The Act on the confirmation of private plans (Wet homologatie onderhands akkoord or WHOA) was submitted to the Dutch parliament last year (2019) and, once adopted, introduces a framework under which tailor-made (financial) restructuring plans can be implemented outside formal insolvency proceedings. The WHOA combines elements of the English Scheme of Arrangements, US Chapter 11 and the EU Restructuring Directive (EU 2019/1023).

In summary

The WHOA provides for a fast and efficient restructuring procedure outside of formal insolvency which, in principle, can be completed within a matter of months. The restructuring plan may bind (a selection of) secured, unsecured and preferential creditors as well as shareholders, whilst at the same time adequately protecting the interests of any dissenting party.

The WHOA enables both the debtor as well as other important stakeholders the opportunity to, at an early stage and outside the public domain, avoid an uncontrolled insolvency and preserve the debtor’s value. In addition, the WHOA provides for a high level of deal certainty as a result of, amongst others, the various supportive measures, offers flexibility on the contents of the restructuring plan and has the option to be (automatically) recognised throughout the EU.

With the Dutch courts assuming jurisdiction in a wide variety of cases, the WHOA offers a world class platform for international debt restructurings.

Expected timeline

On this page, we provide an overview of the main features of the Dutch scheme (WHOA) and keep you updated on the latest developments.

Parliamentary adoption of the act on confirmation of private restructuring plans

On 26 May 2020, the Act on the confirmation of private restructuring plans (Wet homologatie onderhands akkoord or WHOA) was adopted by the Dutch parliamentary House of Representatives (Tweede Kamer). The Dutch Senate (Eerste Kamer) will now have the final vote. Parliamentary consultations in the Dutch Senate will take place on 9 June 2020. Consequentially to the COVID-19 crisis, the Dutch government had indicated the WHOA as one of the emergency bills because the restructuring tool introduced by it could positively help enterprises in financial distress to avoid bankruptcy. It is expected that the WHOA will enter into force between 1 July 2020 and 1 January 2021.

