The Court Approval of the Act on the Confirmation of Private Restructuring Plans (ACPRP, or WHOA in Dutch, Wet Homologatie Onderhands Akkoord) entered into force on January 1, 2021. The Act allows businesses in financial distress to restructure their financial obligations in order to avoid bankruptcy or to effectuate a controlled wind-down of the business.

A debtor can restructure its major obligations to creditors and shareholders through an out-of-court restructuring plan (variously referred to as “a plan” or as “the plan”). Until January 1, 2021, however, such plan required the consent of all creditors and shareholders. The absence of consent by any one of the affected parties could therefore frustrate efforts to put the plan into effect - even though it was in the interest of the joint creditors - and result in the unnecessary bankruptcy of the business. The Act provides for a plan procedure, where the court has the power to cram down the plan on dissenting classes outside of formal moratorium and insolvency proceedings. Because the enforcement of such cramdown is a drastic measure, the Act provides that the plan must be reasonable and fair if it is to be imposed on dissenting classes.

This page contains a list of questions and answers about the most important aspects of the Act. We have tried to address frequently asked questions, however, if you cannot find the answer you are looking for, or would like to discuss the issues relating to this Act, please contact one of our restructuring specialists.

The Act on the Confirmation of Private Restructuring Plans - ACPRP (WHOA)
FAQ

INFORMATION ABOUT THE RESTRUCTURING PROCESS

What does the restructuring process involve?

The process has a number of components, which we will address in more detail in the Fâs below.

Click here for a representation of the process in graph form.

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Initiating the Plan

What is the purpose of a restructuring plan?

A restructuring plan serves two purposes. It allows a debtor to:

  • Restructure its financial obligations in order to restore the business back to financial health and continue its activities as a going concern;
  • Effectuate a controlled wind-down of its business in a pre-insolvency plan procedure in order to achieve a better result than a liquidation in bankruptcy.


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    When can a restructuring process be effectuated?

    A restructuring process can be effectuated when it can reasonably be assumed that the debtor will not be able to continue meeting its financial obligations as they fall due. In other words, the court must find that the state of the business for which the plan is proposed is such that it can reasonably be assumed that it will become insolvent. However, the existence of such state is not determined (i.e. a preliminary review) until the plan is presented to the court during the confirmation process. The preliminary review is required at the time that the court appoints a restructuring expert.

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    Who is eligible to pursue out-of-court restructuring?

    All types of companies, regardless of size, may pursue an out-of-court restructuring. However, banks, insurers or natural persons who do not practice an independent profession or carry on a business are not eligible to do so.

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    Who initiates an out-of-court restructuring process?

    Debtors
    If a debtor is facing the prospect of bankruptcy, it may initiate a voluntary bankruptcy proceeding and propose a plan to its creditors. Where the debtor is a legal entity, it will be represented by its management board. The board does not require the approval of the general meeting to propose or implement a plan.

    Third parties
    Each creditor, shareholder, employee council or employee representative body that is set up in the debtor’s business may submit a request that the court appoint a restructuring expert.³ A request to that effect must be filed by an attorney.⁴ The restructuring expert can then develop and propose a restructuring plan.

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    What is an initiation statement?

    As soon as the debtor starts to prepare a plan, it will submit a statement to that effect to the court. From that moment onward, it may invoke certain provisions contained in the Act, such as a stay, to help it put the plan into effect. The court does not review the statement as it merely represents that the debtor has initiated a restructuring process by preparing a plan.

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    ​ When does the debtor choose between a public or a confidential procedure?

    The debtor can choose between a public or a confidential procedure at the start of the plan procedure. This is a situation in which the debtor can opt to put a plan into effect either in a public or a confidential pre-insolvency plan procedure. If the debtor proposes its plan in the context of the public procedure, it must publish this information in the Government Gazette and insolvency registers. Such information, however, is not published in the context of a confidential procedure. Moreover, the court will consider the requests behind closed doors. Keeping information about the debtor’s insolvency or the debt restructuring plan out of the public domain can be a reason for choosing a confidential procedure. Moreover, the matter of a public or a confidential procedure is an important factor to consider when the plan also involves foreign entities or assets.

