The restructuring plan under the WHOA
The Act on the court approval of private restructuring plans (Wet Homologatie Onderhands Akkoord or WHOA) makes it easier for a company in financial distress to sit down with its creditors and shareholders at the negotiating table in order to agree upon a reduction of its debt burden as set out in a restructuring plan. Such a restructuring plan can be submitted to the court for ratification (homologatie). After ratification of the restructuring plan, all affected creditors or shareholders are bound by the terms of the plan.
The debtor is free to choose whether he wishes to offer the restructuring plan to all its creditors and shareholders or only to a certain limited group. In the latter case, the debtor will be able to use the private procedure (besloten akkoordprocedure) to reach an agreement in relative peace, which could avoid negative publicity about the financial problems that have arisen and the related negative consequences. The rights of creditors and shareholders, who are not involved in the restructuring, remain unaffected in that scenario.
In principle, the restructuring plan can include all kinds of changes to the rights of the involved creditors and shareholders. For example, the restructuring plan could entail a full or partial waiver of an outstanding claim against the debtor, a moratorium, giving the debtor more time to meet its payment obligations, or a Debt-to-Equity Swap, by which a creditor's claim against a company is converted into shares in that company. It is also possible, as was the case with the ADO Den Haag restructuring (District Court of The Hague 25 February 2022, ECLI:NL:RBDHA:2022:1450, to cancel shares and issue new shares to another party (a financier). As set out in the previous newsletter, the WHOA also allows the debtor to unilaterally terminate current agreements if the other party does not agree to a proposed voluntary amendment or termination. Moreover, unlike a suspension of payments (surséance van betaling), a restructuring plan can also include amendments with regard to the rights of preferential and secured creditors.
However, the rights of certain creditors cannot be affected by a restructuring plan. This concerns, amongst others, the rights of employees employed by the debtor or claims in respect of pension instalments that are due or will be paid in the future. Furthermore, financial collateral arrangements and settlement clauses as referred to in Section 7:51 of the Civil Code cannot be affected by a restructuring plan either.
After the ratification of the restructuring plan, all affected creditors and shareholders are bound by its terms, including those who did not vote or voted against the restructuring plan. The guiding principle is that the creditors and shareholders involved should not be placed in a significantly worse position than in case of bankruptcy. In case the restructuring plan does put them in a worse position, the creditor or shareholder may request the court to reject the ratification of the restructuring plan. However, a party can only request the rejection if there it has timely objected against the restructuring plan, as stated in Section 383(9) of the Bankruptcy Act.
If you wish to learn more about the WHOA, the possibilities for your company under the WHOA or your position as an affected creditor or shareholder, please contact us.
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