “suspension of payments” of “moratorium” (surseance van betaling). In a moratorium, final settlement of the company is not a goal. Rather, it is a situation in which an insolvent company is given temporary protection from its creditors. The company remains operational and is placed under the supervision of an administrator (bewindvoerder). This administrator assesses the company’s financial situation and draws up a restructuring plan to get the company back on track.   

During the moratorium period, the payment obligations of the entity in question are frozen, so to speak. This means that creditors cannot take legal action to enforce their claims during this period. The purpose of suspension of payments is thus to give the company a chance to recover and make payment arrangements with creditors. Therefore, the reputation that suspension of payments sometimes has in the Netherlands as the “vestibule of bankruptcy” is not always justified. In many situations, it can truly provide solutions during a tense period. Especially when the insolvency that created it has no reason for a structural nature. Need advice during a period of insolvency or advice on suspension of payments? Our lawyers specialize in insolvency law. Click here for contact details.   

The moratorium/suspension of payments in the Netherlands: the application  

Under Dutch law, applying for suspension of payments is an official legal procedure that starts with a request to the court in the district where the applicant (the company concerned) is located. This request must:  

  • Be filed by an attorney.  
  • When the party applying for suspension of payments is a BV or an NV, be countersigned by a director.  
  • include a detailed explanation of the financial difficulties the company in question is facing and include the reasons why this would lead to a situation where suspension of payments would be necessary.  

The company must also demonstrate in this petition that it does have core viability and therefore could be successfully restructured.   

When the court grants the request, it will also immediately proceed to appoint an (independent) administrator. This administrator will guide the company granted a moratorium during the moratorium period and supervise its financial management. He/she will do this by, among other things, examining the company, negotiating with creditors, and drawing up a restructuring plan. A preference for a particular administrator may be specified in the petition requesting suspension of payments. However, the court does not have to consider this. Good to know about the procedure for application for suspension of payments is also that if a petition for suspension of payments runs concurrently with one or more applications for bankruptcy of the same company (such applications can also be made by creditors, for example), the court will always decide on the suspension of payments first.   

Suspension of payments/a moratorium: a big step  

With the arrival of an administrator, you are handing over a lot as a company. Therefore, the very step of applying for a suspension of payments requires careful consideration. Once you are officially in suspension of payments, you will have to take advice and will no longer be able to decide everything yourself. This makes it a good option for many insolvent companies, but one that you do not approach lightly. It is therefore essential to seek legal advice and professional guidance (leading up to) an application. This not only ensures that you do not apply for a moratorium unnecessarily, but also that, as an entrepreneur or manager, you keep a grip on the process. Want to know more about what Crowe Peak can offer in this regard, also, for creditors of entrepreneurs who are in moratorium? Get in touch.  

The moratorium/suspension of payments in the Netherlands 

So, as touched on above, in the Netherlands, a company in suspension of payments follows a structured process to get its business back on track financially. After the court granted a moratorium, the restructuring process begins under the appointed administrator’s supervision. This administrator assesses the company’s financial situation and works closely with management to create a restructuring plan.   

Such a restructuring plan often includes a package of measures addressing one or more of the following issues:  

  • Cost reduction.  
  • Renegotiation of contracts.  
  • Selling assets.  
  • Restructuring debts.   
  • Reorganizing the corporate structure.  
  • Reorganizing the workforce; and  
  • Divesting loss-generating industries.  

The purpose of such measures is to restore the company to financial health.   

A moratorium period generally lasts up to a year and a half. The company in question remains operational during that period. It also retains control of its operations for the most part. The management remains responsible for day-to-day operations but carries out this authority under the supervision/advice of the administrator. Questions about this division of roles? Ask our specialists.   

The moratorium: the end of the road   

How a moratorium process ends depends on the specific situation. There are three realistic scenarios:  

  1. Approval of restructuring plan: During the moratorium period, the administrator and management work together on a restructuring plan. When this is approved by the creditors and the court, the moratorium can end, and the company can continue its operations according to the restructuring plan and the agreed payment schedule with the creditors.  
  1. Termination by the court: When (for example) there are serious violations of the conditions for suspension of payments, the court that granted the suspension of payments can decide to terminate the suspension of payments. In many cases, this leads to immediate bankruptcy of the company.   
  1. Bankruptcy: When there is termination of moratorium by the court, when a restructuring plan cannot be implemented or is not complied with, or when other problems arise, a suspension of payments can be converted into bankruptcy. You can read more about the implications of bankruptcy of legal entities below.   