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    Can contracting parties amend or terminate agreements if a debtor has initiated preparations for a plan?

    No, contracting parties cannot amend or terminate an agreement due to the mere fact that a debtor has initiated preparations for a plan, even if the contracting parties have included a special ipso facto clause in the agreement. An ipso facto clause, also referred to as a termination clause, provides that contracting parties have the right to terminate the agreement when the debtor proposes a plan to its creditors. Such clauses are not enforceable in bankruptcy unless other grounds exist for amending or terminating the agreement.

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    What information is critical to the success of a restructuring process?

    Click here for a list of relevant documents.

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    THE BOARD, THE RESTRUCTURING EXPERT AND THE OBSERVER

    THE BOARD
    What role does the management board of the debtor company play in the restructuring process?

    The board can develop and propose a plan. Moreover, during the restructuring process, the board retains control over the business and the debtor becomes the debtor-in-possession. As such, the board may continue to run the business and perform legal acts during the plan procedure. This is a distinct difference from the board’s role in moratorium and bankruptcy processes.

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    Does the board require the approval of shareholders to propose a plan?

    No, the board does not require the approval of the shareholders to propose a plan. Statutory provisions, corporate bylaws, or contractual provisions, which provide that shareholder approval is required, have no bearing in this case.

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    RESTRUCTURING EXPERT
    What is a restructuring expert?

    The court may appoint a restructuring expert to develop and propose a plan for a debtor. The debtor may itself submit a request that the court appoint a restructuring expert if, for example, it believes that the engagement of an independent third party will increase the plan’s prospect of success. Under the Act, creditors, shareholders, the employee council, and the employee representative body are permitted to submit a request to the court for the appointment of a restructuring expert. A request to that effect must be filed by an attorney.

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    When is a request for appointment of a restructuring expert granted or denied?

    The appointment of a restructuring expert is subject to the same condition for proposing a plan, in that the debtor’s state is such that it is reasonable to assume it will become insolvent. If the debtor’s state is as described, the court will allow the request unless there is evidence that it is not in the interest of the creditors to appoint a restructuring expert. Such circumstances may arise, for example, if the appointment request is submitted by a creditor with the sole purpose of frustrating or delaying a restructuring process initiated by the debtor that has reached an advanced stage and has a good prospect of success.

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    Who is eligible to be appointed as restructuring expert?

    According to the court, the restructuring expert must have financial knowledge, knowledge of insolvency law and experience with restructuring. The restructuring expert must also be able to create support and confidence among the affected creditors and shareholders. The entity seeking a restructuring expert submits the name of the expert to be appointed to the court for confirmation. It is then up to the court to appoint the restructuring expert.

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    What are the restructuring expert’s tasks?

    The restructuring expert evaluates the debtor’s business operations and the various aspects of the business in order to develop and propose an informed plan. The restructuring expert may also propose a plan developed by the debtor. However, only one plan will be submitted to the court for confirmation.

    The restructuring expert will carry out his tasks in an independent, impartial, and effective manner.

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    How does the restructuring expert obtain information?

    Under the Act, the restructuring expert is entitled to consult the debtor’s records and other documents where the restructuring expert considers examination of the debtor’s records and other documents necessary for the proper performance of his tasks. The board, shareholders, supervisory directors, and employees of the debtor will provide all information the restructuring expert requests and provide him all cooperation necessary.

     The authority of the restructuring expert is identical to the authority of the debtor, in that it has the power to:

    • unilaterally terminate agreements (see ‘The Position of the Parties Involved in the Plan’);
    • request that the court order a stay (see ‘The Stay’);
    • request that the court rule on certain issues; and
    • request that the court confirm the plan. (See ‘The Role of the Court’).
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    Who pays the salary of the restructuring expert?

