Introduction
The Court Approval of a Private Composition Act, known by its Dutch acronym WHOA and internationally as the Dutch scheme, allows a company to be restructured without bankruptcy and without suspension of payments. A creditor who cooperates binds itself; a creditor who refuses is bound by the court once the plan is confirmed. That makes the WHOA fundamentally different from bankruptcy: there, liquidation of the estate takes precedence, while here the aim is continuation of a business whose core is viable even though its balance sheet is not. The regime has applied since 1 January 2021 and is set out in sections 369 to 387 of the Dutch Bankruptcy Act.
When the WHOA comes into play
There is a single condition for access, and it looks forward. The debtor must be in a position in which it is reasonably likely that it will be unable to continue paying its debts (section 370(1)). In the case law that pre-insolvency position has been described as the situation in which the company has not yet stopped paying and can therefore still meet its current obligations, but foresees that without restructuring there is no realistic prospect of avoiding future insolvency.
That formulation marks two boundaries. A company that sees no problem coming cannot offer a plan. A company that has already stopped paying falls outside the regime, and what remains is the route of bankruptcy and a trustee. Where a viable core is absent altogether, turbo liquidation is the route, with the liability risks that come with it.
What a plan can modify, and what it cannot
A plan provides for modification of the rights of creditors and shareholders (section 370(1)): a write-off, a deferral of payment, or conversion of a claim into shares. The Supreme Court drew the outer limit sharply in the case of shipbuilder IHC. A plan cannot oblige a financier to provide new credit, nor to honour a previously committed facility on amended terms. In section 370(1) the legislature had in mind only the compulsory adjustment of existing rights, and that the WHOA is intended as a flexible restructuring instrument is no sufficient ground for concluding otherwise (Supreme Court 25 October 2024, ECLI:NL:HR:2024:1533).
What a plan can do is modify the ranking that applies between the bound creditors on a later enforcement, and that extends to the ranking in property law. A prejudiced creditor has the absolute priority rule against that.
Two categories fall outside the Act. Employees' rights under their employment contracts cannot be modified (section 369(4)), and that includes an industry-wide pension fund's claim for unpaid pension contributions (Supreme Court 25 February 2022, ECLI:NL:HR:2022:328). Financial collateral arrangements and set-off clauses within the meaning of section 7:51 Dutch Civil Code are equally out of reach.
Protection while the plan is prepared
Preparing a plan takes time, and there is no time if creditors enforce in the meantime. The court can order a stay of enforcement, during which enforcement against the company's assets is barred and the handling of a filed bankruptcy petition is suspended (section 376). That protection operates only against creditors who have been informed or who know that a plan is being prepared, so notifying the creditors concerned is part of the measure rather than a formality that follows it. The stay applies for at most four months and can be extended to eight months in total.
Besides the company itself, a creditor, a shareholder or the works council can ask the court to appoint a restructuring expert (section 371). That expert is then authorised, in place of the company, to offer a plan. Where such a request is supported by a majority of creditors, those creditors also bear the costs. Alongside the expert the Act provides for a lighter form of supervision: the observer, who supervises the making of the plan with regard for the interests of the creditors as a body, and who reports to the court (section 380).
Classes, voting and the protective rules
Creditors and shareholders who are not in a comparable position are placed in classes, and voting takes place per class (sections 374 and 381). A class approves if two thirds of the claim value cast within that class is in favour. What counts is therefore the amount and not the number of creditors, and only those who vote are counted. The division into classes thus determines the outcome, and the court reviews its correctness at the confirmation stage.
Three rules protect the dissenting creditor. No one may be worse off under the plan than in bankruptcy (section 384(3)). A creditor without a pledge or mortgage must be able to opt for a cash payment equal to what it would receive in bankruptcy. And the statutory or contractual ranking may not be departed from to the detriment of a dissenting class, unless there is a reasonable ground and those creditors are not prejudiced by it. Those grounds arise only at the request of a dissenting creditor, so a party that does not defend itself cannot invoke them afterwards. No legal remedy lies against the confirmation decision (section 369(10)).
Confidential or public procedure
At the outset a choice arises that shapes the rest of the process. In the confidential plan procedure it is not made public that a plan is being prepared and the court hears all requests in chambers, which brings calm in dealings with suppliers and customers. The public procedure is listed in Annex A to the European Insolvency Regulation, so the court can base its jurisdiction on that Regulation and the procedure is recognised in other member states. For a group with foreign entities, that choice therefore determines whether protection has cross-border effect.
Further reading
How the procedure runs step by step and which test the court applies to each request, in each case with a published decision, is set out in how a Dutch WHOA restructuring works. That article also covers what the court sets by way of costs in the published case law and how long the various decisions take.