Netherlands

A look at corporate, personal and, where relevant, partnership insolvency proceedings in Netherlands, with a brief description to explain key features, as part of our Dictionary of Insolvency Terms in EU Member States. In particular, we highlight who controls the procedure and whether it is likely to be accompanied by a moratorium to prevent enforcement.


Surseance van betaling

Suspension of payments

  • A court-ordered procedure for companies and natural persons, commenced at the debtor’s request when they anticipate they will be unable to continue to pay debts as they fall due.
  • The debtor may choose to present a draft restructuring plan when it files for the suspension of payments order or at a later date.
  • The court grants a preliminary suspension of payments immediately after the request has been filed. Approximately two months later, creditors will vote to decide whether the suspension of payments becomes permanent – for a maximum period of one and a half years, renewable at the end of each term.
  • The procedure is aimed at implementing a restructuring or reorganisation agreement with unsecured creditors. The court-selected and court-appointed administrator and the debtor (or its directors or partners respectively) must act collectively.
  • Secured creditors are generally not affected by these proceedings and may continue to enforce their security over secured assets. However, a moratorium for a maximum period of four months may be declared, during which enforcement by a secured creditor is not permitted (unless the supervisory judge has authorised such enforcement).
  • Suspension of payments may be (immediately) converted into bankruptcy if the administrator determines that the debtor has insufficient means to continue its business and ultimately (partly via composition or wholly) to pay its creditors.

Faillissement

Bankruptcy
Liquidation
Winding up

  • A court-ordered procedure for companies and natural persons that can be commenced at the request of the debtor or any of its creditors.
  • The court will make an order if it is satisfied that the debtor has ceased paying its debts. With retrospective effect from midnight on the date of the bankruptcy order, directors of the debtor company are no longer entitled to dispose of the debtor’s assets, provide security over the debtor’s assets, pay its creditors or enter into any agreements. All such rights transfer to the court-selected and court-appointed insolvency practitioner who then takes control of the entity.
  • The insolvency practitioner has a wide range of powers including selling assets or continuing the debtor’s business (if it is in creditors’ interests to do so).
  • Secured creditors are generally not affected and may continue to enforce their security over secured assets. However, a moratorium for a maximum period of four months may be declared, during which enforcement by a secured creditor is not permitted (unless authorised by the supervisory judge). Furthermore, the insolvency practitioner may set a reasonable deadline for enforcement by a secured creditor, after which the secured creditor’s authority to enforce will lapse and the insolvency practitioner is simultaneously authorised to claim the secured assets and sell them. Upon such sale by the insolvency practitioner, the secured creditor will be entitled to the proceeds after deduction of the bankruptcy costs (which are usually substantial). This usually results in the secured creditor receiving a substantially smaller return (if any) on its outstanding claim.

Wet Schuldsanering Natuurlijke Personen

Debt restructuring for natural persons

  • A court-ordered procedure commenced at the request of a debtor who cannot pay their debts as they fall due.
  • Only the court-selected and court-appointed administrator is entitled to dispose of assets that belong to the restructuring estate.
  • The procedure is intended to provide a "clean slate," pursuant to which, claims that could not be paid out of available assets are no longer enforceable.
  • Secured creditors are generally not affected and may continue to enforce their security over secured assets.
  • However, a moratorium for a maximum period of four months may be declared, during which enforcement by a secured creditor is not permitted (unless authorised by the supervisory judge). Furthermore, the administrator may set a reasonable deadline for enforcement by a secured creditor, after which the secured creditor’s authority to enforce will lapse.

Executeren van een hypotheekrecht

Enforcing rights under a mortgage

  • Appropriation is prohibited under Dutch law. Therefore, a secured creditor will need to enforce its rights as mortgagee by means of a sale of the collateral. The general rule is that collateral is sold at a public auction according to local customs and applicable standard terms and conditions.
  • It is possible for alternative procedures to be used such as a court-approved private sale. The court will usually allow the use of such an alternative procedure if the proceeds of the private sale are likely to be higher than if the collateral were sold at public auction.

