11 May 2020
R&I update - May 2020 – 2 of 5 Insights
The number of bankruptcies in the Netherlands is rising.
Therefore, in mid-April, a number of professors, insolvency practitioners, employers and labour unions petitioned to accelerate the introduction of WHOA (Wet Homologatie Onderhands Akkoord – the Act on Dutch Court Confirmation of Extrajudicial Restructuring Plans to Avert Bankruptcy), the introduction of which was already planned.
According to the petitioners, accelerating the introduction of WHOA should prevent collective dismissal of employees due to the adverse impacts of COVID-19. WHOA aims to strengthen the reorganisation capabilities of companies that are well-managed despite carrying heavy debts.
At the moment, there is no powerful restructuring mechanism available in the Netherlands outside of the formal insolvency proceedings (bankruptcy and moratorium of payments). However, the bankruptcy procedure does not function well as a restructuring mechanism because such procedure was not designed for restructuring purposes. A bankruptcy procedure is a liquidation procedure; it aims to liquidate the assets of the debtor in favour of its creditors. Therefore it is no wonder that the bankruptcy procedure has been proven to be not very effective as a restructuring tool.
It is hoped that the Dutch parliament will acknowledge the need for a speedy introduction of a decent and effective restructuring mechanism.
by Nick Moser