Business debt restructuring: Dutch scheme of arrangements (WHOA) as a solution for international restructurings

The “Wet Homologatie Onderhands Akkoord” (WHOA), or the law on Court confirmation of extrajudicial restructuring plans, introduced in the Netherlands in 2021, has proven its worth for restructuring companies through a private debt agreement with creditors and shareholders.

The flexible debtor in possession procedure has already been used to successfully complete several major international restructurings, with confirmations by Dutch courts.

Characteristics of the flexible debtor in possession procedure

The Dutch legal arrangement concerning the confirmation of extrajudicial restructuring plans is a flexible debtor in possession scheme, where a private agreement can be offered to all or a part of the creditors and shareholders of a company. Creditors and shareholders are divided into different classes. Within these classes, the minority is bound by the majority of the votes. The court can enforce the private agreement on dissenting classes using a confirmation decision (cramdown).

To increase the chances of successful restructuring, the court can apply protective measures, such as a cooling-off period during which some rights of creditors can be limited. Under certain circumstances, the court can appoint a restructuring expert to prepare the agreement. The court can also appoint an observer to oversee the formation of the agreement, keeping in mind the interests of the creditors, as the Ecovis experts know.

An important aspect of this Dutch scheme of arrangement is deal certainty. In the preliminary stages of the agreement’s formation, decisions can be requested from the court concerning disputes about the agreement between the companies and creditors or shareholders. No appeal is possible against a court’s decision to confirm an agreement.

We advise companies in need of restructuring, examine various options and show alternative courses of action.

David Bos, Attorney-at-law, Partner, KienhuisHoving – Member of ECOVIS International, Utrecht, Netherlands

WHOA in international contexts

WHOA offers a public and a private variant, both of which are applicable in international contexts. The advantage of a public procedure is that it is listed in Annex A of the European Insolvency Regulation, which means that a decision to approve an agreement is automatically recognised in most European countries. For a private procedure, recognition of decisions by the Dutch court must be sought through common international private law.

International companies conducting the administration of their interests in the Netherlands on a regular basis and which is ascertainable by third parties, can always use WHOA. An indication of this is the presence of a statutory seat in the Netherlands. International companies with a branch in the Netherlands can also restructure the debts of that branch through the Netherlands. If a company or (debt) agreement(s) are otherwise sufficiently connected to the Dutch legal sphere, the Dutch court can also approve a WHOA agreement. Indications for this include (substantial) assets in the Netherlands, a legal or forum choice in contracts related to the debts to be restructured, being part of a Dutch group of companies, or liability for group debts subject to Dutch jurisdiction.

For further information please contact:

David Bos, attorney-at-law, Partner, KienhuisHoving – Member of ECOVIS International, Utrecht, Netherlands
Email: david.bos@kienhuishoving.nl