The new ‘WHOA’: a great tool to prevent bankruptcy
In the Netherlands, too, from 1 January 2021 there is a scheme to restructure companies financially in order to prevent bankruptcy. This so-called WHOA is aimed at maintaining the value of the company. Viable business activities will thus be preserved. Opposing creditors (such as trade creditors or shareholders) can no longer obstruct a reasonable reorganization. In short, this is a welcome restructuring tool, such as has been in place in the US (‘Chapter 11’) and the UK (‘Scheme of Arrangement’) for long time.
The arrangement may cover all or certain types of problematic debts or creditors, for example only secured bank debts or shareholders. These debts can then be rescheduled, while trade receivables, for example, remain unaffected. Ongoing agreements can also be restructured, for example lease agreements that hang around the company’s neck like a millstone. On the other hand, contracts essential to the company cannot be terminated by the creditor.
Interestingly, provisions can be made so that new financing can be entered into – which cannot subsequently be destroyed because of the actio pauliana – and current account settlements cannot be affected. It is also possible to request that silent pledgees may not collect claims, so that the authority to collect pledged claims remains with the company.
It is possible for the homologation procedure to take place silently. Unnecessary bad press or unrest will thus be prevented. During the procedure, the debtor retains the disposal and management of his assets.
Redeployment of the debt position and preservation of the value of the company are the essentials of the WHOA. Restructuring in continuity will make a company viable again. For companies affected by the Corona crisis, but fundamentally healthy, this can also be an ideal means to clean up. The WHOA is a suitable, efficient and relatively quick procedure for this. A lifebuoy for companies in heavy weather. It is important to start on time. Five to twelve is too late.