Executeren van een pandrecht op vorderingen

Enforcing rights under a pledge over receivables

  • The most common way to enforce a right of pledge over receivables is by notifying the relevant contract debtor that the receivable has been pledged.
  • Following such notice, the contract debtor is obliged to pay the relevant pledged receivable to the secured creditor instead of the pledgor, ie the secured creditor can directly collect the relevant receivable. Alternatively, the receivables may be sold by the secured creditor to a third party by: (i) public auction; (ii) a court-approved private sale; or (iii) a private sale with the consent of the pledgor.

Executeren van een pandrecht op goederen

Enforcing rights under a pledge over assets

  • Appropriation is prohibited under Dutch law. Therefore, a secured creditor will need to enforce its right of pledge by means of a sale of the secured assets. Such sale may be effected by means of: (i) public auction; (ii) a court-approved private sale to either the secured creditor or a third party; or (iii) a private sale to a third party with the consent of the pledgor.
  • Upon request of the secured creditor, the court will usually order the use of such an alternative procedure if the proceeds of the private sale are likely to be higher than if the collateral were sold at public auction.

 

EU Directive Implementation

The EU Directive on Restructuring and Insolvency1  (the Directive) requires Member States to incorporate minimum common standards into their national restructuring and insolvency laws by 17 July 2021, with an option to extend that deadline by one year. The intention of the Directive is to reduce barriers to inter alia the free flow of capital and freedom of establishment which result in differences between national laws and procedures concerning preventive restructuring, insolvency, discharge of debt, and disqualifications and to enhance the rescue culture in the EU.

Notable features required to be included in Member States’ national laws include:

  • An effective preventive restructuring framework to enable debtors experiencing financial difficulties to restructure at an early stage, with a view to preventing insolvency and ensuring their viability.
  • A stay of up to four months extendable to up to 12 months to support negotiations of a restructuring proposal, which should prevent individual enforcement action and include rules preventing the withholding of performance, termination, acceleration or modification of essential contracts.
  • An ability to cram down dissenting classes of creditors.
  • Adequate protection for financing needed to allow the business to survive or to preserve the value of the business pending a restructuring, and for new financing necessary to implement a restructuring plan.
  • Provision for honest, insolvent entrepreneurs to have access to a procedure that can lead to a full discharge of their debts (subject to limited exceptions) within three years. 

Implementation in Netherlands

Although the Directive is currently in the process of being implemented, it has not been implemented in the Netherlands yet. Nevertheless, on 1 January 2021, the Wet Homologatie Onderhands Akkoord (the Dutch scheme of arrangement, hereafter referred to as WHOA), entered into force and serves as an implementation of a part of the Directive, relating to the preventive restructuring framework. According to the explanatory memorandum to the legislative proposal for the amendment of the Dutch Bankruptcy Act (the Legislative Proposal) in connection with the implementation of the Directive, the WHOA has been aligned with the Directive as much as possible.

The WHOA has concepts similar to UK Schemes of Arrangement and US Chapter 11 procedure. It has introduced two new composition procedures (dual-track approach) in the Dutch Bankruptcy Act: a private (confidential) composition procedure outside bankruptcy and a public (non-confidential) composition procedure outside bankruptcy. This has given debtors access to a preventive restructuring framework, in accordance with the requirements of the Directive. Some key characteristics of the WHOA are:

  • The procedure is conducted outside of formal bankruptcy procedures.
  • Both a cram-down as well as a cross class cram-down are possible.
  • All sizes of enterprises (including SMEs subject to certain additional provisions) may use the procedure.
  • It is a debtor-in-possession procedure.
  • The involvement of the court is limited.

Furthermore, with respect to the other elements of the Directive regarding the remission scheme for entrepreneurs, the Debt Restructuring (Natural Persons) Act (Wet Schuldsanering Natuurlijke Personen, hereafter referred to as "WSNP") already provides for a comparable scheme. As a result of the Legislative Proposal, a limited number of amendments have been made to the WHOA and the WSNP in order to perfect the transposition of the aforesaid elements of the Directive. 