    The court determines the salary to be paid by the debtor to the restructuring expert. However, if the request for appointment of the restructuring expert is supported by the majority of the creditors, the creditors will pay the salary of the restructuring expert.

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    OBSERVER
    What is an observer?

    An observer’s task is to monitor the process leading to the plan, with due regard to the interests of the creditors and shareholders. The observer must notify the court as soon as it becomes clear that the debtor will be unable to put a viable plan into effect or that its actions will harm the interests of the creditors and shareholders. The court will usually intervene in such cases. It may appoint a restructuring expert, in which case the observer’s appointment automatically ends.

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    When is an observer appointed?

    The observer is appointed by the court at the request of the debtor, the restructuring expert, or on its own initiative, if it determines that doing so will protect the interests of the creditors or shareholders.

    Where the court orders a stay, the creditors or shareholders may also submit a request that the court appoint an observer.

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    How does the observer obtain information?

    Under the Act, the observer is entitled to consult the debtor’s records and other documents where the observer considers examination of the debtor’s records and other documents necessary for the proper performance of his tasks. The board, shareholders, supervisory directors, and employees of the debtor will provide all information the observer requests and provide him all cooperation necessary.

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    Who pays the salary of the observer?

    The court determines the salary to be paid by the debtor to the observer.

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    THE ROLE OF THE BOARD AND RESTRUCTURING EXPERT
    What role does the board assume next to the restructuring expert?

    The board retains control over the business. However, the board may not propose a plan after the restructuring expert is appointed. The debtor may, however, prepare a plan, but must submit it to the restructuring expert so that he can present it to the creditors and shareholders.

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    Does the restructuring expert require the consent of the debtor to propose a plan in case of an SMB?

    If the debtor is an SMB, the restructuring expert may present the plan to the court only with the consent of the debtor. The debtor is regarded as an SMB if it has fewer than 250 employees, its annual revenue is less than EUR 50 million and its balance sheet total is less than EUR 43 million. Where the debtor withholds consent, the restructuring expert may ask the court to determine whether the debtor is withholding its consent on unreasonable grounds. If the court finds this to be the case, the court’s decision will replace that of the debtor.

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    Can a restructuring expert and observer be appointed simultaneously?

    No, an observer and restructuring expert may not be appointed simultaneously. Where an observer has already been appointed, the court may, at its option, appoint him as restructuring expert if it deems it necessary.

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    THE CONTENT OF THE RESTRUCTURING PLAN

    Which parties are affected by a restructuring plan?

    A plan can affect all types of creditors: unsecured creditors, preferential creditors and creditors with a pledge or mortgage. The rights of shareholders can be restructured under the plan, but the plan cannot restructure the rights of employees.

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    Who decides which parties will be included in the final plan?

    The debtor or restructuring expert proposing the plan will select the parties to be included in the plan. A restructuring plan is not necessarily a collective plan. A debtor may choose to restructure certain rights, including the rights of the financing bank, the tax authorities, and the shareholder.

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    What does a restructuring plan entail?

    The debtor or restructuring expert proposing the restructuring plan has exclusive authority to prepare the plan, or present different proposals to each class. For example, a restructuring plan may include:

    • full or partial relief for an outstanding debt, where all or part of the debtor’s financial obligations are waived;
    • moratorium, where the debtor is afforded more time to meet its financial obligations; or
    • debt for equity swap, where part of a creditor’s claim is converted into an equity interest.

    Thus, in light of the above, a creditor may receive a form of compensation other than cash payment, e.g. compensation in kind, such as a right to receive payment in the future or to receive shares in the debtor company.

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    Can a debtor also amend agreements?

    A debtor may offer a proposal to a contracting party - e.g. the lessor from whom business premises are leased - to amend the agreement. However, if the contracting party does not accept the proposal, the debtor has the right to unilaterally terminate the agreement, provided the plan is confirmed by the court and the court grants leave for the unilateral termination in the confirmation. The claim for damages incurred as a result of the unilateral termination of the plan may be restructured under the plan. In many cases this will mean that the contracting party will not receive the full amount of damages it has incurred.

