Lending focus – December 2020 – 2 / 8 观点
On 26 May 2020, the House of Representatives of the Dutch Parliament passed the Act of Court Confirmation of Extrajudicial Restructuring Plans (CERP). This long-awaited plan for a new restructuring law in the Netherlands features elements of both the US Chapter 11 procedure and UK schemes of arrangements. It is an important development in the evolution of Dutch insolvency practice.
Dutch special purpose vehicles are well-known and often used in cross-border financings and restructurings. However, before CERP, a private restructuring of the indebtedness of a Dutch company was only possible with the cooperation of all its creditors.
CERP gives the company, its shareholders and its creditors the possibility of settling debts outside of insolvency. This will be effected via an agreement which will require court approval. Once this is granted, the agreement will bind all creditors, including those that have not consented to the agreement.
CERP combines the best of the US Chapter 11 and UK schemes of arrangement procedures, together with lower costs and a swifter timeframe.
Like UK schemes, under the Dutch scheme, the court will be involved in the process and will be required to approve the restructuring plan. However, one key difference is that court involvement in the UK starts at an earlier stage: the court calls a meeting to consider the proposed scheme. Then, after class meetings have been held to consider proposals and to vote on the scheme, there will be a court hearing to decide whether or not to sanction the scheme.
By contrast, under Dutch procedures, the court will only be involved from the outset if requested by a stakeholder – this allows any creditor to bring forward their complaints concerning the restructuring plan beforehand, ensuring certainty of outcome. Otherwise, the Dutch court will be asked to approve the restructuring plan only after it has been approved by the creditors.
Creditors will be classified into different classes, such as (secured) lenders, tax authorities, shareholders etc. It should be noted that partly-secured creditors are only classified as secureds to the extent that their claim is covered by security. For the unsecured part of their claim, they will be classified as unsecured creditors.
Once the restructuring plan has been proposed, UK schemes require each class of creditors to vote on whether they agree with the content of the restructuring plan. Every class must approve the plan; if not, it cannot be implemented. A class has agreed with the restructuring plan if the members of that class who together represent at least 75% in value and 50% in number have voted in its favour.
Under Chapter 11, even if all classes do not vote in favour of the plan, the court may still approve it if certain criteria are met. This differs from UK schemes.
CERP deviates from the UK schemes procedure by adopting the Chapter 11 approach (and the UK's newly-introduced Part 26A Restructuring Plan, which does permit cross-class cram-down).
The court can refuse approval of the restructuring plan if it does not offer:
The restructuring plan will only be approved by the court if without an arrangement, it is expected that insolvency will follow, ie the company will not be able to pay its debts when they fall due. In addition, the legal position of employees cannot be changed by the restructuring plan.
Furthermore, the restructuring plan must be reasonable. None of the classes of creditors can be left in a worse position than in a liquidation scenario, and the value that can be realised with the restructuring plan must be distributed among the different classes of creditors and shareholders in a fair way.
Once these and other conditions have been met, the court will approve the restructuring plan and it will become binding on all classes of creditors. There is no possibility of any creditor appealing against a granted approval. After the court has approved the restructuring plan, the restructuring can be carried out.
CERP offers a restructuring procedure with short deadlines and low costs. One of the goals of CERP is to provide certainty of outcome, which is why the terms and the content of the agreement come with substantial freedom and limited grounds for refusal of the restructuring plan.
With CERP, the Netherlands now have a new hands-on tool for cross-border restructurings, including the best of both Chapter 11 and UK schemes of arrangement.
CERP delivers to the demand of a more flexible and quick restructuring regime in Europe.
To discuss any of the issues raised in this article in more detail, please contact a member of our Banking & Finance team.
作者 Cheng Bray