The Netherlands is planning to adopt new restructuring legislation, allowing for court confirmation of extrajudicial restructuring plans (Wet Homologatie Onderhands Akkoord, or WHOA). The bill combines features of the U.S. chapter 11 procedure and the English Scheme of Arrangement. With its broad range of jurisdiction and flexibility, the "Dutch Scheme" will prove to be an effective addition to the restructuring toolbox for both Dutch and non-Dutch entities, for groups of companies, and with the possibility of automatic recognition throughout the European Union.
In this White Paper, we discuss the key features of this new Dutch restructuring bill.
Presently, Dutch law does not provide a mechanism for imposing a restructuring plan on dissenting creditors outside of formal insolvency proceedings. As a result, a restructuring plan currently requires the consent of all creditors and shareholders whose rights are affected by the plan. This has made restructurings outside of a formal insolvency proceeding very difficult and provides stakeholders with ample opportunity to monetize on nuisance value. With the Dutch Scheme, the Dutch legislature is aiming to effectively allow debtors to propose restructuring plans to their creditors and shareholders outside of formal insolvency proceedings, with the prospect of the debtor being preserved on a going-concern basis.
The Dutch Scheme is aimed at (partially) implementing the EU-wide initiative to promote "debtor-in-possession" restructuring, as recently formalized in the EU Harmonisation Directive1 (EU 2019/1023), which requires EU Member States to include such instruments in their national legislation. The bill is currently being discussed in the Dutch Parliament and is expected to take effect later in 2020.
The key features of the Dutch Scheme include:
Restructuring Plan: Debtors or a court-appointed restructuring expert will be permitted to propose a restructuring plan for approval by creditors (secured, preferential, and unsecured) and shareholders. Voting Threshold: Stakeholders may be split into voting classes divided on the basis of the similarity of their rights vis-à-vis the debtor. The restructuring plan has to be approved by a two-thirds majority of each voting class, with the possibility of requesting a cross-class cram down in certain circumstances. Debtor-in-Possession Proceeding: The debtor remains in control of the company's affairs throughout the Dutch Scheme proceeding. Stay of Individual Enforcement Actions: Debtors will be permitted to apply for a stay of individual enforcement actions and bankruptcy requests for a period of four months (extendable to a total of eight months in certain circumstances). Broad Basis for Jurisdiction and Group Restructurings: Subject to certain qualifying criteria, the Dutch courts will have jurisdiction to confirm restructuring plans for both Dutch and non-Dutch companies, allowing for cross-border group restructurings to be centralized in the Netherlands. EARLY ACCESS TO THE DUTCH SCHEME
The proposed bill is aimed at granting viable enterprises in financial distress early access to a restructuring tool that will enable the debtor to restructure its liabilities...