I OVERVIEW OF RESTRUCTURING AND INSOLVENCY ACTIVITY
i Liquidity and state of the financial markets
Quantitative easing by the European Central Bank and others has resulted in high liquidity levels and low funding costs for Dutch borrowers. Dutch corporates have also had good access to financing because foreign financiers and investors have been showing an increasing appetite for Dutch assets. Notably, in the sub-investment grade market, unitranche lenders are gaining market share in mid-market situations that were traditionally dominated by the Dutch banks (often teaming up in club deals). In the bigger ticket market, borrowers have also had very good access to 'covenant lite' financings provided by institutional investors (as high-yield bonds or as a bank-style leveraged loan). There was so much liquidity in that sector of the market in 2018 that borrowers managed to further erode customary credit protections. As far as acquisition financing is concerned, 2018 saw private equity buyouts returning to pre-2008 levels for the first time. The market saw some major divestments by large corporates, with private equity coming out very strongly (e.g., Unilever divesting its spreads business to KKR, Akzo Nobel divesting Nouryon to Carlyle). Leaving aside an overall market dip at the end of the year, the buy-out financings were generally well received in the institutional markets and were often also leveraged further by second lien or senior subordinated financings.
ii Impact of specific regional or global events
Uncertainties around the UK–EU relationship after Brexit, the UK market after Brexit and a global trade war unleashed by Donald Trump affected the markets in 2018. While there was continued M&A activity, many names expected to come to market eventually did not come or were pulled because they were perceived to have too much exposure to these uncertainties. In addition to transactions with a more domestic focus, sectors for which the markets remained buoyant included real estate, infrastructure and services.
In the retail sector, fierce competition between low-budget competitors, online platforms and other market disruptors continue to drive changes. The sector has seen the successful players become the subject of very significant M&A scenarios, while the players unable to adapt to new market circumstances often ended up in insolvency, albeit mostly emerging with a significantly reduced number of stores.
iii Market trends in restructuring procedures and techniques employed during 2018
Pre-packaged insolvencies (pre-packs) remain an area of focus in the Netherlands. In order to ensure continuity of a stressed business, a debtor, sponsor, their advisers and key creditors (notably secured lenders and key suppliers) prepare a deal, following which the court appoints a liquidator to assess the proposed restructuring as a transaction that might be implemented on the first day of an actual bankruptcy. While the Dutch legislator continues to work on a broader statutory platform for pre-packs (see Section VI.ii), employee rights have taken centre stage in the discussion. Following the recent judgment of the European Court of Justice (ECJ) concerning the Estro pre-pack, pre-packs can in most instances no longer be used as a tool to make part of the workforce redundant, at least not without making severance payments.2 As mentioned in the previous edition of this volume, it follows from recent case law of the Supreme Court that no prior approval of the works council3 is required for the liquidator to decide on asset disposals4 or the dismissal of employees.5 However, such decisions by the liquidator do require prior approval in case of a going concern sale pursuant to which (a part of) the debtor's business is continued or if business rescue is facilitated within the same corporate entity (e.g., by the adoption of a composition plan).
In retail insolvencies, one enforcement method that is regularly used includes a liquidation sale conducted by the liquidator under a mandate granted by the secured creditor. Any cash and electronic payments made by customers in respect of encumbered property are deemed to constitute enforcement proceeds available for distribution to the secured creditor.
In recent insolvencies in the retail sector, it appears that landlords increasingly capitalise on hold out value. The termination of a lease in respect of premises on favourable locations could easily thwart any corporate rescue attempt of the debtor's ailing business. Nevertheless, in most cases where a going concern sale is viable, the landlord will cooperate in facilitating the sale by accepting the purchaser of the debtor's business as a new lessee.
In larger insolvency proceedings containing numerous (notably financial) creditors, debt restructurings generally take place through a consensual deal or a restructuring plan combined with a statutory cramdown mechanism in formal proceedings or by using a foreign route (e.g., a scheme of arrangement under English law).
iv Number of formal procedures entered into or exited during 2018
According to details made available by the Central Bureau of Statistics of the Netherlands (CBS), the total number of corporate bankruptcy proceedings commenced in 2018 amounts to 3,144 new cases (excluding sole proprietors and traders). This represents a decrease of approximately 4.5 per cent compared to the number of new filings in 2017, and is the lowest number since 2000. The decrease in the number of new bankruptcy cases is linked to the recovery of the Dutch economy in recent years. However, the decrease in percentage is substantially lower than in previous years. For example, in 2017 there was a decrease of approximately 25 per cent compared to the number of new filings in 2016.
