Company insolvency in the Netherlands: WHOA, suspension or bankruptcy?

A Dutch company in financial difficulty has three formal routes: a court-confirmed private composition under the WHOA, suspension of payments (surseance van betaling) and bankruptcy (faillissement). The key difference is who keeps control: under the WHOA the board stays in charge, in suspension of payments it needs an administrator’s cooperation, and in bankruptcy a trustee takes over completely. The exception is timing: the WHOA is only available while the business is still viable, so a company that waits until the cash has run out has usually lost that option.

Directors also carry personal risk in the run-up to insolvency. Below we explain each route, the deadlines and what directors and creditors should check. Our bankruptcy lawyers and corporate lawyers work on these matters for Dutch and international companies.

Which law governs insolvency in the Netherlands?

All three routes are regulated in the Dutch Bankruptcy Act (Faillissementswet, Fw). The WHOA (Wet homologatie onderhands akkoord, Act on court confirmation of extrajudicial restructuring plans) was added to that Act as Articles 369 to 387 Fw and took effect on 1 January 2021.

The procedures run before the district court (rechtbank) of the place where the company has its registered office. For companies with operations in other EU member states, the EU Insolvency Regulation determines which court has jurisdiction.

What are the early warning signs?

The legal test for each route turns on your payment position, so watch the figures early. Signals are recurring problems paying suppliers, wages or taxes, falling margins, a rising debt-to-equity ratio and refused financing.

Operational signals matter too: losing key customers, high staff turnover and suppliers who demand cash on delivery. When these appear, the board should document its decisions, because a later trustee will review them for the three years before any bankruptcy (Article 2:248(6) BW).

How does a WHOA restructuring plan work?

Under the WHOA the company offers its creditors and shareholders a plan that changes their rights, and the court can confirm it so that it binds dissenting parties. The company must be in a situation where it is reasonably likely that it cannot continue paying its debts (Article 370(1) Fw).

Creditors and shareholders whose rights change vote in classes. A class of creditors approves when those voting in favour represent at least two thirds of the total amount of claims of the creditors in that class who voted (Article 381 Fw). The court can then confirm (homologeren) the plan under Article 384 Fw; under conditions set out there, the plan can also bind a whole class that voted against.

While the plan is being prepared, the court can declare a cooling-off period (afkoelingsperiode) of up to four months. Creditors then cannot enforce against the company’s assets without court permission, and bankruptcy petitions are suspended. The court can extend the period, but the total cannot exceed eight months (Article 376 Fw).

A creditor, shareholder or works council can also ask the court to appoint a restructuring expert (herstructureringsdeskundige) who prepares and offers a plan (Article 371 Fw). The WHOA does not apply to individuals who do not run a business, nor to banks and insurers (Article 369 Fw).

What does suspension of payments involve?

Suspension of payments is meant for a company that foresees that it cannot continue paying its due debts (Article 214 Fw). The company files a petition, signed by itself and its lawyer, and the court grants a provisional suspension immediately and appoints an administrator (bewindvoerder).

During the suspension the board can only act with the administrator’s cooperation (Article 228 Fw). The suspension does not apply to secured and preferential claims, to the extent they can be recovered from the collateral (Article 232 Fw). Because secured creditors such as banks can still enforce, a suspension often ends in bankruptcy.

What happens in bankruptcy?

A company that has stopped paying its debts is declared bankrupt by the court, on its own application or at the request of one or more creditors (Article 1 Fw). The Public Prosecution Service can also file for reasons of public interest.

The court appoints a trustee (curator), who takes over the management of the assets and sells them for the benefit of the creditors. The business only continues if the trustee decides that a sale of the business as a going concern yields more.

Employees can be dismissed by the trustee with a notice period of at most six weeks, regardless of a longer contractual or statutory term (Article 40 Fw). From the bankruptcy date, wages are an estate debt (boedelschuld). A creditor who is also a debtor of the company can in principle set off claims that arose before the bankruptcy (Article 53 Fw).

Can you restructure without going to court?

Yes, an informal (out-of-court) restructuring is always possible, but it only binds the creditors who agree. Typical measures are new payment terms, a partial debt write-off, a debt-for-equity swap, fresh investment or a sale and leaseback of assets.

The weak point is the hold-out creditor: one party who refuses can block the deal. That is where the WHOA helps, because a court-confirmed plan also binds dissenting creditors and classes under Article 384 Fw.

When are directors personally liable?

In a bankruptcy of a BV, every director is jointly and severally liable to the estate for the shortfall if the board manifestly performed its duties improperly and this is likely an important cause of the bankruptcy (Article 2:248(1) BW). The trustee can only rely on conduct in the three years before the bankruptcy.

If the board did not keep proper books (Article 2:10 BW) or did not file the annual accounts with the Trade Register on time (Article 2:394 BW), improper performance is established by law and presumed to be an important cause of the bankruptcy (Article 2:248(2) BW).

For payroll tax and VAT, a company that cannot pay must notify the Tax Administration (Belastingdienst) of its inability to pay without delay (Article 36 of the Tax Collection Act, Invorderingswet 1990). Without a timely notification, directors can be held personally liable for those taxes.

What should you check as a director?

• Whether the company can still pay its debts as they fall due over the next months, based on a cash-flow forecast.
• Whether the books are complete and the annual accounts have been filed with the Trade Register on time.
• Whether a notification of inability to pay payroll tax or VAT must be sent to the Belastingdienst.
• Whether new obligations are entered into that the company will foreseeably not be able to meet.
• Whether board decisions and the reasons for them are recorded in minutes.
• Whether the business is still viable enough for a WHOA plan.

What should you check as a creditor?

• Whether you have security, such as a pledge, mortgage or retention of title, and how that is affected by each route.
• Whether you can set off your claim against a debt to the company (Article 53 Fw).
• In which class you are placed in a WHOA plan and what you would receive compared to a bankruptcy.
• The deadline for voting and for raising objections before the court confirms the plan.
• Whether to ask the court to appoint a restructuring expert (Article 371 Fw).
• In bankruptcy: filing your claim with the trustee before the date set for verification.

What can we do for you with insolvency and restructuring?

Our bankruptcy lawyers act for companies, directors and creditors.

• We assess which route (informal, WHOA, suspension or bankruptcy) is still available for your company.
• We prepare a WHOA plan, the class division and the request for a cooling-off period.
• We review the director-liability risks under Article 2:248 BW and the tax notification duty.
• We file and defend your claim as a creditor and assess your security and set-off rights.
• We object to a WHOA plan on your behalf or negotiate your position in an informal restructuring.

Summary

• Dutch law offers three formal routes: the WHOA, suspension of payments and bankruptcy, all in the Bankruptcy Act.
• Under the WHOA the board stays in control; a class approves with two thirds of the claims voted, and the court can bind dissenters.
• A cooling-off period lasts up to four months, extendable to eight months in total.
• Suspension of payments does not stop secured creditors and often ends in bankruptcy.
• Directors risk personal liability under Article 2:248 BW for conduct in the three years before bankruptcy.

Frequently asked questions