Bankruptcy in Dutch civil law: the application   

Like suspension of payments, bankruptcy in Dutch law is a formal legal proceeding initiated in a court when a company is (or appears to be) no longer able to meet its financial obligations. The filing of a bankruptcy petition can be done by the company itself or by one or more creditors of the company. Note: in exceptional cases, a petition may also be filed by the Public Prosecutor’s Office (Openbaar Ministerie), or bankruptcy may be declared on the court’s own initiative.   

To file for bankruptcy, as with suspension of payments, a petition must be filed with the court. This must be done by an attorney. The petition in question contains a description of the company’s (known) financial situation. That is, at least two outstanding debts are required to reach a ruling of bankruptcy.   

A judge will declare bankruptcy when they have determined the issues from the step-by-step plan below. When declaring bankruptcy, this judge will also immediately appoint a bankruptcy trustee. Parties involved in the adjudication of bankruptcy (that is, the creditors and the party to be declared bankrupt) can indicate a preference for a specific trustee during the bankruptcy hearing. The court need not consider these preferences.   

The trustee appointed to administer and liquidate the bankruptcy estate (faillissementsboedel) has the task of bringing about a fair and orderly resolution of the bankruptcy. They must do this for the benefit of the joint creditors. More on this below. 

The bankruptcy: the adjudication  

The judge who must decide on the bankruptcy petition mentioned above cannot do so based on what seems reasonable to them or based on the vision of the future that they personally have. On the contrary, they are bound by very strict conditions under which they can or cannot pronounce bankruptcy of the legal entity (or a natural person, but we will not go into that in this article). The criteria against which the bankruptcy judge must review the application are set forth in the Dutch Bankruptcy Code (faillissementswet). These add up to whether the legal entity in question:  

  1. Has at least two creditors; and   
  1. Has ceased to pay.  

Whether the answer to this question is “yes” is determined, simply put, by the following:  

  • The default criterion: the court can declare bankruptcy only if the company in question is in default of payment of a debt (already) due.  
  • Multiple creditors: the bankruptcy petition must show that there are multiple creditors who have claims against the debtor (this need not involve default on every claim). A single claim is generally not sufficient to trigger bankruptcy.  
  • Ceased to pay it must be clear that the party concerned has ceased to pay. This means that he is no longer able to pay his debts and that it is plausible that he will not (be able to) continue his payments.   
  • The facts and circumstances: the court must be able to determine, based on the facts and circumstances presented, that the criteria for declaring bankruptcy have been met. To illustrate these facts and circumstances, the parties can introduce financial reports, statements, and bank statements, among other things.   

The bankruptcy orders (faillissementsbeschikking)  

A judge makes the bankruptcy ruling in what is known as an order (beschikking). Such an order roughly consists of the following parts:  

  1. The declaration of bankruptcy: with this, the court declares the debtor in question bankrupt. This officially establishes that it is no longer able to meet its financial obligations. This ruling results in a general attachment of all assets and all income of the debtor/bankrupt party. Read more about the effects of bankruptcy below.  
  1. A decision regarding the appointment of the bankruptcy trustee: the court, in its order, appoints a trustee who becomes responsible for managing the estate and resolving the bankruptcy.   
  1. Publication: the order will state how and where the bankruptcy will be publicly announced.  
  1. Information about the verification meeting (verificatievergadering): in uncomplicated cases, the judgment recording the bankruptcy also sometimes immediately sets a date for a verification meeting. Before this meeting, creditors can submit their claims to a trustee and then the order of payment is determined after a court decision.   

Effects of bankruptcy on the bankrupt entity  

Bankruptcy is an event that has consequences for a lot of parties around the bankrupt entity/person. There are consequences for the bank and other financiers, for any employees of a company, for tenants and landlords of real estate involved, for (business) partners and suppliers. However, bankruptcy often has the most far-reaching consequences for the bankrupt (legal) person. As mentioned above, in this blog we limit ourselves to the bankruptcy of legal entities. The consequences for natural persons are therefore not considered. These are the main things that change for a legal entity when its bankruptcy is declared in the Netherlands:  

  1. The general attachment: pronouncement of bankruptcy results in a general attachment of all assets and income (sources) of the bankrupt entity in question with immediate effect. This means not only that it may no longer freely dispose of these resources (e.g., money, receivables, inventory, stock, rent payments), but also that it may no longer enter any obligation with respect to its assets. In short, with the general attachment, the bankrupt entity loses control over the company and over the resources serving that company. Incidentally, the general attachment also ensures that no new prejudgment or foreclosure attachments can be placed on the entity’s assets, and existing attachments expire.   
  1. Loss of authority and control: the above implies that the bankrupt entity or its board no longer has authority and control over the company. The bankruptcy trustee takes over the company, so to speak. This also means that the trustee, if that seems to them to be in the interest of the joint creditors, can also continue the business (partially).   
  1. Termination of ongoing contracts: bankruptcy can lead to termination of contracts. This is because in the Netherlands, creditors have the right to terminate their contracts with bankrupt parties.   