Similar to previous years, most new bankruptcies have been recorded in the wholesale and retail sector. A total number of 320 new cases were opened in the wholesale sector and 304 new cases in the retail sector. The sharpest drop (measured in percentages) in new bankruptcy cases concerned the real estate leases and trading sector (a decrease of 48 per cent).6
II GENERAL INTRODUCTION TO THE RESTRUCTURING AND INSOLVENCY LEGAL FRAMEWORK
i Available insolvency and restructuring procedures7
The Bankruptcy Code provides for three main formal proceedings: bankruptcy, suspension of payments and debt adjustment for natural persons.
Bankruptcy proceedings have been primarily designed as liquidation proceedings, but in practice, can function as a restructuring tool (e.g., through a composition plan or by means of a going-concern sale of the debtor's viable business parts). The primary objective of suspension of payments proceedings is the reorganisation and continuation of the debtor's business, but the limited scope of the proceedings – confined to ordinary (i.e., unsecured and non-preferential) insolvency claims – and continued application of transfer of undertaking protection rules render it ineffective for many restructurings.8 The main purpose of debt adjustment for natural persons is to provide heavily indebted natural persons with a fresh start. Considering the focus of this chapter on large corporate debtors, debt adjustment for natural persons will not be further dealt with.
The Bank Recovery and Resolution Directive (BRRD)9 and the Single Resolution Mechanism Regulation (the SRM Regulation)10 provide for a European approach towards the recovery and resolution of banks and large investment firms (and certain affiliated entities) in distress. To facilitate a timely intervention in respect of such institutions, national legislation implementing the BRRD and the SRM Regulation grants certain intervention powers to competent resolution authorities. Beyond the scope of the BRRD and the SRM Regulation, the Dutch Central Bank has powers to procure that a bank in serious financial problems is transferred, in whole or in part, to a third party. Furthermore, the Dutch Minister of Finance holds powers to intervene in the affairs of banks, investment firms and (managers and custodians of) investment institutions (all as defined in the Financial Supervision Act), including the power to expropriate their shares or capital instruments and some or all of their assets (e.g., as applied to the nationalisation of SNS REAAL NV and SNS Bank NV in February 2013), where this is necessary to safeguard the stability of the Dutch financial system.
Restructurings often occur beyond the setting of formal insolvency proceedings (e.g., through security enforcement, new or amended financing arrangements, contractual restructuring arrangements or foreign restructuring routes). The main disadvantages of such informal restructurings often include the lack of a stay on individual recourse rights of creditors and the absence of a cramdown mechanism in relation to dissenting and non-participating creditors, beyond those mechanisms agreed between creditors. Changes to the statutory framework are pending to enhance attempts to restructure financially distressed companies outside formal insolvency proceedings (see further in Section VI.ii).
ii The taking and enforcement of security
Loans granted to a corporate debtor can be secured over the company's assets. Creation requirements of security rights are governed by general rules of property law and depend on the relevant type of collateral. All-embracing security can be obtained by a combination of pledges and mortgages over assets comprising the debtor's business.
An important effect of the commencement of bankruptcy proceedings is the divestment of the debtor (i.e., the debtor loses the power to dispose of and administer the assets included in the insolvent estate).11 Pledges granted in advance over future property12 can no longer crystallise after the debtor's divestment.13 During the course of bankruptcy proceedings, the liquidator is exclusively entitled to dispose of and administer the insolvent estate.14
The secured creditor in Dutch insolvency proceedings can enforce its rights as if the proceedings had not been opened.15 Enforcement of security can only be temporarily stayed by the order of a moratorium at the time of the bankruptcy adjudication or subsequently by the supervisory judge.16 Such a moratorium can last for a maximum period of four months (including extensions). The liquidator has powers to expedite enforcement of security by demanding that the secured creditor realise the collateral within a reasonable time period.17 Failure to enforce within that time period will result in a loss of enforcement rights and an obligation to share in the general realisation costs of the proceedings.18 A final limitation on the position of the secured creditor is that it cannot enforce its security in respect of all claims that might arise after the opening of insolvency proceedings.19
In practice, the secured creditor and the liquidator often agree on the realisation of the secured asset by the latter against the deduction of a nominal fee from the realisation proceeds.
