Do not wait too long to start the WHOA-proceedings

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. These agreements are set out in a so-called private arrangement (onderhands akkoord). If not all creditors agree to this arrangement, it can be submitted to the court for ratification. If the court ratifies the arrangement (homologatie), the dissenting creditors will also be bound by the arrangement.

A debtor can use the WHOA to avert an imminent bankruptcy if ‘it is reasonably plausible that the debtor will not be able to continue paying his debts’, the so-called WHOA-state (WHOA-toestand). This is different from a bankruptcy situation under Dutch law, where a debtor ceased paying his debts. The WHOA can be used if the debtor is still able to meet his current liabilities, but at the same time foresees that there is no realistic prospect of averting a future bankruptcy if the debts are not restructured. This is the case, for example, when a debtor foresees that he will not be able to repay a loan, which is due in six months or a year.

As soon as the debtor starts preparing a private arrangement, he files a start-of-procedure declaration (startverklaring) with the court registry. Depositing the start-of-procedure declaration is free of charge and can be done by the debtor himself.

It is important to start the process of restructuring the debt using the WHOA in time. When the company can no longer meet its current liabilities, it is too late. This was the case with Big Bazar's restructuring attempt in the summer of 2023. In April 2023, Big Bazar found that sales at several of its stores were lower than expected. Consequently, various cost-cutting programmes were implemented. In August 2023, preparations for a private arrangement were started and the start-of-procedure declaration was filed. However, Big Bazar was already behind on several substantial payments. To meet its current liabilities during the restructuring, Big Bazar met with three financiers to obtain working capital financing of over €6 million. However, various creditor actions, including bankruptcy petitions, frustrated these negotiations. Big Bazar therefore requested a two-week cooling-off period (afkoelingsperiode), arguing that during those two weeks it would be able to meet its current liabilities from sales. The court was not convinced. Moreover, the WHOA procedure would not be over within two weeks and an extension of the cooling-off period would be necessary. Looking ahead, the court ruled that there was too much uncertainty as to whether Big Bazar could meet its current liabilities after those two weeks, even if Big Bazar managed to get the initial capital injection. The court therefore rejected Big Bazar's request. Big Bazar was declared bankrupt on 26 September 2023.

When a creditor has filed for bankruptcy of a company, a successful restructuring of the company’s debt is still not impossible. On, at least 6 judgments can be found in which, despite a bankruptcy petition having already been filed by a creditor, a private arrangement was ratified by the court and the impending bankruptcy was averted.