Short Reads

The Dutch scheme – when can it be used, and by whom?

The Dutch scheme – when can it be used, and by whom?

The Dutch scheme – when can it be used, and by whom?

11.03.2020 NL law

As mentioned in our earlier blog, the Dutch legislator has prepared a bill – the Act on confirmation of private restructuring plans (Wet homologatie onderhands akkoord) – which introduces a framework allowing debtors to restructure their debts outside formal insolvency proceedings (the “Dutch Scheme“).

In our previous blog, we summarised the Dutch Scheme and explained that either (i) the debtor or (ii) any of its creditors, shareholders or employee representatives (the "creditors et al") may take the initiative for the Dutch Scheme.

In this blog, we further discuss when the scheme can be used, and go into greater detail concerning by whom.

When can the scheme be used?

  • A debtor is entitled to propose a restructuring plan to his creditors or shareholders when the debtor is in a situation whereby it can be reasonably expected that he will not be able to continue paying his debts.
  • In summary, this means that the debtor has sufficient liquidity to meet his short-term obligations, but reasonably expects that without a restructuring of the debt, the debtor will not be able to prevent a future insolvency.
  • An example is the situation in which the debtor foresees that he will not be able to repay or refinance a loan that will become due and payable within six months or a year, and foresees that such a failure would result in bankruptcy.
  • Similarly, when the creditors et al take the initiative for a restructuring plan, the debtor has to be in a situation that it can be reasonably expected that he will not be able to continue paying his debts. It may or may not be difficult for the creditors et al to substantiate this. The court can appoint an expert to investigate whether the debtor is in such a situation.
  • The debtor is not entitled to propose a restructuring if a previous attempt to arrange a Dutch Scheme has failed in the past three years. Such previous failure does not limit the ability of creditors et al to request the appointment of a restructuring expert.

Who can take the initiative and what actions are required?

  • First, the debtor can take the initiative. If the debtor takes the initiative, the Dutch scheme will formally start when (i) the debtor files a declaration with the competent court, declaring that he has started preparing a restructuring plan or (ii) the debtor requests the court to appoint a restructuring expert.
  • The filing of the declaration does not immediately result in court involvement. The purpose of the declaration is that once the declaration is filed, the debtor can request certain measures from the court. For example, (i) authorisation to obtain financing (ii) allowing a cooling-off period, or (iii) other measures protecting the interests of the creditors and shareholders.
  • The debtor does not require shareholder consent for a restructuring plan under the Dutch Scheme. This measure aims to prevent that the management board is unable to initiate the restructuring process in the event that the shareholders oppose such a plan.
  • Second, the creditors et al may take the initiative for the Dutch Scheme. They cannot propose a plan themselves; they must file a request with the competent court to appoint a restructuring expert. The court will subsequently hear the requesting party, as well as the debtor.
  • The court will in principle grant the request if the creditors et al, or the court-appointed expert, demonstrate that the debtor is in a situation whereby it can be reasonably expected that he will not be able to continue paying his debts.
  • An exemption applies in case it appears that appointing a restructuring expert would not serve the interests of the joint creditors.
  • An example of this exemption is the situation when the application is submitted by a creditor, who apparently does so in order to frustrate or delay an ongoing restructuring process, aiming to create a better bargaining position for himself, while the joint creditors are disadvantaged by such ‘strategic’ behavior and the associated delay.
  • In case the creditors et al request for the appointment of a restructuring expert while the debtor has already taken the initiative for a Dutch Scheme, the court will balance the costs and delay involved with the appointment of a restructuring expert against the direct or indirect benefit for the joint creditors stemming from the appointment. The court must grant a request for the appointment of a restructuring expert if the request is submitted by the debtor himself, or is supported by the majority of creditors.

In our next blog, we will discuss the high degree of flexibility offered by the Dutch Scheme.

Team

Related news

02.04.2020 NL law
Stibbe in Amsterdam answers questions from consumers, small business foundations and NGOs about the coronavirus

Inside Stibbe - In a special Q&A (in Dutch), lawyers from our Amsterdam office share their legal expertise and strive to provide answers to questions put to us by consumers, self-employed persons, enterprises large and small, foundations and NGOs as a result of the corona crisis.

Read more

25.03.2020 NL law
Key considerations for management and owners of Dutch privately held companies in distress due to COVID-19

Short Reads - The COVID-19 pandemic has a significant and immediate adverse effect on many companies in different industries. Many PE portfolio companies are particularly vulnerable given the typical high leverage finance structure and inherent need to maintain cash flow. To meet these challenges and mitigate liability risks, management and owners may need to take clear and immediate action (and refrain from certain other actions) in the interest of all stakeholders. The following sets out some key legal guidelines for management and owners when dealing with a Dutch subsidiary in distress.

Read more

27.03.2020 NL law
Certain legal aspects of the corona crisis for the Dutch construction and rental industry

Short Reads - Read in Dutch The spread of the coronavirus has developed into a severe crisis that is also affecting the construction and rental industry in the Netherlands. Catering operators and retailers are wondering (among other difficult questions) whether they can pause their rent payments while they have no or very little turnover.

Read more

24.03.2020 NL law
Job van Hooff and Daisy Nijkamp present webinar on The Dutch scheme (WHOA) – the upcoming new Dutch restructuring tool

Short Reads - Job van Hooff and Daisy Nijkamp, in collaboration with Lexology, will present a webinar on WHOA on 2 April 2020. During the webinar they will look at a new bill prepared by the Dutch legislature - the Act on the Confirmation of Private Restructuring Plans (Wet homologatie onder onderhand akkoord) - which introduces a framework that makes it possible for debtors to restructure their debts outside formal insolvency proceedings.

Read more

This website uses cookies. Some of these cookies are essential for the technical functioning of our website and you cannot disable these cookies if you want to read our website. We also use functional cookies to ensure the website functions properly and analytical cookies to personalise content and to analyse our traffic. You can either accept or refuse these functional and analytical cookies.

Privacy – en cookieverklaring