iii Duties of directors of companies in financial difficulties
No statutory obligation exists for directors of a financially distressed company to file for insolvency proceedings. Nevertheless, governance of the company may be placed under increased scrutiny by third parties and continued trading may give rise to director's liability.
In essence, directors would face liability if their behaviour was negligent towards a third party and constituted serious personal wrongdoing.20 A prominent ground for personal liability is when directors allowed the debtor to execute a transaction with a third party while they knew (or should have known) that the debtor would be unable to meet its obligations under that transaction and that the deprived counterparty would not have sufficient recourse for its damages.21 Director's liability can also arise from actions that resulted in default and non-recoverability of damages,22 as well as selective payments (e.g., non-payment to a particular creditor based solely on unwillingness of the director to allow such payment to be made).23
Each director can also be held personally liable for the entire deficit of the bankrupt estate if their improper management caused the bankruptcy.24 By statute, improper management is established if books and records of the bankrupt company have not been properly maintained or if directors failed to meet obligations regarding the company's annual accounts. Subject to proof to the contrary, that improper management is also assumed to have caused the bankruptcy.25
Directors can also be held liable by the company for improper performance of management tasks allocated to them by law or the articles of association.26 Examples of circumstances in which directors can be held liable include violation of the law or articles of association, procuring reckless and irresponsible financial behaviour of the company and utilising assets of the company for personal benefit.27
iv Clawback actions
During bankruptcy proceedings, a liquidator may invoke the actio Pauliana in order to invalidate antecedent transactions that are detrimental to the insolvent estate. Clawback generally requires prejudice, which will materialise in the event creditors receive a lower distribution on their claims as a result of a transaction.
Prejudice would typically be the result of a reduction in the total value of the debtor's estate as a result of a transaction (transactions at an undervalue) or as a result of a disturbance of the statutory waterfall of priorities when a company is already insolvent (preferences). The liquidator should look at the entire transaction (including beneficial aspects of the transaction) and, therefore, has no right to cherry-pick by only looking at one particular provision of a document as a clause that has a negative impact on the recourse position of the joint creditors. If the disputed act was part of a set of transactions, the positive or negative effects of the combined set should be regarded as well.28
Where prejudice has been established, the right to challenge the prejudicial action depends on further circumstances. The avoidance of an act entered into without a pre-existing obligation to perform the relevant act requires that the debtor (and in the case of a transaction against consideration, also the counterparty) knew or should reasonably have known that such prejudice would materialise.29
Knowledge of a mere chance that prejudice may occur is insufficient to invoke the actio Pauliana. Knowledge must relate to a reasonable degree of likeliness that insolvency proceedings will be opened and that the insolvent estate contains a deficit.30 In certain cases, the onus of proof regarding knowledge of prejudice is reversed by law (e.g., in the event of certain transactions executed between related parties within a period of one year prior to the bankruptcy date).31
A compulsory or involuntary legal act, on the other hand, can only be avoided either in the event that the transaction occurred at a time in which the counterparty knew or ought to have known that a petition was submitted for the commencement of insolvency proceedings against the debtor,32 or in the event of a concerted action by the debtor and the creditor aimed at facilitating preferential treatment of the latter (collusion).33
Finally, it should be noted that set-off effected in the period immediately prior to the commencement of insolvency proceedings could be clawed back if the creditor effecting the set-off acted in bad faith when acquiring its claim or debt on which it relied when setting off.34 Bad faith is, notably, given when the creditor knew or should have known that the insolvency could reasonably be expected.35 A similar rule applies to the right of an account bank to exercise its pledge over monies standing to the credit of bank accounts of its clients (such a pledge is generally stipulated in the general terms and conditions used by the relevant account bank). The pledge cannot be exercised by account banks in relation to monies paid into the account at a time when the account bank is considered to be in bad faith (as defined above).36
III RECENT LEGAL DEVELOPMENTS
i Court order sanctioning private enforcement of a share pledge
The basic assumption under Dutch law is that the enforcement of a right of pledge occurs through a public sale.37 A private sale or appropriation of pledged assets by the pledgee is permitted (1) if prior leave is obtained from the court;38 or (2) if such enforcement is agreed upon between the pledgor and the pledgee at a time on which the debtor is in default in the repayment of the secured obligations (any earlier consent provided by the pledgor (in advance) is considered to be null and void).39 Share pledges are generally enforced by means of a private sale (e.g., following a 'closed auction' process).
