Restructuring, insolvency and bankruptcy

Restructuring, insolvency, and bankruptcy: acting at the right time

When a company is under financial pressure, timely and legally prudent action is crucial. This is not only for the continuity of the business, but also for protecting directors against liability and preventing fraudulent conveyance risks. We advise entrepreneurs, directors, financiers, shareholders, suppliers, and directors of group companies at all stages of financial stress: from early restructuring to the WHOA, suspension of payments, bankruptcy, and restart.

Who do we work for?

We assist a broad range of clients. Our clients are directors and owner-managers of companies in financial distress, shareholders and parent companies, financiers (banks, alternative financiers), suppliers with large claims, buyers in distressed M&A processes, candidates for a restart, and bankruptcy trustees and administrators. Our role varies by position: for entrepreneurs and directors, the emphasis is on preserving the business and protection against liability; for creditors, it is on recovery and securing an optimal position.

Early restructuring

The best restructuring is usually the earliest. When a company is still functioning but financial parameters are deteriorating, room arises for negotiated solutions: renegotiation of credit terms, revision of collateral, payment arrangements with the tax authorities and major suppliers, cost reduction, and restructuring of the workforce. At this stage, directors' liability is still limited and parties are free to negotiate, provided that selective payment and the principle of equality are handled with care.

Private Agreement Homologation Act (WHOA)

The WHOA entered into force on January 1, 2021, and offers the possibility to bind creditors and shareholders outside of bankruptcy through a court-approved compulsory agreement, even against the will of a minority. The WHOA is intended for viable enterprises that would go bankrupt without an agreement. The process requires careful preparation: classification, valuation (going concern versus liquidation), best-interest-of-creditors test, no-creditor-worse-off test, and tight control. A restructuring expert or observer may be appointed, and the court assesses the agreement against a set of strict conditions.

Suspension of payments

Suspension of payments (Article 214 et seq. of the Bankruptcy Act) offers temporary protection against recovery by unsecured creditors, with a court-appointed administrator supervising the management. Since the introduction of the WHOA, suspension of payments has been used less frequently in practice for restructuring, but it can still serve as breathing space pending an agreement, a restart, or an orderly liquidation. Preferential claims (tax authorities, employees) fall outside the protection afforded by suspension of payments.

Bankruptcy

Bankruptcy is the statutory procedure for the liquidation of a company that can no longer meet its obligations. A petition for bankruptcy can be filed by the debtor themselves, by a creditor, or by the Public Prosecution Service. The court appoints a trustee. The trustee inventories assets and liabilities, manages and liquidates the estate, and distributes the proceeds among creditors according to the statutory order of priority (Article 3:277 of the Dutch Civil Code and the specific provisions of the Bankruptcy Act). In the event of bankruptcy, the liability of directors is revived (Articles 2:138/2:248 of the Dutch Civil Code).

Pre-pack and restart

A pre-pack is a type of process in which a restart is prepared prior to bankruptcy under the direction of a prospective trustee (silent administrator), with the aim of preserving as much value as possible for creditors and employment. Following the Smallsteps judgment (CJEU 22 June 2017) and subsequent rulings, the position of employees in a pre-pack has become uncertain. The Bankruptcy Transfer of Undertakings Act (WOVOF) aims to clarify this position, but is still pending at the time of writing. In practice, work is still carried out using a prospective trustee, but with great care regarding communication, market research, and employment law implications.

Pauliana and directors' liability

Directors must exercise extra vigilance in the event of financial stress. The bankruptcy clawback provision (Articles 42 and 47 of the Bankruptcy Act) renders legal acts prior to bankruptcy that prejudice creditors voidable by the trustee. In the case of related-party transactions, there is a presumption of proof regarding knowledge of the prejudice. Additionally, the trustee may hold directors liable under Articles 2:138/2:248 of the Dutch Civil Code for improper management, with presumptions of proof regarding violations of accounting or publication obligations. Timely notification of inability to pay to the tax authorities (Article 36 of the Income Tax Act) is essential to avoid liability arising from this.

