The Court Approved Restructuring Plan Act (in Dutch: Wet Homologatie Onderhands Akkoord, ‘WHOA’), also known as the “Dutch Scheme”, entered into effect almost one year ago (on 1 January 2021). The objective of the Dutch Scheme is to improve the ability of companies to reorganize by being able to offer creditors a private (compulsory) composition (see also our article The Dutch Scheme: Court Approved Restructuring Plan Act).
This way, a bankruptcy can be prevented. The Dutch Scheme also offers opportunities to companies with no more chances of survival. Via a ‘liquidation composition’ these can eventually wind up their company, without having to go through formal (and often long-term) bankruptcy proceedings first.
Before the WHOA entered into effect on 1 January 2021, it was regarded as an important development in the Dutch insolvency practice, which was moreover eagerly awaited by this practice, also in light of the economic consequences of the corona crisis. Naturally, the legal framework still had to be given substance in the form of case law from practice.
The first nine months of the Dutch Scheme in practice
The number of court judgments that is published on the government’s website rechtspraak.nl is only a small part of the total judgments. In order to get a good picture of the actual current state of affairs of the Dutch Scheme, we therefore contacted the eleven Dutch courts directly, and asked them to answer the following five questions with regard to the period from 1 January 2021 to 1 October 2021:
- How many start-of-procedure declarations have been filed in total?
- How many of these start-of-procedure declarations in total concern a public- and how many concern a private procedure?
- How many cooling-off periods have been applied to the court in total?
- How many cooling-off periods did the court declare?
- How many arrangements were eventually approved by the court?
We received responses from seven out of the eleven courts.1
The figures up to now presented in an overview
The answers provided by the courts, combined with the published judgments on rechtspraak.nl, have resulted in the following overview:
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What is notable about these figures?
With respect to the above overview, we note the following:
- In the past nine months, a total of 134 start-of-procedure declarations have been filed with these seven courts, out of which in the period from 1 January 2021 to 1 October 2021 eventually ‘only’ seven proposals have resulted in the approval of an arrangement. The courts pronounced the approval of an arrangement six times. One request for the approval of an arrangement was denied. When we compare these figures to the number of bankruptcies within the same period, we see that 1,581 bankruptcies were declared in the Netherlands between 1 January 2021 and 1 October 2021.2 It is noteworthy that the number of bankruptcies in the period from 1 January 2021 to 1 October 2021 was historically low (despite of the corona crisis).
- The private procedure – behind closed doors – is popular among entrepreneurs: in all courts companies chose the private procedure: 118 times in total. By contrast, a public procedure was only chosen in six cases. For ten start-of-procedure declarations it is unknown whether the entrepreneur chose a private or a public procedure. Rounded off, this means 95% private procedures and 5% public procedures.3
- Although it was expected before the entry into force of the Dutch Scheme that the cooling-off period would be a frequently used tool at the start of a procedure4 , the courts were ‘only’ requested for a cooling-off period 31 times after 134 start-of-procedure declarations were filed (rounded to 23%). However, it can be concluded that after its announcement, a cooling-off period was relatively often allowed by the courts (25 declarations of a cooling-off period compared to 31 requests, which is rounded to 81%).
What does this mean?
Although some (insolvent) companies have found their way to the Dutch Scheme, this Dutch Scheme has not yet taken off on the expected scale. To a large extent, this will have to do with the historically low number of bankruptcies declared. So far, the private Dutch Scheme procedure is by far the most popular, and the number of declared cooling-off periods seems to be lower than expected before the Dutch Scheme came into force.
The Dutch Scheme offers a balanced procedure for achieving an arrangement with all or part of the creditors. A restructuring of debts or liquidation via the Dutch Scheme has the important advantage that it can prevent a bankruptcy, the appointment of a trustee, and long-term bankruptcy proceedings. The entrepreneur remains in control of the process, at least to an important extent. If you foresee that your company will be unable to meet its current liabilities, and if you are considering a restructuring of debts or a liquidation, the Dutch scheme may provide an appropriate solution.
Should you have questions or wish to discuss about this with experts, please do not hesitate to contact one of the members of the Insolvency & Restructuring team of Kennedy Van der Laan.