In a recent case before the Supreme Court, the interplay was addressed between the aforementioned enforcement rules and limitations imposed by the articles of association on (among other things) the enforcement of share pledges (e.g., pre-emption rights). The view was confirmed by the Supreme Court that any transfer limitation rules provided for in the articles of association must be adhered to by an enforcing pledgee (as follows explicitly from a statutory provision),40 but that the relevant company regime does not displace the statutory rules on enforcement of share pledges.41 Hence, the application of pre-emption rights cannot displace the requirement of court leave or consent by the pledgor (as described above) for the private enforcement of the share pledge to take place.
ii Enforcement of a pledge over bank accounts in respect of pre-commencement payment orders
It is explicitly precluded by law to invoke a right of set-off during insolvency proceedings in respect of claims or liabilities which were acquired by the debtor's counterparty at a time when the debtor's insolvency could reasonably be expected.42 In previous judgments of the Supreme Court it was held that a similar rule can be deemed to apply in respect of the enforcement of security rights for secured liabilities which were transferred to the secured creditor by a third party at a similar point in time (as described above in relation to insolvency set-off).43 The last piece of the puzzle to equate the rules applicable to insolvency set-off and the enforcement of security rights during insolvency proceedings was whether the same rule can be deemed to apply in relation to the enforcement of a pledge over bank accounts granted to account banks in respect of monies paid onto the account pursuant to payment orders made at a time on which the debtor's insolvency could reasonably be expected. As a result of the payment transfer to the account holder (pledgor), the account bank becomes indebted to the account holder. If the timing of such payment transfer would render insolvency set-off prohibited, this rule cannot be evaded by enabling the account bank to enforce its right of pledge over the relevant bank account.44
An exception to the above rules applies in respect of set-off during insolvency proceedings by an account bank that has been granted a right of pledge on receivables that are paid by means of a payment transfer to the account holder.45
iii Creditor remedies against a (going concern) sale contemplated by the liquidator
Certain stakeholders (including insolvency creditors) can request the supervisory judge to issue an instruction to the liquidator to perform a certain act or to refrain from doing so.46 For example, a creditor can request the supervisory judge to prohibit a public or private sale of assets as contemplated by the liquidator. The request lodged by the creditor can also relate to the terms of a specific sale agreement or the identity of the third party purchaser (e.g., a party related to the insolvent debtor).47 The supervisory judge will balance the legitimate interests of the petitioning party and the general interest of the debtor and the joint creditors in an expedient settlement of the insolvency proceedings. In principle, the decision of the supervisory judge can be appealed (unless the relevant decision concerns approval granted to the liquidator to execute a private sale of assets belonging to the insolvent estate).48
iv Status of post-commencement claims originating from pre-commencement legal relationships
In a landmark decision of the Supreme Court49, the view was held that post-commencement claims that arise from pre-commencement legal relationships (i.e., contractual relationships executed between the debtor and a counterparty prior to insolvency) are admissible in insolvency proceedings as ordinary insolvency claims. This decision significantly reduced the number of claims that had previously been treated as administration claims (i.e., claims against the estate). Various questions triggered by the 'new approach' of the Supreme Court were answered in subsequent case law. An important example concerns the question whether a secured creditor may enforce a right of pledge or mortgage during insolvency proceedings for secured claims which will come into existence after the commencement of the proceedings (and possibly even after the enforcement has occurred). The Supreme Court endorsed the view that the secured creditor was entitled to do so provided that such post-commencement claims originate from a pre-commencement legal relationship.50 A similar rule applies to insolvency set-off which can be invoked by the debtor's counterparty in respect of any reciprocal claims which existed at the time of bankruptcy adjudication or which originate thereafter from a pre-commencement legal relationship.51
