The compulsory settlement: forcing a creditor to accept

A debtor who cannot pay in full usually tries first for a voluntary arrangement: creditors accept a percentage of their claim, paid over time, against a discharge of the rest. That arrangement collapses the moment a single creditor refuses. Dutch law gives the debtor two separate routes to overcome that refusal, and which one applies depends on whether the debtor is a private individual or a business.

Can a court force a creditor to accept a settlement offer?

For individuals, yes. Under article 287a of the Bankruptcy Act (Faillissementswet), a debtor who has offered a voluntary arrangement (buitengerechtelijk akkoord) and is refused by one or more creditors can ask the court to order those creditors to accept it anyway.

What test does the court apply?

The court grants the request only if the refusing creditor could not, weighing all the interests involved, reasonably have decided to refuse. In practice it compares what the creditor is offered with what it would realistically obtain otherwise.

Where the offer represents the maximum the debtor can raise, is properly documented, is supported by the other creditors, and the alternative is a statutory debt restructuring in which the creditor would receive the same amount or less, refusal is difficult to justify. Where the offer is thin, the documentation incomplete, or the debtor’s own conduct open to criticism, the creditor is entitled to hold out.

What if the court refuses to impose the settlement?

The request for a compulsory settlement is typically combined with a request for admission to the statutory debt restructuring scheme for individuals (wettelijke schuldsaneringsregeling natuurlijke personen, WSNP). That way, if the compulsory settlement fails, the debtor still has a route out of the debts.

Is there an equivalent instrument for businesses?

Yes, and it is considerably more powerful. Since 1 January 2021, the WHOA (Wet homologatie onderhands akkoord, the Act on Court Confirmation of a Private Restructuring Plan), set out in articles 369 to 387 of the Bankruptcy Act, allows a business threatened with insolvency to offer a restructuring plan to its creditors and shareholders, divided into classes, and to have the court confirm it.

Once the court confirms the plan, it binds dissenting creditors within a class that voted in favour, and it can even bind an entire class that voted against – provided the safeguards built into the WHOA are respected, including the guarantee that no creditor receives less than it would in a liquidation.

How does the WHOA differ from the compulsory settlement?

The compulsory settlement only overcomes the refusal of individual holdout creditors against an otherwise agreed arrangement. The WHOA goes further: it can write down claims, convert debt into equity and terminate onerous contracts, and it can bind entire classes of creditors and shareholders, not only individual objectors.

What should a creditor do when confronted with a proposal?

Refusing on principle is rarely the strongest position. The questions worth answering are concrete: what would this claim realistically yield in a bankruptcy or a statutory restructuring, is the offer supported by verifiable financial information, are all creditors being treated equally, and is there any indication of undisclosed assets?

A creditor who raises specific, substantiated objections is in a considerably stronger position – both in resisting a compulsory settlement and in negotiating a better outcome – than one who simply declines without explanation.

In summary

• A voluntary arrangement fails if even one creditor refuses; Dutch law offers two ways to overcome that.
• Individuals can ask the court for a compulsory settlement under article 287a Faillissementswet, granted only if refusal was unreasonable given all the interests involved.
• That request is usually combined with an application for the WSNP debt restructuring scheme, so the debtor still has a route if it fails.
• Businesses can use the WHOA (articles 369-387 Faillissementswet, in force since 1 January 2021) to have a restructuring plan confirmed by the court, binding entire classes of creditors.
• Creditors are better placed with specific, substantiated objections than with an unexplained refusal.

FAQ

Does a compulsory settlement apply to businesses as well as individuals?
No. The compulsory settlement under article 287a Faillissementswet is for private individuals. Businesses use the WHOA instead.

Can a creditor still object once the WHOA plan has been confirmed?
Once the court has confirmed the plan, it binds the creditor as a member of the class that voted, subject to the safeguards built into the WHOA, including the minimum of what the creditor would receive in a liquidation.

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