Leiden Researchers To Collaborate, WODC Commissions An Evaluation Of The WHOA
Leiden researchers Reinout Vriesendorp, Jessie Pool, and Harold Koster from the Department Corporate Law and Jan Adriaanse and Marc Broekema from the Department Business Studies are about to start a collaboration with Groningen University. The WODC (the knowledge centre in the field of the Dutch Ministry of Justice and Security) has commissioned them to conduct an evaluation of the WHOA (The Dutch Court Approval of Private Composition Act).
In 2012, the legislator announced the legislative programme ‘Herijking faillissementsrecht’ (Review insolvency law). This had been long expected and stemmed from the Voorontwerp Insolventiewet (Preliminary design insolvency law) from 2007 which envisioned a complete revision of the Faillissementswet (Bankruptcy Act). Although a complete revision was seen as too extensive at the time, there were a few problems within the insolvency law requiring definitive solutions. This resulted in the legislative programme mentioned above that is based on three pillars: combatting fraud, reenforcing the reorganising capabilities of companies, and modernisation.
The formation of the WHOA was part of the second pillar and came into effect on 1 January 2022. The aim of the WHOA is, in short, to prevent viable companies, that are viable of themselves but are threatening to go under because of too high debt burdens or too high structural debts, to go bankrupt. The introduction of the WHOA was meant to increase the reorganising capabilities of companies in the Netherlands.
Added incentive
It has never been the intention to devaluate the existing extrajudicial restructuring practices. Rather, the WHOA was meant to be an added incentive for stakeholders. The reasoning behind this was that the existence of the WHOA would make sure that creditors would not be able to reject an agreement without just cause as the debtor would still be able to enforce such an agreement through intervention of the court. Thus, making sure that the number of cases to actually appear in front of a judge remained limited.
It was decided to allow for a quick, efficient, and flexible application of the WHOA because an important aim of the WHOA was to bring about an effective and widely accessible agreement procedure for debtors in financial problems. Against this background, a lot of attention was given to finding a good balance between:
on the one hand, preventing unnecessary appeals to the court by creditors or shareholders unwilling to cooperate on a restructuring and trying to halt or delay this process; and
on the other hand, the provision of the necessary judicial guarantees where the arrangement can have fare reaching consequences for creditors and stakeholders.
Subsequently, the involvement of the court is in principle limited up until the moment the homologation request is submitted. Unless the creditor explicitly seeks intervention of the court at an earlier stage.
Commissioned by the WODC, the researchers of the departments Corporate Law and Business Studies, in collaboration with Groningen University, will try to answer the question if, and if so, to what extent, the aims of the WHOA have been realised in practice. As well as what the experiences in practice and possible outcomes have been of the implementation of this legislation.