In a recent case regarding the treatment of post-commencement claims as ordinary insolvency claims (as discussed above), the Supreme Court has confined the scope of such claims which are admissible in the proceedings.52 If post-commencement claims arise from a pre-commencement legal relationship due to acts performed by the counterparty to which the latter was entitled but not obliged under the existing (contractual) relationship, the relevant post-commencement claims of the counterparty are inadmissible. In contrast, any post-commencement claims which originate from such legal relationship due to acts performed by the counterparty prior to the commencement order or due to mandatory acts of the counterparty performed during the proceedings, are thus admissible as ordinary insolvency claims. The latter rule also applies to any statutory or contractual damages claims which arise during the proceedings due to non-performance of the latter category of post-commencement claims.53
Admissible post-commencement claims must be submitted for admission in the proceedings pursuant to the same rules which apply to admissible pre-commencement claims (even if such post-commencement claims would originate only after the claims admission meeting). In a controversial decision of the Supreme Court,54 it has been held that any such claims which are unliquidated (i.e., the relevant (future) claims have an uncertain amount) must be admitted for a value that can be attributed to such claims at the date of the commencement order. Various alternative suggestions have been made in legal literature (including the treatment of unliquidated post-commencement claims on par with pre-commencement contingent claims).
IV SIGNIFICANT TRANSACTIONS, KEY DEVELOPMENTS AND MOST ACTIVE INDUSTRIES
As a summary, below is an overview of significant formal proceedings, informal restructurings and restarts commenced in or still pending in 2018–2019:
- bankruptcy proceedings:
- Klesch Aluminium (previously: Aldel);
- Doniger Fashion Group (previously: McGregor);
- Witteveen Mode;
- The Phone House; and
- Roto Smeets;
- Vidrea Retail;
- Steinhoff Group; and
- Coolcat; and
- Fred de la Bretonière.
i General cross-border insolvency framework
The general legal framework pertaining to cross-border insolvency proceedings is primarily of European origin. Dutch courts recognise foreign insolvency proceedings that fall within the ambit of the Recast of the European Insolvency Regulation (Recast EIR)55 and the Winding-Up Directives concerning credit institutions and insurance undertakings.56 To date, the Netherlands has not adopted the UNCITRAL Model Law on Cross-Border Insolvency.
In the absence of binding international rules on recognition of foreign insolvency proceedings, other than the said EU law instruments, the fall-back position under Dutch law is based on case law only. Under that case law, foreign proceedings outside of the scope of EU law instruments are merely granted territorial effect in the following ways.
- Assets of a debtor that are situated in the Netherlands are excluded from the scope of a general attachment and a general stay under the lex concursus.
- Any legal effects of the commencement of insolvency proceedings applicable under the lex concursus cannot be invoked in the Netherlands to the extent that this would prevent the debtor's creditors from taking recourse against assets situated in the Netherlands during or upon the conclusion of the proceedings.
- The application of the territoriality principle does not prevent any other legal effects from being invoked in the Netherlands. For example, a liquidator is entitled to administer and dispose of the debtor's assets situated in the Netherlands, provided that such rights are conferred to him under the lex concursus and any attachments levied by an execution creditor prior to such acts by the liquidator are respected.57
ii New case law on international jurisdiction to hear actions to set a transaction aside in cross-border insolvency proceedings
It has been held by the Court of Justice of the European Union that Article 3(1) of the European Insolvency Regulation58 must be interpreted as meaning that the courts of the Member State within the territory of which insolvency proceedings have been opened have jurisdiction to decide an action to set a transaction aside by virtue of insolvency that is brought against a person whose registered office is in another Member State.59 Such jurisdiction should be considered to be exclusive (and not optional). Hence, the liquidator is not at liberty to bring such an action before, for example, a court of the Member State in which the defendant has his registered office or habitual residence.