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04/03/2020
WHOA – the fu­ture of (in­ter­na­tion­al) debt re­struc­tur­ings in The Neth­er­lands
The Act on the con­firm­a­tion of private plans (Wet ho­mo­log­atie on­der­hands akkoord or WHOA) was sub­mit­ted to the Dutch par­lia­ment last year and, once ad­op­ted, in­tro­duces a frame­work un­der which tail­or-made (fin­an­cial) re­struc­tur­ing plans can be im­ple­men­ted out­side form­al in­solv­ency pro­ceed­ings. The WHOA com­bines ele­ments of the Eng­lish Scheme of Ar­range­ments, US Chapter 11 and the EU Re­struc­tur­ing Dir­ect­ive (EU 2019/1023).This news­flash provides a high level over­view of the most im­port­ant fea­tures of the WHOA, which is ex­pec­ted to come in­to force in Janu­ary 2021.The pro­ced­ureUn­der the WHOA a debt­or (not be­ing a in­surer or bank) may present a re­struc­tur­ing plan to (cer­tain of) its cred­it­ors and/or share­hold­ers if it can be reas­on­ably as­sumed that the debt­or will not be able to con­tin­ue to pay its debts as they fall due in the near fu­ture.In ad­di­tion, any cred­it­or and/or share­hold­er or, if es­tab­lished, the debt­ors’ works coun­cil (or oth­er em­ploy­ee rep­res­ent­at­ive body) may re­quest the ap­point­ment of a re­struc­tur­ing ex­pert to pre­pare a re­struc­tur­ing plan on be­half of the debt­or. A debt­or may also it­self re­quest the ap­point­ment of a re­struc­tur­ing ex­pert to avoid any ap­pear­ance of a con­flict of in­terests or to in­crease con­fid­ence in the pro­cess. The ap­point­ment of a re­struc­tur­ing ex­pert rules out a pro­pos­al from the debt­or to en­sure that the parties’ ef­forts are al­ways con­cen­trated in a single pro­cess.The WHOA al­lows for the re­struc­tur­ing plan to be pro­posed in a con­fid­en­tial or pub­lic pro­ced­ure.The pub­lic pro­ced­ure is avail­able to a debt­or hav­ing its cen­ter of main in­terests (COMI) in The Neth­er­lands. The pro­ced­ure is made pub­lic by pub­lish­ing a no­tice in the in­solv­ency re­gister and the Dutch trade re­gister and the court-ap­proved plan res­ult­ing from the pub­lic pro­ced­ure will be (auto­mat­ic­ally) re­cog­nised through­out the EU (ex­clud­ing Den­mark).For the con­fid­en­tial pro­ced­ure the Dutch courts will have jur­is­dic­tion in cases where any rel­ev­ant party (debt­or, cred­it­or, share­hold­er or af­fected third party) is loc­ated in The Neth­er­lands. In ad­di­tion, the Dutch courts may as­sume jur­is­dic­tion if the case oth­er­wise has “suf­fi­cient con­nec­tion” with The Neth­er­lands. This will be the case if, amongst oth­ers, the debt­or has sub­stan­tial as­sets or activ­it­ies in The Neth­er­lands, a sub­stan­tial part of the debt­or’s group con­sists of com­pan­ies dom­i­ciled in The Neth­er­lands, or if a sub­stan­tial part of the debt­or’s ob­lig­a­tions to be amended un­der the plan are gov­erned by Dutch law. The court-ap­proved plan res­ult­ing from the con­fid­en­tial pro­ced­ure will not be re­cog­nised through­out the EU and will be sub­ject to the re­cog­ni­tion prin­ciples of the rel­ev­ant jur­is­dic­tion.Con­tents of the re­struc­tur­ing plan and sup­port­ive meas­uresThe debt­or may de­term­ine which cred­it­ors and/or share­hold­ers will be in­cluded in the re­struc­tur­ing plan. However, the rights of em­ploy­ees un­der em­ploy­ment con­tracts can­not be amended un­der the WHOA. The re­struc­tur­ing plan may in­clude the fol­low­ing ele­ments:a write-off or de­fer­ral of the (pay­ment) ob­lig­a­tions of the debt­or;an amend­ment of the rights of (third) parties hav­ing re­course against the debt­or (such as guar­ant­ors or jointly li­able parties);a debt-for-equity swap (in­clud­ing, if re­quired, amend­ing the debt­or’s art­icles of as­so­ci­ation or any ap­plic­able share­hold­ers agree­ment);the ter­min­a­tion or amend­ment of the terms of oner­ous con­tracts and any claims for dam­ages res­ult­ing there­from may be in­cluded in the plan;a gen­er­al or in­di­vidu­al stay (morator­i­um) of a max­im­um of two times four months; andipso facto and change of con­trol clauses may not be in­voked.Emer­gency fund­ing provided to the debt­or dur­ing the pro­cess (and any se­cur­ity gran­ted in con­nec­tion there­with) can be pro­tec­ted against claw-back ac­tions by a bank­ruptcy trust­ee in the event the re­struc­tur­ing plan is not im­ple­men­ted suc­cess­fully and the debt­or is sub­sequently de­clared bank­rupt.To lim­it the risk of the court re­ject­ing the re­struc­tur­ing plan at a later stage, the court may be re­ques­ted by the debt­or and the re­struc­tur­ing ex­pert to make bind­ing de­term­in­a­tions on any ele­ment of the re­struc­tur­ing (such as the vot­ing pro­ced­ure, the class form­a­tion and valu­ation is­sues). A court rul­ing may be re­ques­ted at any time dur­ing the pro­cess be­fore the re­struc­tur­ing plan is put to vote. These court de­term­in­a­tions are not sub­ject to ap­peal, but be­fore de­cid­ing on any is­sue the court will hear those parties af­fected and, if ap­poin­ted, the re­struc­tur­ing ex­pert or the ob­serv­er.A spe­cif­ic meas­ure which can be taken by the court is the ap­point­ment of an ob­serv­er. The task of the ob­serv­er is to mon­it­or the pre­par­a­tion and ne­go­ti­ation of the re­struc­tur­ing plan, with due re­gard to the in­terests of the gen­er­al body