Under pressure, everything liquefies. This is evident even now. Adjustments to the Bankruptcy Act have been debated in The Hague for decades. Therefore, when Minister of Legal Protection Dekker sent the bill to amend this nineteenth-century law to the House of Representatives in the summer of 2019, the expectation was that it would again take years. But then came the corona crisis. And politicians succumbed to the lobbies of employers' and workers' organisations at an accelerated pace, who fear that this crisis will lead to a wave of unnecessary bankruptcies.
WHOA: 'coercive agreement' for creditors
The House of Representatives took the knee-jerk reaction to the Private Arrangement Homologation Act (WHOA). The WHOA introduces a regulation under which the court can approve (homologate) a private agreement between a company and its creditors and shareholders concerning debt restructuring. Companies - if the Senate also agrees, which is expected - will thus get ample opportunities to enter into compulsory composition agreements with creditors.
Indeed, the homologation results in that the arrangement is binding on all creditors and shareholders concerned by the arrangement. Creditors or shareholders who have not consented to the agreement may still be bound by the agreement if the decision-making on and content of the agreement meets certain requirements. This is why the term 'coercive agreement' used. The WHOA will become part of the Bankruptcy Act.
'Landslide for creditors'
The difference with the current Bankruptcy Act is life-changing. Now one creditor can still completely block a reorganisation plan, even if his claim is (much) smaller than that of all other creditors. Not for nothing did the Association For Credit Management (VVCM), the interest group for credit managers and debtors' managers, immediately speak of a 'Landslide for creditors'. That landslide did not come overnight, by the way. Besides the lobbies of workers' and employers' organisations, the Ministry of Justice also consulted receivers, corporate lawyers and bailiffs, among others. Support for the WHOA is thus high.
We at Xolv also believe that it is good that the Bankruptcy Act is being amended. The current composition scheme in suspension of payments has proved ineffective and for this reason remains virtually unused in practice. And that while in practice - especially in this corona crisis - there is an urgent need for a workable arrangement outside bankruptcy. Moreover, it would be rather disastrous for our economy if one company after another were to collapse. With WHOA, we can avoid this unnecessary wave of bankruptcies, which is better for the overall economy - and therefore ultimately for the majority of creditors. Because a relaunch or reorganisation often creates more value than can be claimed in bankruptcy.
Protection for individual creditors
A small caveat is provided by the WHOA for individual creditors. SMEs and natural persons may lodge protests against the forced settlement and thus enjoy a certain form of protection. If they are offered an amount by the reorganised company that is eighty per cent or more lower than their outstanding claim, they can object. The same applies to consumers and unincorporated entrepreneurs (e.g. self-employed workers). The fear that small creditors will soon have to lose out to the interests of banks and other broad-shouldered creditors has thus been partly allayed, which the new law more socially just makes.
Are you facing bankruptcy, in which a reorganisation or relaunch may be required? Xolv can play a mediating role between you, the insurer and the collection agency.
