The first WHOA decisions are a fact

On 1 January 2021, the Court Confirmation of Extrajudicial Restructuring Plans Act (in the Netherlands: de Wet Homologatie Onderhands Akkoord or WHOA) entered into force. The WHOA makes it possible for a company to impose a binding settlement (so-called compulsory settlement) on its creditors and shareholders in the event of an impending bankruptcy. Conditions include that the company is still (partly) viable and that the plan is ratified by the court (so-called homologated). Sander Schouten explains.

In the case in which the District Court of The Hague recently issued a WHOA ruling, it concerned a request for a cooling-off period as well as a request for the lifting of seizures in share The portion of registered capital of a private or public limited company
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and (shop) inventory. Promulgation of a cooling off period was also requested at the District Court of Amsterdam. In addition, the appointment of an observer was requested, see this blog about that.

Depositing a statement

In order to start the WHOA process, the debtor is required to deposit a statement to that effect with the court; a so-called initial statement. In this statement, the debtor states that a settlement is being prepared and which procedure it will follow; the public or private settlement procedure. By filing such a statement, the debtor obtains various protections and options, such as submitting a request to declare a cooling-off period and the intervention of a judge so that customisation can be provided.

Cooling-off period

After the statement has been filed, a debtor can ask the court to declare a cooling-off period. However, this requires that the settlement has already been offered to the creditors or that the debtor has declared that he will offer a settlement within a period of two months. If the request is granted, a cooling-off period of a maximum of four months can be announced, whereby a one-off extension of four months is possible.

The judgment of the District Court of The Hague shows that before granting it, it will check whether “it has been summarily shown that a cooling-off period is necessary in order to be able to continue the undertaking supported by the applicant during the preparation and negotiation of an agreement”. The court ruled that this is the case because being able to continue is important for actually bringing about an agreement.

Due to the declaration of a cooling-off period, i) third parties cannot recover or claim assets The assets of a Dutch company reflect the value of all that the company possesses
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from the debtor, ii) the court can lift any attachments already made and (iii) the processing of a bankruptcy or suspension of payments application is suspended. Also, pledgees cannot collect the claims pledged to them.

Judicial intervention

Between the moment of filing the initial statement and the request to the court to approve or establish the settlement (so-called homologation of the settlement), the debtor can ask the court to comment on elements that are important for bringing about an agreement. This could include class division, the voting process and the question of who should or should not be allowed to vote.

Lifting of attachments

After or at the same time as the termination of the cooling-off period, the court may, at the request of the debtor, lift any attachments already made.

The decision of the District Court of The Hague shows that, before granting such a request, it will check whether “it has been summarily shown that the parties levelling the attachments are not materially harmed in their interests by the lifting of the attachments”. In the present case, this test led to the removal of the seizure of inventory and share The portion of registered capital of a private or public limited company
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. The court’s reasoning was that because of COVID-19 the inventory will be used to a limited extent and therefore would not decrease in value and with regard to the stock that this is what leads to income for the company. And that if there is no possibility for income, this will soon lead to bankruptcy, in which case parties who had levied attachments will also be left empty-handed.