Dutch insolvency law: bankruptcy, suspension of payments and WHOA

If a company in the Netherlands can no longer pay its debts, Dutch law offers three main routes: bankruptcy (faillissement), suspension of payments (surseance van betaling) and a restructuring plan under the WHOA. Private individuals have a separate route, the statutory debt restructuring scheme (WSNP); for directors, the key exception is that acting too late or keeping poor records can make them personally liable.

Which route applies decides almost everything that follows: who controls the business, which creditors are bound, and what creditors can still recover.

Which rules govern insolvency in the Netherlands?

The main rules are in the Dutch Bankruptcy Act (Faillissementswet, Fw), which dates from 1893 and has been amended many times. Since 1 January 2021, it also contains the Act on the Confirmation of Private Restructuring Plans (Wet homologatie onderhands akkoord, WHOA).

The Bankruptcy Act covers bankruptcy, suspension of payments and the WSNP. For cross-border cases, the European Insolvency Regulation (Regulation (EU) 2015/848) decides in which member state the main proceedings are opened and which law applies. You can read the Bankruptcy Act on wetten.overheid.nl; the courts publish every declaration in the Central Insolvency Register, which you can search via rechtspraak.nl.

How is a company declared bankrupt?

The debtor can file its own petition (eigen aangifte), or a creditor can apply for the bankruptcy. The court declares the bankruptcy if it is summarily shown that the debtor has stopped paying its debts.

Under Article 1 Fw, the test is whether the debtor is in a situation where it has ceased to pay. When a creditor applies, the court will normally want to see that there are at least two creditors, one of whom has a claim that is due and payable. The court holds a hearing, at which the debtor can contest the application or pay the claim. A debtor’s own petition is usually decided quickly.

On the declaration, the court appoints a trustee (curator) and a supervisory judge (rechter-commissaris). Under Article 23 Fw, the debtor loses the right to manage and dispose of its assets from the start of the day of the declaration. From then on, the trustee manages the estate.

What happens during a bankruptcy?

The trustee takes control of the assets, investigates the causes of the bankruptcy and sells the assets for the benefit of the creditors. The supervisory judge oversees the trustee and must approve important decisions.

A common outcome is a restart (doorstart): the trustee sells the business, or parts of it, to a buyer who continues it, sometimes the former shareholders. The trustee will want a price that is fair to the creditors, and a restart by insiders is scrutinised closely.

Creditors submit their claims to the trustee. If there is money available for ordinary creditors, the claims are checked at a verification meeting (verificatievergadering), where they are admitted or disputed. In many bankruptcies, however, the proceeds do not even cover the estate debts, and the case is closed without any payment to ordinary creditors.

Who gets paid first?

The costs of the bankruptcy itself, the estate debts (boedelschulden), are paid first. Next come creditors with a preferential right, and ordinary unsecured creditors come last.

Creditors with a pledge or mortgage can in principle enforce their security as if there were no bankruptcy (Article 57 Fw). The trustee can, however, impose a cooling-off period (afkoelingsperiode) of up to two months, which can be extended once by another two months. The Tax and Customs Administration has a strong preferential position. Employees’ outstanding wages are largely taken over by the UWV under the wage guarantee scheme, and the UWV then claims them in the bankruptcy.

A supplier who delivered goods under retention of title (eigendomsvoorbehoud) can reclaim goods that are still present and identifiable. This is one reason why a creditor should secure its position before problems arise.

When is suspension of payments an option?

Suspension of payments gives a business that is fundamentally viable temporary protection from its creditors, so that it can reorganise. It is available to companies and to individuals who run a business.

The court grants a provisional suspension immediately on the application and appoints an administrator (bewindvoerder). The management then acts together with the administrator. The protection is limited: under Article 232 Fw, secured and preferential creditors are not bound and can still take action. In practice, suspension of payments often turns into bankruptcy after a short time.

How does a WHOA restructuring plan work?

Under the WHOA, a company that can reasonably foresee that it will not be able to continue paying its debts can offer its creditors and shareholders a plan, outside bankruptcy. The court can confirm the plan, which then binds creditors who voted against it.

Creditors are divided into classes, for example secured creditors, the tax authorities and trade creditors. Each class votes on the plan. If at least one class of creditors that would receive something in bankruptcy votes in favour, the company can ask the court to confirm the plan for all classes. The court checks, among other things, whether any creditor is worse off than in bankruptcy.

