Meaning
Restructuring legislation frameworks in the Netherlands provide companies with a court-approved process to restructure their debts outside of formal bankruptcy. Utilizing the WHOA framework allows a debtor to negotiate a binding composition with its creditors and shareholders even if some of them vote against the plan. This system is designed to prevent the unnecessary liquidation of viable businesses by offering a flexible and efficient restructuring tool.
Legal Process
The procedure begins when the debtor files a declaration with the court stating that the company is in danger of insolvency. This filing allows the court to appoint a restructuring expert to assist in drafting the plan and to order a stay of execution to protect the assets. The proposed scheme is then put to a vote among different classes of creditors.
In most cases, the process can be completed in a matter of months.
Creditor Protection
To ensure fairness, the framework includes a court review to verify that dissenting creditors are not left worse off than they would be in a standard bankruptcy. This is known as the best-interest-of-creditors test, which protects minority rights. It prevents a majority of creditors from forcing unfair terms on others.
Corporate Outcome
Successful confirmation of the plan by the court makes the restructuring agreement binding on all parties, including those who voted against it. This outcome allows the company to continue its operations with a clean balance sheet. It preserves the value of the business and protects jobs.
