The first court decisions under the Homologation Private Agreement Act (WHOA) were issued last Friday. The WHOA allows you to offer a composition to your creditors and shareholders, as well as proposals to amend and terminate agreements. The aim of the WHOA is to give companies that have fallen on hard times the opportunity to restructure their debts or terminate the company without bankruptcy. This can be done through either closed or public proceedings. During the proceedings, a cooling-off period can be requested as a result of which bankruptcy petitions are suspended and attachments can be lifted. The first two decisions involved a dispute about a cooling-off period. In the second judgment, the Amsterdam District Court arrived at a necessary reasonable interpretation of Section 376(4)(a) of the Fw.
The first ruling was handed down by The Hague District Court (https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBDHA:2021:198).
A shopkeeper had run into serious financial difficulties and creditors had seized his shop stock and fixtures and fittings. A third party was prepared to finance a settlement if the debts could be restructured whilst the business remained in operation. The parties who had seized the assets objected to the cooling-off period and the lifting of the seizures. The court ruled that it was in the debtor’s interest to keep his shop stock and fixtures together and that this was necessary in order to prepare a settlement. It has also become apparent that the arrangement is in the interests of the creditors as a whole. In this context, the court also takes into account that a significant portion of the proceeds from the sale of the shop stock and fixtures and fittings will be used to cover the costs of the insolvency proceedings and the insolvency practitioner’s fees.
The second ruling was handed down by the Amsterdam District Court (https://uitspraken.rechtspraak.nl/inziendocument?id=ECLI:NL:RBAMS:2021:84).
The employees of a foundation that had already ceased its activities had filed for bankruptcy. The foundation was awaiting payments from health insurers. In response to the bankruptcy petition, the foundation had filed a statement of commencement and requested a cooling-off period. The foundation takes the view that an orderly winding-up of its activities is in the interests of the creditors as a whole. The employees argue that a cooling-off period cannot be granted, as there is no question of the business continuing. The court agrees with this objection but, citing the rationale behind the WHOA as set out in the Explanatory Memorandum, grants the request for a cooling-off period nonetheless. According to the court, the cooling-off period is necessary and in the interests of the creditors as a whole, as it allows for a controlled winding-up of the business operations. Given the relatively short timeframe for reaching a settlement proposal, and in order to avoid insolvency costs and the liquidator’s fees, this appears to be a reasonable solution.
Then contact one of our WHOA specialists.