Insolvency and restructuring in the Netherlands: which route fits?

Dutch insolvency law offers three formal routes under the Bankruptcy Act (Faillissementswet, Fw): bankruptcy (faillissement) to liquidate the assets, suspension of payments (surseance van betaling) as temporary breathing space, and the Dutch Scheme (WHOA), in force since 1 January 2021, under which the court confirms a restructuring plan that also binds dissenting creditors. Which route is open depends mainly on whether the business still has a viable core and on how early you act; once a creditor’s bankruptcy petition is pending, your options narrow quickly.

This article explains what each route involves, what the court tests, which deadlines apply and when directors become personally liable. It is written for boards facing a cash shortage and for creditors of a business in difficulty.

When is a business insolvent under Dutch law?

A business is insolvent in the legal sense when it has ceased to pay its debts; Dutch law does not use a balance sheet test. Under Article 1 Fw the court declares a debtor bankrupt if it is in the state of having ceased to pay (opgehouden te betalen), and in practice this requires more than one creditor.

A petitioning creditor must summarily show its own claim and at least one other unpaid claim, the supporting claim (steunvordering). A single unpaid invoice is not enough. A company with negative equity that keeps paying its bills is not insolvent in this sense; a company that is solvent on paper but has run out of cash can be declared bankrupt within weeks.

Under Article 1 Fw a petition can be filed by the debtor itself, by one or more creditors, or by the Public Prosecution Service (Openbaar Ministerie) on grounds of public interest. The district court usually hears a creditor’s petition within a few weeks. In that window the debtor can still pay, settle, apply for suspension of payments or start a WHOA procedure.

What happens once bankruptcy is declared?

The court appoints a trustee (curator), supervised by a supervisory judge (rechter-commissaris), and the debtor loses the power to dispose of its assets. The declaration takes effect from the beginning of the day on which the judgment is given.

Individual enforcement stops: attachments lapse and creditors must lodge their claims with the trustee for verification instead of suing separately. Creditors with a right of pledge or mortgage may enforce as if there were no bankruptcy, which puts a secured bank in a far stronger position than an ordinary supplier.

The ranking decides who is paid. The costs of the estate, including the trustee’s fee, come first. Tax and social security debts and certain employee claims are preferential. Unsecured creditors come last and in most Dutch bankruptcies receive little or nothing.

The trustee may terminate employment contracts with the permission of the supervisory judge, with a shortened notice period. The UWV takes over unpaid wages, holiday allowance and pension contributions for a limited period under the wage guarantee scheme (loongarantieregeling) of the Unemployment Insurance Act (WW). Employees should register with the UWV promptly.

What does suspension of payments offer?

Suspension of payments gives breathing space, not a rescue. Only the debtor can apply, when it foresees that it cannot continue paying its debts as they fall due.

The court grants a provisional suspension immediately and appoints an administrator (bewindvoerder). From then on management may only act together with the administrator. Under Article 223 Fw a definitive suspension lasts at most eighteen months, and the debtor may ask for one or more extensions of up to eighteen months each.

The instrument is weak because it does not bind secured or preferential creditors, such as the Tax and Customs Administration (Belastingdienst). A suspension that does not lead to an arrangement with creditors usually ends in bankruptcy. Its realistic use is as a holding position while a sale or refinancing is arranged. Our guide to suspension of payments in the Netherlands covers the procedure in detail.

How does the WHOA bind dissenting creditors?

Under the WHOA (Wet homologatie onderhands akkoord, Articles 369-387 Fw) a debtor offers a composition plan to its creditors and shareholders, and once the court confirms it, the plan binds everyone it covers, including those who voted against. The debtor keeps control of the business: there is no trustee.

Under Article 371 Fw any creditor, shareholder or the works council (ondernemingsraad) can ask the court to appoint a restructuring expert (herstructureringsdeskundige), and the debtor can do so too. Once an expert is appointed, only the expert can offer a plan. Creditors should therefore not see the WHOA as a debtor-only tool.

There are two variants. The private procedure (besloten akkoordprocedure) is not published, which protects commercial relationships. The public procedure (openbare akkoordprocedure) is published and recognised across the EU under the EU Insolvency Regulation, which makes it the better choice where foreign assets or creditors are involved.

How does voting work?

Creditors and shareholders are divided into classes according to their rights in a bankruptcy and their rights under the plan (Article 374 Fw). Under Article 381 Fw the plan must be put to the voters at least eight days before the vote, and a class of creditors accepts it if creditors holding at least two-thirds of the total amount of claims of those who actually voted in that class are in favour.

Under Article 383(6) Fw the confirmation hearing takes place at least eight and at most fourteen days after the confirmation request and the voting report have been filed. A straightforward restructuring can therefore be completed in weeks.

What does the court test before confirming the plan?

The court checks the class formation, the information given and the refusal grounds of Article 384 Fw. Two safeguards matter most to individual creditors who voted against.