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    THE STAY

    What is a stay (or moratorium)?

    Under the Act, a stay has the following consequences:

    • creditors may not enforce their rights against the debtor’s assets or repossess assets under retention of title from the debtor without leave from the court;
    • the court can lift attachments;
    • consideration of applications for moratorium or bankruptcy is stayed.

    The stay therefore allows the debtor’s business to continue in relative peace during the negotiations on the plan.

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    Does a stay always apply in a restructuring process?

    No, the debtor or the restructuring expert must request that the court order a stay. A request to that effect must be filed by an attorney. The court will order the stay if:

    • it is necessary to continue the debtor’s business;
    • it can reasonably be assumed that it will be in the interests of the creditors and it will not materially prejudice their interests.
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    To which class of creditors does the stay apply?

    The court will determine the class of creditors to whom the stay will apply. These may be all creditors, but it may also be limited to a specific creditor or a subset of creditors.

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    What is the duration of the stay?

    In principle, a stay remains in place for a period of four months, but the court can extend it up to eight months. The extension depends on the extent of the progress made on the plan. Before making a decision on this, the court will hear the individual views of the creditors who submitted the request, and the restructuring expert or the observer, if either is appointed.

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    What can creditors do to lift a stay?

    Creditors who are temporarily unable to enforce their rights against the debtor’s assets can ask the court to appoint an observer to protect their interests and monitor the debtor’s actions. Creditors can also ask the court to grant leave to execute the security instrument or to exercise their rights against the debtor’s assets. Lastly, they can also ask the court to lift the stay in its entirety if, for example, they believe that no viable restructuring plan will be proposed or that the stay would materially prejudice their interests.

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    Can the debtor use, expend and/or dispose of property during a stay?

    Under the Act, the debtor may continue to use, expend and/or dispose of third-party property or encumbered property during the stay insofar as:

    • the debtor was entitled to do so before the stay;
    • it is necessary to maintain normal business operations; and

    the interests of the creditor who encumbers that property are adequately protected, e.g. by providing the affected creditor with replacement security or direct cash payment.

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    Can contracting parties amend or terminate an agreement during a stay?

    No, throughout the period that a stay is in place, contracting parties may neither amend nor terminate the agreement, despite the default of payment by the debtor prior to the stay. An important condition is that the debtor promptly pay the new financial obligations that arise during the stay or provide adequate security for them. When this condition is met, a contracting party will not be able to invoke suspension of performance.

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    Can creditors with a pledge or mortgage exercise their rights during the stay?

    Where a stay has been ordered, creditors with a pledge or mortgage may not exercise their pledge and mortgage rights, unless the court grants leave to do so. A holder of an undisclosed pledge on claims may not give notice of the pledge to the debtor in question nor may it receive or offset payments. This is different from the rules applicable to the stay during moratorium or bankruptcy proceedings. However, the debtor must provide replacement security, for example by pledging the new claims that arise from the continuation of the debtor’s business.

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    Voting Rights

    ​Who is eligible to vote on a restructuring plan?

    Creditors and shareholders whose rights are restructured under the plan have the right to vote on the plan. Creditors and shareholders whose rights are not affected by the plan are not eligible to vote on the plan.

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    How does voting on a plan take place?

    Voting takes place in classes of creditors or shareholders. As such, creditors and shareholders with voting rights in each class will verify whether the plan has sufficient support.

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    Why does voting on a restructuring plan take place in classes?

    Voting on a plan takes place in classes because it allows creditors and shareholders with voting rights in each class to verify whether the plan has sufficient support. This process, which is referred to as class formation, allows creditors and shareholders with comparable positions to be placed in the same class. If the majority of the affected class supports the plan, the court may assume that a reasonable offer has been made.

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    How does class formation take place?

    The debtor or restructuring expert who proposes the plan divides the creditors and shareholders into classes. Creditors and shareholders are placed in different classes if the rights they have are so different that they are not in a comparable position.