Bankruptcy trustee

Bankruptcy and the trustee  

Being a bankruptcy trustee: a complicated task  

One of the most important key figures in a bankruptcy, if it is clear from the above, is the bankruptcy trustee. Because the way in which the trustee fulfills their role, i.e., manages the bankruptcy estate, is crucial to the way the bankruptcy is handled, their duties are minutely defined in laws and regulations and in Dutch case law. Proceedings in Dutch courts regularly revolve around bankruptcy trustees because they bring a lot of proceedings and get quite a lot of proceedings directed against them. What a receiver can and cannot do and what they can and cannot do vis-à-vis the bankrupt and their creditors is therefore strongly governed by case law. It is therefore a subject that is extensively studied by legal experts.  

Settlement of bankruptcy for the benefit of the joint creditors  

In general, it can be said that the bankruptcy trustee has a legal duty to ensure the orderly and fair resolution of the bankruptcy, looking after the interests of all parties involved. In doing so, they must expressly consider the order of creditors, as will be discussed further below. In connection with this duty, the bankruptcy trustee has at least (but not exhaustively) the following duties:  

  1. Management and realization of the estate: One of the main tasks of the bankruptcy trustee is to manage and realize the estate of the bankrupt entity. This includes listing and securing (through legal proceedings or otherwise) the assets, assessing their value and selling or liquidating them as efficiently as possible. The proceeds of these actions are used to repay creditors (see below) as much as possible.  
  1. Investigating the causes of bankruptcy: A trustee has an obligation to investigate the causes of bankruptcy. This investigation includes analyzing the financial records and assessing the actions of directors (in connection with directors’ liability, among other things).   
  1. Safeguarding the interests of creditors: A bankruptcy trustee must safeguard the interests of creditors (note, all creditors: there is an order of distribution of funds, but not an order of importance) to the best of their ability. This means that they must identify which creditors there are, assess what claims they have against the bankrupt entity and distribute the available resources among them in an equitable manner (that is, based on the order established by Dutch law). In this regard, the trustee is also in charge of communication with creditors and providing information on the bankruptcy’s progress.   
  1. Reporting and accountability: Under Dutch Law, a bankruptcy trustee has a legal duty to report on the progress of the bankruptcy and the work carried out. This report must meet the legal requirements for this purpose and must be filed with the court. It is useful to know that bankruptcy reports are public. They can be accessed through the Bankruptcy Register (faillissementsregister).This is especially useful, for example, for creditors in large bankruptcies who want to keep an eye on whether there is still a chance that they will ever get their (unsecured) claim satisfied.   

The bankruptcy trustee and their practical duties  

As part of carrying out the legal duties, a bankruptcy trustee may also take practical measures to settle the bankruptcy as well/efficiently as possible. For example, they can do this by organizing auctions or sales, conducting negotiations with creditors, or deciding to continue business activities during bankruptcy. In principle, a trustee is reasonably free to decide how and when to set these types of actions in motion. However, they should always consider their legal duties (see above) and their goal in doing so. If they fail to do so, litigation can be brought against a bankruptcy trustee (sometimes successfully).   

Creditors

Bankruptcy and the creditors  

Of course, the key question after a bankruptcy is declared is: who gets what? And who is likely to draw the short straw? The answer to those questions requires an exceedingly difficult puzzle to be laid by the bankruptcy trustee. To do so, the bankruptcy trustee uses the Dutch law as a guide. In fact, the Dutch Bankruptcy Act describes in detail which category of creditor is entitled to compensation in which phase of the bankruptcy process. Below is a summary of the position of diverse types of creditors in bankruptcy. Do you have more detailed questions about this? Or do you think your organization’s position as a creditor in bankruptcy should be made clear to a trustee in clear legal language? Our lawyers will gladly provide you with a helping hand. Describe your situation here and we will contact you.   

