The WHOA can be a useful tool for companies in dire straits. A cooling-off period may be requested in circumstances. In short, creditors cannot recover from the debtor during that period. The court assesses such a request based on a number of criteria. Recently, the court in Overijssel rejected such a request.
The debtor, a construction company, has a significant debt burden of around €1.5 million. The construction company initiated a WHOA process to stop and wind down the company in a controlled manner. To allow the preparation and negotiation of the agreement with creditors to be completed in peace, the construction company requested a four-month cooling-off period.
The construction company found itself in this situation as several construction projects turned out to be loss-making. A contractor has since obtained repossessions and leave for repeat repossessions. One specific major project has seen multiple issues and discussions about more/less work. However, if that project is completed, which it expects to do soon, the construction company expects to make a net gain of one to one and a half tonnes. The construction company argues that the attachments prevent it from receiving the amount from the major project, making bankruptcy likely. The contractor defends and argues that the construction company is not providing any information. The amount receivable cannot be traced, there is no evidence anywhere that the construction company's operations would still be viable in the core and that a settlement would indeed avert bankruptcy.
The court notes that granting an application for a cooling-off period requires the following:
The court then considers that the alleged benefit is not certain as the construction company has a dispute with one of the project parties in the range of five to six tonnes, among other things. In addition, insufficient financial information was given. The court also found no evidence that the construction company had already taken serious steps towards offering a WHOA agreement. In conclusion, therefore, it cannot be established that the interests of the joint creditors are served by a cooling-off period.
The court therefore rejects the request for the declaration of a cooling-off period and the parallel requests for the lifting of levied attachments.
Conclusion
As noted earlier in this blog series, it is essential to provide the court with full and accurate information when making a WHOA-related application. If the applicant does not do so sufficiently, the court is likely to regard the application as an attempt to postpone execution rather than a serious attempt to achieve debt restructuring. Rejection of an application is then to be expected.