    The Act provides that the debtor or restructuring expert must consider:

    • the rights that creditors or shareholders have in bankruptcy; and
    • the rights that creditors or shareholders acquire under the plan.

    The ranking of a creditor is an important factor for the class formation.

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    How does the voting procedure take place?

    Voting takes place in physical or electronic form. The debtor or restructuring expert who proposes the plan decides on the voting procedure. The vote may be cast at a meeting or electronically via video conferencing, a website, or email.

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    When is a class deemed to have accepted the plan?

    A class of creditors is deemed to have accepted the plan if it is supported by a group of creditors who jointly represent at least two-thirds of the total amount of the claims of creditors who cast their votes in that class. In other words, this is a value criterion; the outcome is determined by the financial interest that the votes in favor represent and not by the number of creditors who voted in favor. A similar value criterion applies to shareholders.

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    THE ROLE OF THE COURT

    INITIATING THE RESTRICTING PROCESS
    What role does the court play when the debtor initiates a restructuring process?

    As soon as the debtor starts to prepare a plan, it will submit a statement to that effect to the court. The court does not review the statement as it merely represents that the debtor has started preparing a plan. However, if the debtor submits a request that the court appoint a restructuring expert to propose a plan, the court will conduct an in-depth review.

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    What is the court’s role in cases where entities other than the debtor initiate preparations for a plan?

    Where creditors, shareholders, employee council or employee representative body initiate preparations for a plan, the court will conduct an in-dept review and make a decision on the request to appoint a restructuring expert. In that context, the court will determine whether the state of the debtor is such that it can reasonably be assumed that it will become insolvent. If that is the case, the request to appoint a restructuring expert will, in principle, be granted, unless the court finds, after a brief and simple inquiry, that the interests of the creditors are not served by the appointment of a restructuring expert.

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    BESPOKE MEASURES
    What measures can the court take and what provisions can it stipulate?

    The Act provides for bespoke measures, where the court may, at the request of the debtor or the restructuring expert, or on its own initiative, make such determinations or provisions as it deems necessary to protect the interests of the creditors or shareholders. A request to that effect must be submitted by an attorney. The court may, for example, order the debtor to ensure that a vote is held on the plan within a given period and to provide the court and affected creditors and shareholders with regular progress reports. Another measure is the appointment of an observer. See ‘The Board, the Restructuring Expert and the Observer’ for more about the observer.

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    STAY
    What is the court’s role during the stay?

    The main functions of the court during the ordering of the stay process are to:

    • Decide on a request to order the stay;
    • Decide on a request to extend the stay;
    • Decide on requests to lift the stay;
    • Hand down decisions on requests to grant leave for repossession of assets during a stay.
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    DISPUTE RESOLUTION
    What does the dispute resolution process involve?

    Before the plan is put to a vote, the debtor or the restructuring expert may request that the court make binding determinations on any issues that are relevant in the context of putting the proposed plan into effect. This ensures that points of contention can be heard and addressed at an early stage and not during the confirmation process. A request to that effect must be submitted by an attorney.

    Creditors and shareholders are not permitted to seek an interim ruling from the court, but the court will give them an opportunity to express their views before it makes a decision. Conversely, creditors and shareholders are required to raise their objections with the debtor or the restructuring expert if they believe that the restructuring plan cannot be confirmed. If they fail to raise objections to that effect with the debtor or the restructuring expert, they may not invoke a ground for rejection. The objections raised give the debtor and restructuring expert a clear indication as to which components of the plan are in dispute and allows them to seek an interim ruling from the court.

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    On what points of contention can the court hand down an interim ruling?

    According to the Act, issues on which the court can make determinations include:

    •  the information contained in the plan;
    • the class formation, voting procedure, admission of a creditor or shareholder to the vote; or
    • the existence of grounds for rejection that would prevent confirmation of the plan.

    The above list is not exhaustive.

    If the court deems it necessary when making its decision, it may appoint an expert to examine certain issues. Before making a decision, the court will offer the parties - i.e. the debtor, the restructuring expert, the observer, creditors or shareholders - whose interests are directly affected by the decision an opportunity to express their views. The decision of the court is binding only on those parties who were given an opportunity to express their views. No appeals may be filed.

