On 6 October 2020, the Dutch Senate adopted the long-awaited legislative proposal for the Act providing for court confirmation of a private restructuring plan (Wet homologatie onderhands akkoord (“WHOA”)). The act introducing this 'Dutch scheme' will enter into force at the beginning of next year at the latest.
The WHOA meets the growing demand for a practical restructuring tool outside the formal insolvency procedure, by introducing a fast and efficient pre-insolvency procedure to restructure a company’s business through a scheme between the company and its creditors and/or shareholders. It is part of the reassessment of bankruptcy law in the Netherlands (Programma Herijking Faillissementsrecht) that aims to modernise Dutch insolvency law. This legislative overhaul, announced in 2012, features elements of the US Chapter 11 procedure and the UK scheme of arrangement. It also ties in with the preventive restructuring framework set out in the 2019 EU directive on insolvency, restructuring and second chance.
The key elements of the new restructuring tool are as follows:
- It is a debtor-in-possession process with limited involvement of the court.
- The initiator can choose between a public or an undisclosed proceeding, with their choice affecting international jurisdiction and recognition.
- As well as the debtor, creditors, shareholders, works council or trade union also have the right to initiate a plan. They will need to request the court to appoint a restructuring expert, who prepares the plan. The debtor can prepare a plan itself or request the court to appoint a restructuring expert.
- The tool has protective measures, such as a stay and new money protection, that enable the debtor to prepare a restructuring plan.
- Funding required during the restructuring process can be protected from avoidance actions.
- The plan can amend the rights of all or a subset of (secured or unsecured) creditors and/or shareholders .
- Creditors and shareholders whose rights are affected by the plan are entitled to vote in classes.
- The court can refuse confirmation based on its own motion or at the request of dissenting creditors on the basis of, for example, procedural grounds, the ‘best interest of creditors’ test and/or the ‘priority rule’.
- A court-confirmed plan is binding on all creditors and shareholders, including ‘out of the money’ classes, and creditors and shareholders who did not vote or who voted against the plan.
For further details of the WHOA, please see our summary briefing (PDF).