The case has only limited importance in respect of the Recast EIR (which contains an explicit rule on international jurisdiction for actions deriving directly from insolvency proceedings and closely linked with them in Article 6).
iii Recognition of UK schemes of arrangement
Dutch companies have increasingly been using English law-governed schemes of arrangement as a means of implementing debt restructurings. The first case involving a Dutch company in which recognition issues have been considered is Re NEF Telecom Company BV.60 Another example entails the scheme offered by Magyar Telecom (a Dutch finance vehicle of a telecommunication group operating in Hungary).61 Other recent examples include Metinvest BV (a Dutch finance vehicle in an Ukrainian based iron ore and steel conglomerate), Indah Kiat International Finance Company BV (a Dutch finance vehicle related to the APP Group, which is primarily engaged in manufacturing paper pulp) and several entities belonging to the Estro Group (active in the childcare services industry) and the Van Gansewinkel Group (a leading group in the Dutch waste management industry).
The prevailing view in legal literature and practice is that Dutch courts will probably recognise an English court order sanctioning a scheme of arrangement. There is guidance that a scheme of arrangement is within the scope of the Brussels I bis Regulation,62 so that the Dutch court is generally not entitled to dispute the English court's jurisdiction and refuse recognition of the scheme.
Should schemes of arrangement be outside the scope of the Brussels I bis Regulation, then alternative grounds for recognition have been identified, including:
- the Rome I Regulation;63
- the Convention providing for the Reciprocal Recognition and Enforcement of Judgments in Civil Matters (concluded on a bilateral basis between the Netherlands and the United Kingdom on 17 November 1967); and
- general Dutch private international law.
VI FUTURE DEVELOPMENTS
i EU instruments
The Dutch restructuring and insolvency regime is increasingly shaped by EU instruments. An important example concerns the EU Directive on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures.64 The Directive does not attempt to harmonise core aspects of formal insolvency procedures such as the conditions for opening insolvency proceedings, definitions of insolvency or the ranking of claims. Instead, the Directive focuses, as far as corporate debtors are concerned, on ensuring that a statutory framework is put in place in each Member State, which maximises the chances of a company with a viable business being able to restructure its debts before it is forced into liquidation. The European Parliament and Council adopted a joint text in May 2019. The Council is expected to adopt the Directive without further amendments in June 2019, after which it will be published in the Official Journal. Member States (which may or may not include the UK) will then have two years to transpose the Directive, with the exception of a few provisions that allow for a five-year transposition period.
Another example of such future EU developments concerns future EU measures to reduce non-performing loans (NPLs) and prevent their renewed build-up. The EU package of proposed new measures includes a proposal for an EU Directive on credit servicers, credit purchasers and the recovery of collateral.65 The draft Directive proposes measures on credit servicers, credit purchasers and the recovery of collateral. It aims to encourage the development of secondary markets for NPLs by removing barriers to credit servicing and the transfer of bank loans to third parties across the EU. However, the application of many of these proposals is not restricted only to NPLs nor to portfolio trades, and accordingly they have the potential to impact the wider loan markets more generally. The draft Directive also provides a new framework for secured creditors to recover value efficiently through extrajudicial collateral enforcement for newly originated loans ('accelerated extrajudicial collateral enforcement'). The new extrajudicial procedure would be accessible only when agreed in advance by both lender and borrower in the loan agreement. It is intended that most of the proposals in the draft Directive would require implementation by Member States by January 2021, with the remainder in force by July 2021.
ii Future reform of Dutch law
It is currently clear that no full revision of the statutory regime will occur in the foreseeable future. Various proposals are currently pending or have recently been implemented to improve specific parts of the current regime. Main themes of reform include:
- combating insolvency fraud through the introduction of director disqualification rules, revision of criminal law aspects of insolvency proceedings and other powers;
- the promotion of corporate rescue through the Business Continuity Acts described below; and
- the modernisation of insolvency proceedings by enhancing electronic communication modes, abolishing physical claims admission meetings, adding flexibility in the composition of the creditors' committee and other tools.
Specific attention should be drawn to the proposed Business Continuity Act I and the Act on Court Sanctioning of a Private Restructuring Plan (the Private Restructuring Plan Act) as a precaution against bankruptcy. These Acts purport to promote the rescue of financially distressed companies at an early stage.