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    CONFIRMATION
    What does confirmation entail?

    The final stage in which the court plays an important role is the confirmation process. In this stage, the court determines whether it can confirm the plan. A plan that is confirmed by the court becomes binding on all creditors and shareholders who are a party to the plan, even if they did not vote on, or voted against, it. The court may also reject a request to confirm the plan. The Act contains general and additional grounds for rejection on the basis of which a plan will not be confirmed.

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    Why is a request for confirmation required?

    After the plan has been voted on, it is clear which classes voted for or against it. If all classes voted in favor, the debtor or the restructuring expert must submit a request to confirm the plan in order to bind the dissenting minority within those classes to the plan. A request to that effect must be submitted by an attorney. Where one or more classes have rejected the plan, the court must also consider, as part of the confirmation process, whether the plan can be crammed down on that dissenting class.

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    What is the difference between general and additional grounds for rejection?

    The Act contains a number of general grounds for rejection. The court can reject a request to confirm the plan if one of the general grounds for rejection exists. However, it can also reject the request to confirm the plan if no request to that effect has been made by creditors and shareholders.

    The court will reject a request to confirm the plan on additional grounds for rejection only when a dissenting creditor or shareholder has invoked such an additional ground. Thus, the court itself does not determine whether additional grounds for rejection exist.

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    What are the general grounds for rejection of the confirmation request?

    The confirmation request will be rejected on the following general grounds for rejection:

    •  the debtor’s state of insolvency is not inevitable;
    • the class formation does not meet the applicable requirements;
    • the voting procedure does not comply with the applicable requirements;
    • the plan does not contain all the information required;
    • the plan is deceptive and fraudulent;
    • performance of the plan is not adequately assured; and
    • other compelling reasons (open grounds) exist against confirmation.
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    What are additional grounds for rejection of the confirmation request?

    The following three additional grounds for rejection apply:

    First additional ground for rejection:

    The court may, at the request of a single dissenting creditor, refuse to confirm the plan if it does not meet the “best interest of creditors” test, also referred to as the “no creditor worse off” test.

    In the best interest test, the court compares the plan proposal with the cash payment that the creditor or shareholder would expect to receive in the bankruptcy of the debtor, i.e. the liquidation value. Each creditor or shareholder must receive at least the cash payment they would expect to receive in the bankruptcy of the debtor. In other words, they should not be worse off under the plan.

    Second additional ground for rejection:

    The Act contains a comprehensive mechanism - referred to as the cross-class cramdown mechanism - by which the court determines whether a dissenting class can be bound by the plan. With the cross-class cramdown mechanism, the court takes as starting point the value that will be distributable if the plan comes about (i.e. the reorganization value), and not the value that will be distributable in the bankruptcy of the debtor (i.e. the liquidation value).

    The court then determines whether the reorganization value, which is realized under the plan, is distributed fairly among creditors and shareholders in accordance with applicable priority rules. Dissenting classes that expect to receive a cash payment in the bankruptcy of the debtor must have the right to opt for a cash payment that is equal to the cash payment that will be distributable in the bankruptcy of the debtor. This right is referred to as the exit or cashout right. Banks do not have this exit right.

    Third additional ground for rejection:

    There is a special arrangement in place for SMBs that is structured to distribute at least 20% of their claim under the plan. However, if that class agrees to a cash payment that is less than 20%, the court will not be able to conduct an in-depth review. Moreover, the court may rule that there is a compelling reason to pay them less than 20%.

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    Can the confirmation decision be appealed or litigated in the Supreme Court?

    No, there are no legal remedies against a confirmation plan. The court therefore has a great responsibility to ensure that a confirmation plan is reasonable and has come about according to the appropriate procedure.

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    The Position of the Parties Involved in the Plan

    Can I, as a creditor, compel my debtor to propose a plan?

