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The WHOA is gradually gaining a foothold in insolvency law

Since the Act on the court approval of private restructuring plans (Wet Homologatie Onderhands Akkoord, and hereinafter “WHOA”) entered into force in 2021, the WHOA Pool - a group of specialised judges and staff tasked with implementing the WHOA - has been issuing annual reports. Their main conclusion of the 2023 annual report, published on 18 June 2024, is that the WHOA is gradually gaining a foothold in insolvency law. Read more about the figures and trends related to WHOA in 2023 below.

As soon as a debtor starts preparing an restructuring plan in a private arrangement (onderhands akkoord), he will file a declaration with the court registry, known as a start-of-procedure declaration (startverklaring). The annual report shows that as many as 355 start-of-procedure declarations were filed in 2023; more than the 293 declarations in 2021 and 2022 combined. If the start-of-procedure declarations of ‘groups’ - such as a group of legal entities or general partnerships (vennootschappen onder firma) and their partners - are only counted once, the adjusted number for 2023 comes to 199 (compared to 132 in 2021 and 71 in 2022).

After having filed the start-of-procedure declaration, the debtor can request the court for one of the many restructuring instruments that the WHOA has to offer. However, not every start-of-procedure declaration will result in a WHOA proceeding before the court. In 2023, (only) 46 (group) proceedings were initiated, which is a notably low number compared with the number of start-of-procedure declarations filed in that year (the adjusted number of 199). It should be noted, however, that these figures are not entirely connected: some start-of-procedure declarations filed in 2023 may lead to proceedings in 2024, while some of the 46 proceedings started in 2023 may originate from start-of-procedure declarations already filed in 2022.

Although the annual report offers no concrete explanation for this difference, there are several possible explanations that can be considered. As described in an earlier news item (click here), it is important to start restructuring debt on time. Some companies will simply be too late with their restructuring attempt. As it turns out, almost 10 per cent of companies that filed a start-of-procedure declaration have already been declared bankrupt before they were able to file a request for one of the restructuring instruments that the WHOA provides.

A more positive explanation could be that because of the WHOA, creditors are more inclined to accept a debtor's restructuring plan in order to avoid formal WHOA proceedings. This effect was at least expected by the legislator, indicating that “the mere existence of an effective and efficient scheme leading to a speedy final court decision may avoid the need for an actual go to court” (Explanatory Memorandum to the WHOA, p. 2).

In addition, the start-of-procedure declarations may be filed frequently because this is free of charge and without any obligation to take any subsequent steps and thus the threshold for taking this step is low. The start-of-procedure declaration remains available for inspection at the registry for one year, see section 370(3) Fw. There are no statutory consequences if a request is not filed within that year and the possibility of filing a start-of-procedure declaration again after the expiry of one year is not excluded.

If a request is filed and WHOA proceedings are initiated in court, it does not always lead to a successful restructuring. In 2023, there were a total of 16 requests for homologation of the agreement; 14 agreements were homologated and two requests were rejected. A total of 16 companies were eventually declared bankrupt after the start of WHOA proceedings.

Although the awareness of the WHOA is growing, it appears that not every start-of-procedure declaration leads to actual WHOA proceedings or a successful restructuring. The next few years will have to show to what extent the WHOA will prove to be an effective tool to achieve successful restructurings.