The events industry is suffering greatly from the Corona crisis. A recent ruling by District Court Noord-Holland last week, shows that the new Homologation Private Agreement Act (WHOA), which is included in the bankruptcy law, can offer a solution.
We previously wrote about the WHOA. Among other things, the WHOA allows a company to offer a composition to its creditors and shareholders. Not all creditors have to agree to the accord. If enough creditors support the agreement, the court can approve (homologate) the agreement. The aim of the WHOA is to give companies that are in dire straits the opportunity to restructure their debts or terminate the company without bankruptcy.
The ruling we cover in this article was published on 19 February 2021. The Haarlem-based JurLights was until the corona crisis a healthy company that provided light shows at major events at home and abroad. The corona crisis brought the business operations to a sudden halt, leaving JurLights with no turnover from March 2020. Costs, of course, continued.
JurLights made efforts to cope with the problems in the lead-up to this ruling. For instance, the company reorganised, changed insurance policies and terminated lease and rental agreements. In addition, JurLights offered its creditors an agreement to restructure its debts.
That agreement was offered before the introduction of the WHOA. Under the then-regime, creditors still all had to agree to an arrangement. That did not succeed in the case of JurLights. Because a large number of creditors did support a settlement, a WHOA route after 1 January 2021 was a good option to still force a settlement through the courts.
The WHOA provides that an offered settlement will be approved unless one or more grounds for refusal listed in the WHOA occur. In this ruling, the court sees no grounds for refusal and concludes that the conditions for adjudication have been met. Thus, the most important requirement has been met: without an agreement, bankruptcy is reasonably the only alternative. In addition, all information was correctly supplied and creditors were correctly divided and informed about the arrangement.
Although the court ruled that the WHOA strictly prescribes that an agreement must be offered per company - while JurLights offered a joint agreement for both the operating company and the holding company - the court ruled that in this case no consequences need to be attached. After all, it must have been clear to all creditors that there were in fact two agreements and that it was a restructuring of all outstanding debts and not just joint debts. The court granted the application for that reason.
In this matter, the North Holland court takes a practical approach to assessing whether an agreement can be approved. The court considers that the request for approval must be granted in the absence of grounds for rejection based on the law. Approval is based on a number of factual aspects of the request for homologation, including the information provided and insight into earlier steps taken to avert the consequences of reduced turnover. For this reason, it is important to outline the correct circumstances both prior to a request for homologation and in the petition. Naturally, we can be of assistance in this regard.
Then contact one of our WHOA specialists.