The “boedelcrediteuren”  

Most certain of satisfaction of their outstanding or pending claims against a bankrupt entity are the so-called “boedelcrediteuren.”  These creditors have claims against the bankruptcy estate arising from actions taken after the bankruptcy was declared. Consider, for example, the costs of the bankruptcy trustee. Creditors who are considered boedelcrediteuren – because they thus incur costs that serve the settlement of the bankruptcy – have priority over other creditors and are paid first from the proceeds of the bankruptcy estate.   

Preferential creditors: UWV, Tax Authorities and some employees  

Other creditors who enjoy a special position in bankruptcy are the “preferential creditors” (preferente schuldeisers). These have a priority position over “ordinary creditors” (concurrente schuldeisers) based on the law. Note that preferential creditors do join only after estate creditors (see above). Examples of preferential creditors under Dutch law are the Dutch Tax Authorities (Belastingdienst) and the Employed Person’s Insurance Administration Agency (UWV). The reason for their preference is that their claims consist of public money.   

The separatists: banks and other security holders  

One group that does not have priority by law yet cannot be mentioned in the same breath as “ordinary” (unsecured) creditors, is the group of the so-called “separatists” (separatisten). Separatists are creditors who have a specific right to a particular asset that is part of the bankruptcy estate. This could include a party who holds a lien (recht van beslag) on a specific asset or a party who holds a right of mortgage (hypotheekrecht) on real estate owned by the bankrupt. Separatists have the right to recover their claim on the property in question outside the bankruptcy estate. They are then satisfied with the proceeds of the property to which they are entitled.   

The unsecured/ordinary creditors (concurrent schuldeisers)

In most bankruptcies, the ordinary/unsecured creditors constitute the largest group of creditors. These are the “regular” creditors who do not hold collateral and do not enjoy legal priority over other creditors. The claims of unsecured creditors are not satisfied until the “boedelcrediteuren,” and preferential creditors have been satisfied and/or something remains from the proceeds of the execution of the goods on which a separatist had a security interest. The distribution of bankruptcy proceeds among unsecured creditors takes place in proportion to their claims.   

Ranking of creditors remains subject to debate   

The above description of the ranking of creditors only provides a general impression of the place of the various creditors in Dutch bankruptcy law. Indeed, the reality the ranking of the creditors is often disputed, and bankruptcy trustees are often in discussions with separatists and/or the Dutch Tax Authorities. The position of tenants and employees of the bankrupt company is also often an exciting one in Dutch bankruptcy law. In this regard, it is always advisable to seek legal advice on the position of your company in the bankruptcy of an affiliated party. Do you want to plan an informal discussion? Get in touch.   

The verification meeting in the Netherlands  

The above makes it clear that for a bankruptcy trustee in the Netherlands – to achieve a correct distribution of funds from the bankruptcy estate – it is of enormous importance to have all claims and the position of all parties involved clear. In this regard, the concept of a “meeting of creditors” (verificatievergadering) was created. In such a meeting, creditors in a bankruptcy meet to have their claims “verified” and assessed. This means that parties first submit claims to the bankruptcy trustee, who then presents them to the meeting, at which the creditors can verify them and submit any objections (which sometimes leads to so-called “renvoi proceedings” in court). Questions can also be put to the bankruptcy trustee at this meeting. After the verification meeting, the court – based on a report from the trustee – decides on the verification of claims. This determines which creditors are recognized and entitled (subject to the above ranking) to a payment from the bankruptcy estate.   

It is worth noting that in much more complex bankruptcies, or in bankruptcies in which it is not clear for a long time whether there will be sufficient proceeds to satisfy (several) creditors, a meeting of creditors may take a long time. The trustee can provide more information about this.  

Bankruptcy and directors’ liability

One of the powers that a trustee in bankruptcy has, or is in fact obliged to carry out, is to hold directors of a bankrupt legal entity liable when there is cause to do so. The reason they are legally obliged to do this is that the trustee is obliged to do everything in their power to keep the bankruptcy estate as high as possible so that as much as possible can be distributed to the joint creditors. This includes that the trustee litigates against parties from whom the legal entity/the estate of the bankrupt legal entity still receives money. These may be its directors, if there is a suspicion that they have acted in such a way that they are liable for damages suffered by the bankrupt legal entity.  