Moreover, the Legislative Proposal contains provisions that implement the other elements of the Directive, such as: (i) quality requirements with regard to the appointment of two new insolvency practitioners: the restructuring expert and the observer, (ii) exception to the general provision with regard to the actio pauliana which, if certain requirements have been met, enables a company to attract new funding and provide new security without the risk of future annulment of this provided security by a practitioner in bankruptcy in case the company is later declared bankrupt, and (iii) some adjustments with regard to content and approval requirements of the composition plan to be assessed by the court.

Implementation Date

When the implementing act, including the implementation of the various elements of the Directive, shall enter into force is yet to be determined and the moment of implementation can differ per (part of) the various articles included therein.

Recognition of foreign insolvency proceedings

EU regulation on insolvency proceedings

The EU Regulation on Insolvency Proceedings (the Regulation)2 applies to all EU Member States except for Denmark and requires that certain collective insolvency proceedings, which are listed in Annex A to the Regulation, occurring in one EU Member State are automatically recognised in all other EU Member States and that each EU Member State automatically recognises the powers and authority of an insolvency practitioner appointed in another EU Member State. 

Recognition of third country insolvency proceedings

In the event that an insolvency procedure has been opened in a third country, this procedure is capable of being recognised in the Netherlands under certain conditions. In the event that there is no treaty between this third country and the Netherlands arranging for the recognition of insolvency procedures, we have to rely more often on general rules of Dutch international private law to etermine the consequences attributed to such insolvency proceedings. This means that assets of the bankrupt foreign company located in the Netherlands do not automatically fall within the scope of the bankrupt estate, as a result whereof individual creditors can continue to take recourse against those assets in the Netherlands, within the framework of the case law of the Dutch Supreme Court.

According to Dutch case law, foreign court decisions are eligible for recognition in the Netherlands only if (i) the jurisdiction of the foreign court is based on a ground that is acceptable under international standards, (ii) the foreign proceedings were conducted with due observance of the principles of due process of law and (iii) the foreign judgment is not in violation of Dutch public policy.

These conditions intend to prevent a foreign judicial decision from being enforced in the Netherlands that, in its creation or content, is in conflict with principles and values that are regarded as fundamental in the Dutch legal system. In assessing whether these conditions are fulfilled, the principle of mutual trust in the administration of justice in the third country, which underlies international arrangements and treaties on the recognition and enforcement of foreign judgments, does not apply.

Provided that the foreign judgment is not contrary to Dutch public policy, and in the absence of insolvency proceedings against the debtor in the Netherlands, a foreign insolvency practitioner can perform acts of administration and disposal with respect to assets situated in the Netherlands – including alienation of the assets and transfer of the proceeds into the foreign bankruptcy estate – provided that the insolvency practitioner is empowered to do so under its own lex concursus. However, any attachments in the Netherlands by individual creditors levied up to the moment of transfer must be respected. A foreign insolvency practitioner can act in the Netherlands without a prior court decision, exequatur or court recognition of the foreign proceedings, provided that the lex concursus allows for such actions.

Insolvency changes in response to COVID-19

As a result of the COVID-19 pandemic the Dutch government introduced several economic support measures for businesses affected by the corona crisis. Those support measures vary from compensation for turn over losses and support for fixed costs as well as the possibility to acquire new loans guaranteed by the government.

As a result of this support program a wave of bankruptcies has been avoided, but this could still have an aftermath.

For more information on changes to insolvency law in Netherlands as a result of the COVID-19 pandemic please see our Guide to changes in insolvency law in response to COVID-19. 

Contact: Marc Molhuysen


1 Directive (EU) 2019/1023 of the European Parliament and of the Council of 20 June 2019 on preventive restructuring frameworks, on discharge of debt and disqualifications, and on measures to increase the efficiency of procedures concerning restructuring, insolvency and discharge of debt, and amending Directive (EU) 2017/1132.
2 Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings (recast).