The WHOA will introduce a framework allowing debtors to restructure their debts outside formal insolvency proceedings (the “Dutch Scheme“). Following the parliamentary discussions that took place on 14 May 2020 and the voting that took place on 19 May 2020, the Act will be amended in terms of content on three points which differ from the proposal of the WHOA:
- The WHOA will specifically provide for bifurcation of secured creditors’ claims. Prior to the amendment, the explanatory memorandum explained that a secured creditor’s claim must be divided and placed into two separate classes if the relevant claim is only partially covered by security; however this was not explicitly included in the WHOA itself. In addition, the explanatory memorandum did not explain how to determine the value of the secured assets. After the amendment:
- the WHOA specifically provides that creditors holding security rights will be placed in a preferred class only in relation to the part of their claim that is secured, and the remainder of the claim must be placed in a class of ordinary creditors.
- an exemption applies in the situation where the separation of the claim has no effect on the outcome of the distribution of the post-restructuring value.
- The determination of which part of the claim is secured will be based on the expected value of the security rights in a bankruptcy scenario.
- Small enterprises with an unsecured claim for supplied goods or a claim based on tort will receive a minimum distribution of 20%, unless there is a compelling ground for a lower distribution.
- The WHOA provides that creditors from an opposing class are entitled to receive a distribution in cash of the amount they would receive in a bankruptcy proceeding. In summary, the amendment provides that secured creditors are exempt from this rule and therefore secured creditors cannot demand a cash distribution.
In addition to the amendments, an evaluation clause will be added to the WHOA. Pursuant to this provision, the WHOA will be evaluated within 3 years of its date of entry into force to assess the effects and effectiveness of the WHOA in practice. In particular, the evaluation will focus on the position of ordinary creditors. The background to this amendment is that certain parties are concerned that the Dutch Scheme will, in practice, be primarily beneficial to secured creditors and shareholders, at the cost of ordinary creditors.
The adoption by the House of Representatives was an important step in the legislative process. The WHOA is still on track to enter into force on 1 July 2020.