What was going on?
Company X requested the appointment of a restructuring expert on 21 July 2021. On 11 May 2021, a bankruptcy petition has already been filed against company X, by the trustee of company Y, because the trustee believes that company X still owes money to company Y. The bankruptcy petition has been suspended due to the request for appointment of a restructuring expert.
It emerges at the hearing that legal proceedings are pending between company X and the receiver of company Y. The receiver claims €10 million in these proceedings. Company X did not inform the court of these proceedings in its application for the appointment of a restructuring expert.
What does the court rule?
The court finds that Company X failed to disclose in its application that liability proceedings are pending. Company X did not provide the court with full information, even though it was obliged to do so. Company X should have disclosed this, as a claim for payment of €10 million is undeniably relevant to these WHOA proceedings.
However, the court attaches no consequences to this omission, as it rejects the application for the appointment of a restructuring expert on other grounds. These grounds include, amongst other things, the fact that no business activities are taking place any longer.
A liquidation agreement is possible within the WHOA, despite the law's premise that the company must be able to continue profitably after restructuring. However, a liquidation agreement within the WHOA then requires that it is a company where there are no longer profitable business activities. With the help of the WHOA, such a company can be terminated in a controlled manner. The prerequisite for this is that it must yield a better result for creditors than bankruptcy.
The director additionally stated at the hearing that the WHOA agreement is intended to prevent any reputational damage arising from bankruptcy.
The court finds that there is no business activity. Nor has it been made plausible that the creditors of company X would be better off in a WHOA process than in bankruptcy. The court therefore rejects the request to appoint a restructuring expert.
Conclusion
It is essential to inform the court fully and correctly in the event of a WHOA-related application. This shows that a WHOA process can only be used for purposes arising from the Act. It does not include preventing reputational damage.
Do you have any questions? Do not hesitate to contact our WHOA specialists.