The directors stay in control during the process. The company or a creditor can ask the court to appoint a restructuring expert (herstructureringsdeskundige), and the court can order a stay of enforcement to prevent creditors from taking action while the plan is being prepared. A WHOA procedure can be public or confidential.

What is the WSNP for private individuals?

The statutory debt restructuring scheme for natural persons (WSNP) is a court procedure for individuals who cannot pay their debts. After the period set by the court, you can obtain a discharge from the remaining debts, known as the clean slate (schone lei).

Before applying, you must first try to reach an amicable debt settlement with your creditors, usually with help from the municipality. During the scheme, an administrator manages your income. You must live on a limited budget, look for work and pay what you can spare to the creditors. Creditors who want to know what they can still recover after the scheme should get advice on their specific claim.

Can the trustee undo transactions made before the bankruptcy?

Yes. Under Article 42 Fw (the actio pauliana), the trustee can annul legal acts that the debtor performed before the bankruptcy without being obliged to, if both parties knew or should have known that creditors would be prejudiced.

There is no fixed three-year window. Instead, Article 43 Fw presumes knowledge of prejudice for certain acts performed within one year before the bankruptcy, such as transactions with related parties or on clearly unfavourable terms. Payments that the debtor was obliged to make can only be annulled in narrower cases under Article 47 Fw, for example if the creditor knew that a bankruptcy petition had already been filed, or if debtor and creditor conspired to favour that creditor. Keep a clear record of major transactions and the reasons for them.

When are directors personally liable?

In a bankruptcy of a BV or NV, the trustee can hold directors personally liable for the deficit if manifestly improper management was an important cause of the bankruptcy. This follows from Article 2:248 of the Dutch Civil Code (BW) and concerns the three years before the bankruptcy.

If the directors did not keep proper accounts, or filed the annual accounts late, the law assumes that the management was improper and that this was an important cause of the bankruptcy. Directors can then only escape liability with difficult evidence. Directors must also report an inability to pay payroll tax, VAT and some other taxes to the Tax and Customs Administration (Belastingdienst) within two weeks after the due date (Article 36 of the Collection of State Taxes Act, Invorderingswet 1990), or they risk personal liability for those taxes.

What should you check as a director of a company in difficulty?

Act early and keep your records in order. Under Article 2:248 BW, poor records or late annual accounts are presumed to be manifestly improper management.

• Check whether the company can still pay its debts as they fall due, and whether a WHOA plan or a negotiated arrangement is still possible.
• Keep the accounts up to date and file the annual accounts with the KVK on time.
• Report an inability to pay payroll tax or VAT to the Belastingdienst within two weeks of the due date.
• Record the reasons for major transactions, especially with related parties in the year before a possible bankruptcy (Article 43 Fw).

What should you check as a creditor?

Secure your position before problems arise and act quickly once they do. After the bankruptcy, an unsecured creditor often recovers little or nothing.

• Agree retention of title (eigendomsvoorbehoud) in your general terms and conditions or contract.
• Ask for security, such as a pledge, a mortgage or a guarantee, for larger exposures.
• Submit your claim to the trustee before the deadline set for the verification meeting.
• Reclaim goods delivered under retention of title that are still present and identifiable, and respect any cooling-off period of up to two months.

What can we do for you with insolvency?

Our corporate lawyers advise companies, directors and creditors on insolvency, restructuring and claims in bankruptcy.

• We assess whether a WHOA plan, suspension of payments or a negotiated arrangement is still an option for your company.
• We submit your claim to the trustee and reclaim goods under retention of title.
• We defend directors against a liability claim by the trustee under Article 2:248 BW.
• We review whether a transaction can be annulled under Articles 42 to 47 Fw, or defend it against the trustee.

Summary

• Dutch insolvency law offers bankruptcy, suspension of payments and the WHOA for businesses, and the WSNP for private individuals.
• In bankruptcy, a trustee manages the estate under supervision of a supervisory judge.
• Estate debts are paid first, then preferential creditors; secured creditors can enforce their security, subject to a cooling-off period.
• The trustee can annul prejudicial transactions under Articles 42 to 47 Fw.
• Directors can be personally liable for manifestly improper management under Article 2:248 BW.