In various blogs we inform you on certain aspects of the Dutch Scheme of Arrangement (the WHOA). On 1 January 2021 this legislation will become effective. In this blog the various supporting measures the WHOA is offering are discussed.
Upon request the court can set a cooling-off period of four months. This period can be prolonged to a maximum of eight months. During this period creditors cannot claim their goods and these goods can be consumed, provided that the consummated goods are paid for.
Protection for rescue financing
During the WHOA procedure, upon request, the court can protect certain legal acts against retrospective nullification based upon fraudulent preference. This is possible if the legal act is necessary for the continuation of the enterprise and if this is in the interest of the joint creditors while the interests of an individual creditor will not be harmed substantially. So new funding can be protected.
Preservation of agreements / protection against termination
During the WHOA procedure contract parties cannot terminate their agreements with the debtor by reason of a default prior to the WHOA procedure or based on a ‘ipso facto’ of change of control provision.
Possibility to cancel unfavourable agreements
The reorganisation plan under the WHOA may include a request for amendment of certain agreements. Should the counterparty refuse, the debtor can cancel the agreement against a maximum notice period of three months. A possible compensation for damages caused by this premature termination can be included in the reorganisation plan. This provision is not applicable to labour agreements. For more information about this subject, we refer to the blog below.
Approval of shareholders not required
Even when the articles of association or the shareholders agreement stipulate differently, a director can start a WHOA procedure without shareholders permission. A possible dismissal of a director by the shareholder due to starting a WHOA procedure can be cancelled by the court.
Deal certainty provisions
Discussions about amongst others valuation, classification, entitlement to vote, the entry requirements can all be brought before court for resolution in an early stage. This offers the debtor the opportunity of interim adjustments and gives the debtor more assurance that the reorganisation plan will be approved by the court. In this respect it is also important that no appeals against decisions in a WHOA procedure are possible.
Suspension of an bankruptcy request
When a bankruptcy application and an application for the appointment of a restructuring expert to prepare a compulsory settlement, are brought before the court simultaneously, the court will first decide on the request for appointing a restructuring expert. If such request is granted, the court sets a cooling-off period during which period the application for the declaration of bankruptcy will be suspended.