Restart

Restart

If an organization is at risk of bankruptcy, the decision may be made to initiate a restart. After the bankruptcy has been declared by the court, the assets offered by the trustee can be sold. The assets are then purchased before the trustee proceeds to liquidate the estate. In most cases, selling the entirety of the assets to a single party yields more than selling the assets in separate parts. Consequently, the trustee will often accept a good offer. To effect a restart, a restart plan must be drawn up. This plan includes a reasoned offer regarding the assets required for the business operations of the new legal entity. Our legal experts and lawyers provide the necessary legal support for executing a restart.

Do you have questions about making a restart? Please contact us.

What is a restart within restructuring and insolvency?

A restart is the continuation of the healthy, viable parts of a company after bankruptcy has been declared. The debts and loss-making activities remain in the bankruptcy estate, while the valuable assets – stock, inventory, customer base, trade name, and intellectual property – are acquired by a new or existing legal entity via an asset transaction. Within the broader field of restructuring and insolvency , the restart is the final step: whereas a suspension of payments, a creditors' agreement , or a reorganization aims to prevent bankruptcy, a restart offers a way out when that is no longer possible. Whether it concerns an international group or the baker on the corner: our lawyers and corporate counsel guide the restart from start to finish.

The asset transaction with the bankruptcy trustee

Following the declaration of bankruptcy, the authority to sell assets rests with the trustee. Pursuant to Article 68 of the Bankruptcy Act, the trustee is charged with the administration and liquidation of the estate, in the interest of the collective creditors. The trustee will aim to sell the assets for the highest possible proceeds. Therefore, a restart company negotiates directly with the trustee regarding the purchase price and the composition of the portfolio to be acquired. A strong point of the restart is selectivity: in principle, you only purchase what you need. You do not automatically take ongoing contracts and assignments with you – you can continue the good agreements (with the consent of the counterparty), while you leave the loss-making ones behind in the estate. A well-substantiated, reasoned offer – part of the restart plan – increases the likelihood that the trustee will agree.

The pre-pack: preparing a restart before bankruptcy

In a pre-pack, the restart is quietly prepared before the declaration of bankruptcy. Upon request, the court appoints a prospective trustee (also known as a “silent administrator”), who oversees the process while the transaction is being prepared. The restart is then executed immediately after the bankruptcy is declared. The goal is to limit loss of value, realize a higher return for creditors, and preserve as much employment as possible. The pre-pack does not yet have full legal anchoring in the Netherlands; the legislative proposal for the Transfer of Undertakings in Bankruptcy Act (WOVOF) aims to change this. We assess on a case-by-case basis whether a pre-pack is feasible and sensible, and tailor the process to your company, ranging from large corporations to SMEs.

Personnel and transfer of undertaking in a restart

One of the most sensitive issues in a business restart is the position of the staff. In a “regular” restart following bankruptcy, protection regarding the transfer of undertakings (Article 7:662 et seq. of the Dutch Civil Code) does not, in principle, apply: Article 7:666 of the Civil Code makes an exception to this when the employer is in a state of bankruptcy and the undertaking belongs to the bankruptcy estate. The restarting party may then decide for itself which employees to offer a new employment contract to. In the case of a pre-pack, the situation is more nuanced: the Court of Justice of the European Union ruled that employee protection regarding the transfer of undertakings may apply when the bankruptcy was used solely to prepare for the restart and was not aimed at liquidation. An incorrect assessment can lead to the restarting party having to take over all employees after all. We map out this risk in advance so that you are not faced with any surprises.

Directors' liability and the Pauliana action in the event of a business restart

A restart requires due care from the director involved. If valuable assets are siphoned off before bankruptcy or transferred at an excessively low price, the bankruptcy trustee can challenge these assets by invoking the <i>faillissementspauliana</i> (Article 42 of the Bankruptcy Act for non-obligatory acts, and Article 47 of the Bankruptcy Act for obligatory acts). In addition, the director runs the risk of directors' liability: in the event of manifestly improper management that is a major cause of the bankruptcy, the trustee can hold the director liable pursuant to Article 2:248 of the Dutch Civil Code. A bankruptcy application filed too late or entering into obligations that the company cannot fulfill (the Beklamel standard) can also lead to personal liability. A restart that gives the appearance of prejudice to creditors increases this risk. Our specialized directors' liability lawyers ensure that the restart is structured to be liability-resistant.

The step-by-step plan for a restart

A restart typically follows a fixed pattern. We guide you through every step:

Risks and pitfalls of a restart

A restart offers opportunities, but also has pitfalls. The key points of attention at a glance:

Our approach: lawyers and in-house counsel together

MKB Juristen works with mixed teams of lawyers and in-house counsel. This combination pays off during a business restart: while the lawyer safeguards the procedural position, the <em>pauliana</em> action, and liability risks, the in-house counsel translates the plans into a workable, commercial reality. We work for a broad client base – from international corporations to the baker around the corner – and tailor our approach and rates to the size and complexity of your case. Because we have gained experience both on the side of restart companies and (where applicable) as bankruptcy trustees, we know both sides of the negotiating table.

Frequently asked questions about a restart

Can I restart my own bankrupt company?
Yes, that is possible. In principle, a director may make a bid for the assets themselves, but the bankruptcy trustee will scrutinize this bid extra critically for market conformity and for potential prejudice to creditors. An independent valuation and transparent negotiations are essential in this regard.

Do I assume the debts in a restart?
No. In an asset transaction, you purchase only the assets; the debts remain in the bankrupt estate. In principle, you start with a clean balance sheet.

Do I have to take over all the staff?
In the case of a regular restart after bankruptcy, protection regarding the transfer of undertaking does not apply in principle, so you can choose which employees to offer a new employment contract. This may be different in the case of a pre-pack; seek advice on this in advance.

How quickly does a restart need to be completed?
There is often significant time pressure. The bankruptcy trustee wants to liquidate the assets quickly, and the value of the company is declining every day. Good preparation – if necessary via a pre-pack – is therefore crucial.

Do you have questions about a business restart, or would you like to have it assessed whether a restart is feasible in your situation? Contact us for a no-obligation consultation.