Directors of legal entities can be held liable in many ways for damages that “their” legal entity suffers or that third parties suffer due to their (faulty) management. In a bankruptcy situation, special circumstances apply for directors’ liability and therefore also specific requirements. To establish directors’ liability (and thus in many cases also the obligation to pay compensation to the estate), it must first be established that there has been improper management (onbehoorlijk bestuur) by the entire board or an individual director. This means that the board/director did not perform their/their duties properly, for example by acting recklessly, not keeping proper records, or not filing the annual accounts on time.   

Second, there must be causality (causaal verband) between the improper management and the creation or aggravation of the company’s debts. In other words, improper management must have contributed to/a major cause of the bankruptcy of the company concerned. Finally, culpability (verwijtbaarheid) is important. This means that each director in question must be reproachable for mismanagement. Among other things, the seriousness and extent of the reproach and the personal circumstances (including knowledge of business) of the director in question are considered.  

Failure to comply with the accounting obligation and the failure to (timely) file the annual accounts are, according to the law, considered cases of improper management by the board, and it is presumed that improper fulfillment is a significant cause of the bankruptcy. Against this legal presumption, the director has the opportunity to provide counter-evidence to exonerate themselves. If they fail, the director is personally liable for the shortfall in the estate. 

Additionally, the failure to timely report payment inability to the tax authorities and the pension fund (if applicable) also leads to personal liability for the directors. 

As mentioned above, under Dutch law, directors’ liability is a complex legal issue, especially in bankruptcy situations. When this is (potentially) the case, legal advice is certainly not an unnecessary luxury. Our specialist lawyers will be happy to assist you.  

Personnel in bankruptcy and restart 

In the event of bankruptcy, the trustee will assess early on whether and which employees they want to retain to keep the business of the bankrupt entity running for some time, to increase the chances of a restart, and which employees should be dismissed as soon as possible. The trustee does not need a dismissal permit but must consider the applicable notice period as stipulated in the employment contract, the collective labor agreement, or the law. However, in bankruptcy, the notice period is limited to a maximum of 6 weeks in all cases. 

For employees who have not received their wages, the UWV (Employee Insurance Agency) takes over the wage payment obligation. However, this ‘wage guarantee scheme’ is limited. Arrears in wages up to three months before the bankruptcy date and a maximum of six weeks thereafter are paid by the UWV to the employees. However, in the case of dismissal due to bankruptcy, employees are not entitled to a transition compensation. 

Because the UWV takes over the wage obligation of the bankrupt entity, the UWV becomes a preferential creditor towards the estate. 

Bankruptcy generally means a swift end to the employment contract. However, if a ‘restart’ (sale of the company’s assets to a third party with the aim of continuing business activities in a reduced form) was already being worked on in the run-up to bankruptcy, this may under certain circumstances lead to employees being entitled to continuation of their employment with the acquiring party. The Supreme Court has already ruled in several cases that employment contracts with employees, despite the bankruptcy, have automatically transferred to the acquiring party. The legislator is currently working on an amendment to the law to strengthen the rights of employees in the event of a restart from bankruptcy. If, as an entrepreneur, you can acquire assets from another bankrupt company, have it legally assessed whether there are (unforeseen and undesirable) employees who can claim continuation of their employment with the acquiring party, and prevent adverse surprises. 

The end of bankruptcy

How long the resolution of bankruptcy takes is a question that can be answered in countless ways. The Netherlands’ most complex bankruptcies sometimes last more than a decade to conclude, due to litigation on every possible point by the bankruptcy trustee and other parties involved, while other bankruptcies are concluded within weeks. The following is an overview of the several ways in which a (Dutch law) bankruptcy can end:  

  1. Revocation: in some cases, bankruptcy can be revoked. This is the case, for example, when new facts become known that show that the bankruptcy was wrongly declared.   
  1. Dissolution for lack of assets: when the trustee concludes that there are insufficient assets in the bankruptcy estate to meet the bankruptcy costs and debts, they can petition the court for dissolution for lack of assets. The court can then terminate the bankruptcy. In practice, this will often mean that the creditors stay empty handed. After the bankruptcy is terminated, their claims expire.  
  1. Termination after satisfaction of creditors: in a better scenario for the creditors, if all creditors are fully satisfied, the trustee can petition the court to terminate the bankruptcy. In practice, it is not common that all creditors can be fully satisfied.   
  1. Restructuring or relaunch: during bankruptcy, a trustee may also investigate whether a so-called “relaunch” (doorstart) of a business is possible. In such a situation, often parts of the company’s assets are sold, and part of the company continues, whether under the direction of a new owner or executive. To make this easier, new laws have been introduced in several areas in recent decades. You can read more about this below.  
  1. Agreement with creditors: a bankrupt party – through its bankruptcy trustee – can propose an agreement to its creditors proposing to repay (part of) its debts or to change payment terms. If the agreement is accepted by most of the creditors and is acknowledged (gehomologeerd) by the court, the bankruptcy can end. The agreement in question is called a “homologation agreement” (homologatieakkoord). This is explained in more detail below.   

