Since 1 January 2021, the Netherlands introduced ‘The Dutch Scheme’ also known as the ‘Wet Homologatie Onderhands Akkoord’ (Whoa). This law is a type of insolvency procedure, that is far more extensive compared to other insolvency laws because it limits the possibilities for creditors. Perhaps you have already encountered this law when dealing with a claim against a Dutch party. If you haven’t then our Dutch Desk explains everything you should know below.
Impact on Dutch insolvency law
With the new scheme, Whoa prevents imminent insolvency and seizure of capital. Both creditors and shareholders can initiate the procedure, offering a compulsory settlement. This means that if creditors and shareholders cannot find a solution with their debtors, the court can still approve an agreement. While the procedure can be requested by creditors and stakeholders, debtors can also initiate Whoa. With this procedure, the primary goal is to aid companies facing financial difficulties or high amounts of debts but are still partially viable.
Offering a compulsory settlement to creditors
What distinguishes this procedure from others, is that a debtor can determine themselves to which creditor they wish to offer the settlement. Employees are excluded by definition and cannot be offered a settlement.
Ranking creditors into categories
The Whoa allows debtors to rank creditors into different categories. For example, creditors will be categorised into groups who are qualified as separatists, competing creditors or creditors with retention of title. The creditors and shareholders in these categories will then have an opportunity to place a vote for the settlement that is being offered.
If 2/3rd of the majority of voters agrees with the settlement, then this means that all other creditors and shareholders are bound by it. If one creditor already votes in favour, then the arrangement can be submitted to the court for approval. If the case is not clear to the court, then the court can conduct a summary review. Often the more creditors and stakeholders in a category that agree, the less extensive the review will be.
Enforcing Whoa without consent?
The consequence of a successful settlement is that even creditors who have not given their consent are bound by that settlement. If the agreement is accepted and, in some cases, enforced upon creditors who did not consent, the debtor is able to make a fresh start.
Obviously, this has a significant impact on the position of creditors. Especially if they have stipulated certain securities and, for example, are not prepared to agree to the settlement.
Conditions for the Whoa agreement
The conditions for using Whoa are as follows:
- The debtor must be in a situation where it is expected that their firm will not be able to continue paying their debts without an agreement.
- The performance of the agreement must be sufficiently guaranteed.
- There must be at least one category with a majority representing 2/3 of the total indebtedness, which has voted in favour of the agreement within that category.
- Finally, the agreement must show a sufficient degree of certainty that none of the creditors or shareholders in a category involved will be worse off because of the agreement than in the event of bankruptcy.
More information about the Whoa
Would you like to know more about the Whoa and the impact on your organisation? Then don't hesitate to contact our Dutch Desk. We will gladly help you.
Author: Hanneke Zandvoort