    Yes. Under the Act, creditors and shareholders have an ‘initiative right’ to ask the court to appoint a restructuring expert, who can then propose a plan for the debtor. Please refer to ‘The Board, the Restructuring Expert and the Observer’ for more on the restructuring expert and how a creditor can submit a request that the court appoint a restructuring expert.

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    Which parties are affected by a restructuring plan?

    A restructuring plan can affect all types of creditors: unsecured creditors, preferential creditors and creditors with a pledge or mortgage. The rights of shareholders can also be restructured under the plan, but the plan cannot restructure the rights of employees.

    The debtor or restructuring expert who proposes the plan will select the parties to be included in the plan. A restructuring plan is not necessarily a collective plan. A debtor may choose to restructure certain rights, including the rights of the financing bank, the tax authorities and the shareholder.

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    When am I bound by the plan as a creditor?

    A plan that is confirmed by the court becomes binding on all creditors and shareholders who are involved in the plan, even if they did not vote on, or voted against, it.

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    How do I ensure that my interests as a creditor are adequately protected during the restructuring process?

    Creditors may, in certain cases, ask the court to appoint an observer. An observer’s task is to monitor the process leading to the plan, with due regard to the interests of the creditors and shareholders. If the court orders a stay, you can ask the court to appoint an observer. An observer can also be appointed when a cross-class cramdown mechanism is applied (see ‘The Role of the Court’) or when the debtor or restructuring expert ask the court to appoint an observer. An observer is appointed only if no restructuring expert has been appointed.

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    What should I do if I do not agree with the proposed plan?

    You can vote against the plan. However, if a request to confirm has been submitted to the court, for example because other creditors from your class or from another class have voted in favor of the plan, you may, in certain cases, challenge confirmation by the court based on the existence of a ground for rejection (see ‘The Role of the Court’). But this is only possible if you have promptly raised an objection to that effect with the debtor or the restructuring expert after discovering the possible existence of that ground for rejection.

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    Can I still enforce a claim against the debtor, for example through attachment of property?

    No, not if the court orders a stay during the restructuring process (see ‘The Stay’ for more on the topic). You can only enforce a claim if the court grants you leave to do so or if the stay ends. You may ask the court to lift the stay if your interests are materially prejudiced or there is evidence that the stay is no longer necessary to enable the debtor’s business to continue and/or it can reasonably be assumed that the stay is not in the interests of the joint creditors.

    If you have already executed an attachment, it can be lifted by the court at the request of the debtor or the restructuring expert. Moreover, consideration of applications for a debtor’s bankruptcy is suspended while a stay is in effect.

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    Does the debtor have the authority to amend or terminate the agreement it has entered into with me?

    The Act gives the debtor the ability to restructure debts through a plan and to offer a proposal to amend or terminate agreements that are in place (with the exception of employment contracts). If you do not accept the proposal, the debtor has the right to unilaterally terminate the agreement, provided the plan is confirmed by the court and the court grants leave for the unilateral termination in the confirmation.

    The claim for damages incurred as a result of the unilateral termination of the plan may be restructured under the plan. In many cases this will mean that you will not receive the full amount of damages you have incurred, in which case you can challenge the termination by filing an appeal with the court. You can also vote on the proposal for the restructuring of claims for damages.

    It is advisable to determine the value of the agreement in the situation that it is amended or terminated, so that you can make an informed decision about whether you should accept the proposal.

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    Can I amend or terminate an agreement with the debtor if it has initiated preparations for a plan?

    No, you cannot amend or terminate an agreement due to the mere fact that a debtor has initiated preparations for a plan, even if you have included a special ipso facto clause in the agreement. An ipso facto clause, also referred to as a termination clause, provides that you have the right to terminate the agreement when the debtor proposes a restructuring plan to its creditors. Such clauses are not enforceable in a restructuring process, unless other grounds exist for amending or terminating the agreement.

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    If my claim is restructured under a plan, can I still recover the restructured claim from the sureties or bank guarantees of third parties as they are jointly and severally liable for the claim?