Note: in the case of a natural person’s bankruptcy, the bankruptcy may also end by an adjudication of a request for admission to the debt restructuring scheme for natural persons (schuldsanering voor natuurlijke personen).   

WHOA

Opportunities for relaunch/restart outside of bankruptcy: the WHOA offers perspective

A bankruptcy does not always have to end in complete misery, as Dutch law also offers several opportunities for bankrupts to restart/relaunch – under the guidance of the trustee and after the consent of the creditors. A restart/relaunch allows a company to be revived and continue its activities despite a previous bankruptcy. Before the year 2021, opportunities for restarts depended mainly on finding a third party willing to buy the bankrupt estate.  

With the introduction of the WHOA (Wet homologatie onderhands akkoord), which is a law that caters for broader options in the terms of private arrangements between the bankrupt party and its creditors, new tools and opportunities have emerged for a relaunch.   

The main goals of the WHOA are (i) to promote successful restarts and (ii) to prevent bankruptcies. This law introduced the concept of a “compulsory agreement prior to bankruptcy” (dwangakkoord buiten faillissement) in 2021. This allows creditors and shareholders to save a company from bankruptcy. However, the most important aspect of the WHOA is the possibility of reaching a homologation agreement (homologatieakkoord) with only a qualified majority of creditors. Before WHOA came into force, a creditors’ agreement or restructuring often required unanimous consent of creditors, which made it difficult to reach an agreement. The WHOA has ensured that creditors who do not consent to the agreement can still be bound by agreements made therein, provided the court approves (“homologates”) the agreement. Thus, the WHOA provides greater flexibility in bankruptcy situations and increases the likelihood of success for a relaunch.   

The bankruptcy register

The above shows that although bankruptcy law in the Netherlands is tightly structured, each bankruptcy is likely to turn out differently in practice. This is related to the number of creditors and the size of the bankrupt organization, but also to the possibilities a bankruptcy trustee will see to litigate against, for example, directors or potential creditors. Also, the extent to which (major) creditors are willing to extend a helping hand to the bankrupt and the extent to which creditors have an interest in a particular settlement of the bankruptcy will be important aspects to consider. As already stated, bankruptcy certainly does not only affect those involved in the bankrupt organization, but also its creditors and business partners who are not (or no longer) creditors.   

In connection with the latter, you may suspect that a party you trade with, cooperate with, or otherwise interact with is bankrupt. However, you do not always need to know this. If you are not a (potential) creditor, the bankruptcy trustee will not write to you individually. It would also be impractical for a trustee to do his job if one of his day-to-day tasks was to make sure that everyone knew about the bankruptcy.   

However, it is important for a functioning economy that companies and individuals know which parties are bankrupt. For this reason, in the Netherlands, the bankruptcy register exists. This register is an official (government-controlled) register in which information is kept about bankruptcies of natural and legal persons. It contains information such as the name of the bankrupt entity/person, the date of the bankruptcy, the appointed bankruptcy trustee, and the court by which the bankruptcy was declared. The bankruptcy register is publicly accessible and can be accessed online through the website of the Dutch Judiciary.   

It is worth noting here that you cannot see in this registry whether someone is “almost” bankrupt, or whether a petition for bankruptcy is pending before the court. The Dutch bankruptcy registry only shows information about bankruptcies that have been adjudicated. However, information about pending proceedings can be obtained from the court where a bankruptcy is to be filed, from other (suspected) creditors of the party in question, or from the party itself. If you need help with this, our specialists will be happy to assist.   

Other questions about insolvency and bankruptcy: Crowe Peak  

Crowe Peak’s legal, tax and financial experts are well experienced in the world of financial management, insolvency, bankruptcy law, restructuring and business closure. They can provide you and your company with broad advice when it comes to tax, legal and financial issues. Whether those questions are about your own organization, or about a party you do business with. Fill out the contact form here.  

 

Crowe peak

Curious to see what we can do for your organization?

Let’s meet!

Make appointment