• Best-interests test (Article 384(3) Fw): no dissenting creditor may be worse off under the plan than in a bankruptcy. The creditor must raise this itself.
• 20% rule (Article 384(4)(a) Fw): if a class of small business creditors (50 or fewer staff) with claims for goods, services or tort did not accept the plan, it must receive at least 20% of its claims, unless the debtor shows a compelling reason for less.

Under Article 369(4) Fw a WHOA plan cannot change employees’ rights under their employment contracts. Under Article 376 Fw the court can order a stay of enforcement (afkoelingsperiode) of up to four months, extendable to eight months in total, and it can authorise protected interim financing. Our article on the WHOA scheme follows the procedure step by step.

Can the business be sold out of insolvency?

Yes. In a bankruptcy the trustee often sells the business to a buyer who continues it, a relaunch (doorstart), because that usually yields more for the creditors than piecemeal liquidation. The trustee must obtain the best result for the joint creditors, so expect a competitive process and approval by the supervisory judge.

A pre-pack, where the sale is prepared confidentially before the bankruptcy and completed straight after it, has no statutory basis in the Netherlands. In Smallsteps (C-126/16, 2017) the Court of Justice of the EU held that a pre-pack aimed at continuing the business does not fall under the bankruptcy exception, so employees transfer with their rights. In Heiploeg (C-237/20, 2022) the Court accepted that the exception can apply where the procedure aims at liquidation, is supervised by a court-appointed officer and is governed by formal rules.

Under Article 7:666 BW the rules on transfer of an undertaking (Articles 7:662-7:665 BW) do not apply when the employer has been declared bankrupt and the business belongs to the estate. Legislation to regulate transfers in bankruptcy has been in preparation but is not in force. Any relaunch involving staff therefore needs employment-law advice before the structure is fixed.

When do directors become personally liable?

Earlier than most boards assume. Three routes recur in practice, alongside specific tax and pension rules.

• Article 2:248 BW: in a bankruptcy the trustee can hold each director jointly and severally liable for the deficit if the board manifestly performed its duties improperly and this is likely to be an important cause of the bankruptcy. If the books were not kept properly (Article 2:10 BW) or the annual accounts were not filed on time (Article 2:394 BW), improper performance is established and its causal role is presumed.
• Beklamel liability (Article 6:162 BW): a director who commits the company to an obligation while knowing, or reasonably should know, that it cannot pay and offers no recourse can be personally liable to that counterparty.
• Article 2:9 BW: liability towards the company itself for seriously improper management, which the trustee can also invoke.

If the company cannot pay wage tax, VAT or pension premiums, the board must notify the Tax and Customs Administration or the pension fund of its inability to pay in time. Late notification shifts the burden of proof onto the directors. Filing the annual accounts on time and notifying in time are the cheapest protection a director has.

What should you check as a director or shareholder?

Take advice as soon as the board doubts that all creditors can be paid; that is when the choices are widest.

• Do you have a weekly 13-week liquidity forecast that you can show to a bank, supplier or court?
• Is the problem liquidity in a viable business (WHOA territory) or a loss-making business model (controlled sale or bankruptcy)?
• Have the annual accounts been filed with the Chamber of Commerce (KVK) on time, and are the books complete?
• Has the inability to pay wage tax, VAT and pension premiums been notified in time?
• Are board decisions and their reasons recorded in writing?
• Are you avoiding payments that favour one creditor? A trustee can set these aside (actio pauliana, Articles 42-47 Fw) and hold the responsible director liable.

What should you check as a creditor?

Your position depends on your security and on acting within the procedural deadlines.

• Do you hold a pledge, mortgage or retention of title (eigendomsvoorbehoud), and can you identify your goods?
• Have you lodged your claim with the trustee or administrator, with supporting documents?
• In a WHOA procedure: which class are you in, and does the plan give you at least what you would receive in bankruptcy?
• Have you raised any objection at the confirmation hearing? There is only limited scope for appeal afterwards.
• Is filing a bankruptcy petition yourself realistic: can you show a supporting claim?

Our guide to bankruptcy for entrepreneurs and creditors covers each stage from the creditor’s side.

What can we do for you with insolvency and restructuring?

Our bankruptcy lawyers advise companies, directors and creditors, in Dutch and English.

• We assess your liquidity position and advise which route fits: WHOA, suspension of payments, sale or bankruptcy.
• We prepare the WHOA plan, the class formation and the voting report, and conduct the confirmation hearing.
• We file or defend a bankruptcy petition at the district court.
• We structure or review a relaunch, including the employment-law consequences.
• We defend directors against liability claims by the trustee under Article 2:248 BW.
• We lodge your claim as a creditor and raise objections to a WHOA plan at the hearing.

Summary

• Insolvency in Dutch law means having ceased to pay (Article 1 Fw), with at least two creditors; it is not a balance sheet test.
• Bankruptcy hands control to a trustee; suspension of payments gives up to 18 months of protection but does not bind secured or preferential creditors.
• A court-confirmed WHOA plan binds dissenting creditors, subject to the best-interests test and the 20% rule for small business creditors.
• Directors risk liability under Articles 2:248, 2:9 and 6:162 BW; late filing of the annual accounts creates a presumption against them.

Frequently asked questions