of cred­it­ors.Classes and vot­ingParties must be placed in dif­fer­ent classes if the rights they have are so dif­fer­ent that they are not in a com­par­able po­s­i­tion. This will be the case if, amongst oth­ers, in an en­force­ment against the debt­or’s as­sets the parties have a dif­fer­ent rank­ing un­der Dutch law.All cred­it­ors and/or share­hold­ers whose rights are af­fected by the re­struc­tur­ing plan are en­titled to vote. If, how­ever, the leg­al title is split from be­ne­fi­cial own­er­ship of a claim, only the be­ne­fi­cial own­er is en­titled to vote. The vote takes place in a meet­ing held phys­ic­ally, elec­tron­ic­ally or in writ­ing votes.A class will have ac­cep­ted the re­struc­tur­ing plan if a two-thirds ma­jor­ity in value of the class’ out­stand­ing claim or cap­it­al has voted in fa­vour of the plan. No head count re­quire­ment ap­plies.Court con­firm­a­tion and safe­guardsThe debt­or or the re­struc­tur­ing ex­pert may sub­mit a re­quest to con­firm the re­struc­tur­ing plan to the court if at least one class of cred­it­ors has voted in fa­vour of the plan. If the debt­or is an SME, the re­struc­tur­ing ex­pert may only seek court con­firm­a­tion with the con­sent of the debt­or.Gen­er­al grounds for re­fus­al The court must, at its own ini­ti­at­ive, re­fuse con­firm­a­tion of the re­struc­tur­ing plan if:the debt­or is not likely to be able to con­tin­ue pay­ing his li­ab­il­it­ies;the form­al or pro­ced­ur­al re­quire­ments have not been ob­served;a party should have been ad­mit­ted to the vote for a dif­fer­ent amount, un­less that de­cision could not reas­on­ably have led to a dif­fer­ent out­come of the vote;the per­form­ance of the plan is not ad­equately safe­guarded;the debt­or wishes to ob­tain new fin­an­cing to im­ple­ment the plan, which fin­an­cing will ma­ter­i­ally pre­ju­dice the in­terests of the joint cred­it­ors;the plan is the res­ult of fraud or de­cep­tion;the fees and ex­penses of the re­struc­tur­ing ex­pert or oth­er court-ap­poin­ted parties are not paid or no se­cur­ity for pay­ment has been provided; orthere are oth­er com­pel­ling reas­ons against the con­firm­a­tion of the plan.Sup­ple­ment­ary grounds for re­fus­alAt the re­quest of one or more cred­it­ors or share­hold­ers who re­jec­ted the re­struc­tur­ing plan or who were wrongly ex­cluded from the vote, the court may re­fuse to con­firm the plan if a party re­ceives less in value than it would re­ceive in the li­quid­a­tion of the debt­or’s as­sets in bank­ruptcy (the “best in­terest of cred­it­ors test”).At the re­quest of one or more cred­it­ors or share­hold­ers who re­jec­ted the re­struc­tur­ing plan and who were placed in a class that did not ac­cept the plan or who were wrongly ex­cluded from the vote and should in­stead have been placed in a class that did not ac­cept the plan, the court must re­fuse to con­firm a plan:the dis­tri­bu­tion of the value real­ised de­vi­ates to the dis­ad­vant­age of the class that did not ac­cept the plan from the rank­ing that ap­plies upon en­force­ment against the debt­or’s as­sets un­der Dutch law or any oth­er law, in­stru­ment or con­trac­tu­al ar­range­ment bind­ing on the debt­or, un­less there are reas­on­able grounds for such de­vi­ation and the in­terests of the rel­ev­ant parties are not pre­ju­diced by it; orthe plan does not give the rel­ev­ant party a right to opt for a cash pay­ment in the amount that party would have ex­pec­ted to re­ceive in cash in a li­quid­a­tion of the debt­or’s as­sets in bank­ruptcy (the “cash-out op­tion”).The sup­ple­ment­ary grounds for re­fus­al are largely in­spired by the US Chapter 11 “best in­terest of cred­it­ors test” and the “ab­so­lute pri­or­ity rule”.“Cram-down”Fol­low­ing court ap­prov­al of the re­struc­tur­ing plan, the plan be­comes bind­ing on all rel­ev­ant parties, in­clud­ing any dis­sent­ing parties. As a res­ult, the court will have the power to “cram-down” dis­sent­ing classes who voted against the re­struc­tur­ing plan, provided that lower rank­ing classes can­not “cram-up” high­er rank­ing classes.In sum­maryThe WHOA provides for a fast and ef­fi­cient re­struc­tur­ing pro­ced­ure out­side of form­al in­solv­ency which, in prin­ciple, can be com­pleted with­in a mat­ter of months. The re­struc­tur­ing plan may bind (a se­lec­tion of) se­cured, un­se­cured and pref­er­en­tial cred­it­ors as well as share­hold­ers, whilst at the same time ad­equately pro­tect­ing the in­terests of any dis­sent­ing party.The WHOA en­ables both the debt­or as well as oth­er im­port­ant stake­hold­ers the op­por­tun­ity to, at an early stage and out­side the pub­lic do­main, avoid an un­con­trolled in­solv­ency and pre­serve the debt­or’s value. In ad­di­tion, the WHOA provides for a high level of deal cer­tainty as a res­ult of, amongst oth­ers, the vari­ous sup­port­ive meas­ures, of­fers flex­ib­il­ity on the con­tents of the re­struc­tur­ing plan and has the op­tion to be (auto­mat­ic­ally) re­cog­nised through­out the EU.With the Dutch courts as­sum­ing jur­is­dic­tion in a wide vari­ety of cases, the WHOA of­fers a world class plat­form for in­ter­na­tion­al debt re­struc­tur­ings.

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08/06/2020
Par­lia­ment­ary ad­op­tion of the act on con­firm­a­tion of private re­struc­tur­ing...