Our working method

In times of financial stress, the principle is: rapid assessment, clear choice, and careful execution. We first assess the financial position, directors' liability risks, Pauliana limits, and strategic options. Subsequently, we determine the course of action: early restructuring, WHOA, suspension of payments, controlled bankruptcy with restart, or a pre-pack. At every step, we think ahead: how will the bank react, how will the tax authorities respond, what are the consequences for suppliers and employees, and which documentation will guide subsequent Pauliana or liability discussions?

Why MKBjuristen.nl?

MKBjuristen.nl has years of experience in restructuring and insolvency, from the perspective of directors and entrepreneurs as well as trustees and creditors. We are familiar with WHOA practice, pre-pack case law, Pauliana case law, and the practices of banks, the tax authorities, and major creditors. Specialist advice starting from €155 per hour excluding VAT, with clear agreements in advance regarding scope and budget.

The WHOA procedure step by step

A WHOA process has its own rhythm and critical decision points. It begins with the declaration of commencement, after which the debtor (or a designated restructuring expert) prepares an agreement. Crucial elements are the class division, in which creditors and shareholders with a comparable position are grouped into the same voting class, and the valuation of the company on a going concern and liquidation basis. The court may declare a cooling-off period (Article 376 of the Bankruptcy Act) offering protection against recovery, attachment, and bankruptcy applications for a maximum of four months and, after extension, eight months, allowing the agreement to be worked out at a leisurely pace. If a class does not consent, the judge may still homologate the agreement via a cross-class cram-down, provided the no-creditor-worse-off test and other homologation conditions are met. You can choose between a closed agreement procedure and a public procedure (relevant for recognition within the EU). We guide the entire process, from class division to hearing, and align it with any potential creditors' agreement.

Collateral, separatists and the position of financiers

In financial restructuring, the position of secured creditors is decisive. Pledgees and mortgagees are secured creditors: in principle, they can exercise their rights as if there were no bankruptcy (Article 57 of the Bankruptcy Act), although the trustee may set a reasonable time limit and protection applies during a cooling-off period. In out-of-bankruptcy restructuring, much revolves around renegotiating financing documentation, revising the security position, intercreditor agreements, and the question of whether new financing (bridge or DIP financing) can be protected under the WHOA. It is important for entrepreneurs and directors to understand which assets are pledged or mortgaged and what room remains. We analyze the security structure and negotiate with banks and financiers; also read our page on financing and securities.

Restructuring within corporate and group structures

From a corporate law perspective, restructuring is often a matter of structure. Within a group of companies, intercompany claims, joint and several liability, Section 403 declarations, guarantees, and mutual security positions play a significant role. A sound restructuring may entail spinning off viable units, placing them in a new entity, or divesting them, while winding down loss-making activities. In doing so, the board pays attention to fulfilling its duties towards the company (Article 2:9 of the Dutch Civil Code) and to the interests of all stakeholders, not just the shareholder. Structures such as a tax-neutral transfer or a "deathbed" construction require careful legal structuring to prevent subsequent discussions regarding fraudulent conveyance (Pauliana) or liability. We provide guidance on the divestment of business units and the restructuring of group structures, for international conglomerates as well as for entrepreneurs with a few private limited companies (BVs).

Distressed M&A: sale under financial pressure

A company in distress is often still valuable, provided the sale is structured correctly. In distressed M&A, you sell assets, shares, or a company under time pressure and with limited guarantees. The buyer wants certainty regarding title and whether the transaction is fraudulently fraudulent; the seller and the board wish to avoid liability. A transaction can be structured outside of bankruptcy, via a WHOA agreement, a pre-pack, or a restart from bankruptcy. We advise both buyers and sellers on valuation, market analysis, due diligence under time pressure, the purchase agreement, and employment law implications, ensuring the company retains maximum value and the involved directors remain protected.

Part of our corporate law

Restructuring, insolvency, and bankruptcy are part of our broader Corporate Law. Financial stress almost always impacts a company's governance, shareholder relations, financing, and contracts. Our mixed teams of lawyers and in-house counsel combine insolvency law with corporate, contract, and employment law, ensuring you have a single point of contact for the entire issue. Whether you manage an international group or are the baker around the corner as an entrepreneur, we translate legal options into a concrete plan that fits your situation and your budget.