    Under the Act, creditors generally retain their rights against guarantors and other co-debtors of the debtor. You can therefore recover (the remaining value of) your claim from such third parties. However, claims that are restructured under the plan cannot be recovered from group companies of the debtor as they fall within the scope of a broad restructuring plan, which can be proposed if such group companies are facing the prospect of insolvency.

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    HOW DOES THE ACT AFFECT ME AS...
    ​ SMB with a claim against the debtor

    In principle, SMBs will receive at least 20% of their claim under the plan, unless your class of creditors accepts a lower payment. If this is not the case, the court may depart from the 20% rule only if there are compelling reasons to do so.

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    Supplier

    Throughout the period that a stay is in place, suppliers may be obligated to continue to honor their commitments despite the default of payment by the debtor prior to the stay. An important condition is that the debtor pay the new financial obligations or provide adequate security for them. As such, the parties may not terminate the agreement or suspend performance.

    If you have supplied goods that are subject to a retention of title, you cannot recover those goods without leave from the court.

    The debtor retains the right to use, expend and dispose of property insofar as:

    (i)            it was entitled to do so before the stay;

    (ii)           it is necessary to maintain normal business operations; and

    (iii)         your interests are adequately protected, for example by providing replacement security or direct cash payment. If the debtor is not able to guarantee that your interests will be adequately protected, you can ask the court to remove or limit the debtor’s right of use.

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    Creditor with a pledge or mortgage

    Where a stay has been ordered, creditors with a pledge or mortgage may not exercise their pledge and mortgage rights, unless the court grants leave to do so. A holder of an undisclosed pledge on claims may not give notice of the pledge to the debtor in question nor may it receive or offset payments. This is different from the rules applicable to the stay during moratorium or bankruptcy proceedings. However, the debtor must provide replacement security, for example by pledging the new claims that arise from the continuation of the debtor’s business.

    As a creditor with a pledge or mortgage, you may be required by the court to continue financing the business under certain circumstances. The rule of thumb in this case is that dissenting classes that expect to receive a cash payment in the bankruptcy of the debtor must have the right to opt for a cash payment. This right, which is also referred to as exit or cashout right, does not apply to corporate lenders with pledge and mortgage rights. The restriction applies only to the part of the claim that is secured by pledge or mortgage rights; the rest is unsecured, which means you have an exit right. The court ultimately decides whether it is reasonable for you to continue financing the business despite the fact that your class voted against it.

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    Lessor

    The debtor may make a proposal to you to amend or terminate the agreement, for example by negotiating a lower lease or removing an operating obligation. If you do not accept the proposal, the debtor has the right, under the Act, to unilaterally terminate the agreement, provided the plan is confirmed by the court and the court grants leave for the unilateral termination in the confirmation. The claim for damages incurred as a result of the unilateral termination of the plan may be restructured under the plan. In many cases this will mean that you will not receive the full amount of damages you have incurred, in which case you can challenge the termination by filing an appeal with the court. You can also vote on the proposal for the restructuring of claims for damages.

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    Shareholder

    As a shareholder, you cannot prevent the board of the debtor company from proposing a plan. Statutory provisions, corporate bylaws or contractual provisions, which provide that shareholder approval is required, have no bearing in this case.

    Your rights as a shareholder may also be restructured under a plan. Because a plan divides the reorganization value in accordance with the applicable priority rules, your equity interest may become diluted, or worse, worthless.

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    The Role of Wijn & Stael

    Whether you are a debtor and have questions about the rights and options available to you under the Act, or a creditor involved in a restructuring process, our firm can help you understand the bankruptcy process and make it as painless and simple for you as possible.

    Our attorneys have specialized legal knowledge and experience as restructuring experts and observers and can help you no matter what may come up in your particular case.

    For advice tailored to your situation, contact our firm to schedule a consultation with one of our restructuring specialists.

    What does the restructuring process involve?

    The process has a number of components, which we will address in more detail in the Fâs below.

    Click here for a representation of the process in graph form.

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