A proposed amendment of the current regime under the Business Continuity Act I includes the debtor's right to request the court to appoint a silent administrator (and a supervisory judge) prior to the commencement of formal proceedings. The silent administrator will, in principle, be appointed as liquidator in subsequent bankruptcy proceedings. The silent administrator can prepare the future commencement of such proceedings (including a possible going concern sale to be executed swiftly upon the commencement of the proceedings). These preparations beyond the ambit of formal (public) proceedings can have a beneficial impact on, for example, the expected sale proceeds and the preservation of employment opportunities.
The Private Restructuring Plan Act as a precaution against bankruptcy purports to introduce a statutory regime governing restructuring plans outside formal insolvency proceedings. The proposed regime provides for a cramdown in relation to creditors and shareholders dissenting to a debt restructuring supported by a majority of creditors and shareholders in the relevant class of creditors or shareholders. Sanctioning by the court of the arrangement will be binding on all creditors and shareholders involved in the settlement. A restructuring plan can be offered to individual classes. The Council of State has given its advice on the legislative proposal on 27 March 2019. The bill is now scheduled to be debated in Parliament.
1 Paul Kuipers is a partner at Linklaters LLP.
2 The Minister of Justice and Security wrote in a letter to Parliament that case law will ultimately provide more clarity on the consequences of the judgment of the ECJ in the Estro case. Thus far, there are a few judgments where lower courts had to rule whether or not the case was similar to the Estro pre-pack. See Court of Appeal Arnhem-Leeuwarden 17 July 2018, JOR 2018/265; Court of Appeal Amsterdam 10 July 2018, JOR 2018/264; District Court Gelderland 1 February 2018, JOR 2018/111; Cantonal Court Limburg 26 September 2018, JOR 2018/316.
3 Such prior approval is governed by Article 25 of the Works Council Act.
4 Article 176 of the Bankruptcy Code.
5 Such dismissal may occur pursuant to Article 40 of the Bankruptcy Code. Cf. Supreme Court 2 June 2017, JOR 2017/248 (DA).
7 See further on available insolvency and restructuring procedures: Dennis Faber and Niels Vermunt, 'National Report for the Netherlands', in: Dennis Faber et al. (eds), Commencement of Insolvency Proceedings, Oxford International and Comparative Insolvency Law Series, Volume 1, Oxford University Press 2012, page 428 ff.
8 Article 232 of the Bankruptcy Code, Article 7:663 and Article 7:666 of the Civil Code. Following the aforementioned decision of the ECJ concerning the Estro pre-pack, such rules may also apply in case of a going concern sale implemented in bankruptcy proceedings (prepared as a pre-pack).
9 Directive 2014/59/EU of the European Parliament and of the Council of 15 May 2014 establishing a framework for the recovery and resolution of credit institutions and investment firms and amending Council Directive 82/891/EEC, and Directives 2001/24/EC, 2002/47/EC, 2004/25/EC, 2005/56/EC, 2007/36/EC, 2011/35/EU, 2012/30/EU and 2013/36/EU, and Regulations (EU) No. 1093/2010 and (EU) No. 648/2012, of the European Parliament and of the Council.
10 Regulation (EU) No. 806/2014 of the European Parliament and of the Council of 15 July 2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund and amending Regulation (EU) No. 1093/2010.
11 Article 23 of the Bankruptcy Code.
12 Mortgages cannot be granted in advance over future immovable assets, registered ships and registered aircraft. See Articles 3:97(1) and 3:98 of the Civil Code.
13 Articles 23 and 35(2) of the Bankruptcy Code.
14 Article 68(1) of the Bankruptcy Code.
15 Article 57(1) of the Bankruptcy Code.
16 Article 63a of the Bankruptcy Code.
17 Article 58(1) of the Bankruptcy Code.
18 Articles 58(1) and 182 of the Bankruptcy Code.
19 It follows from Article 132(2) of the Bankruptcy Code and Article 483e of the Civil Procedure Code that security can only be enforced during insolvency proceedings for (1) pre-commencement secured claims; and (2) post-commencement secured claims which originate from a pre-commencement legal relationship. Cf. also Supreme Court 16 October 2015, JOR 2016/20; NJ 2016, 48 (DLL/Van Logtestijn).
20 Article 6:162 of the Civil Code.
21 Supreme Court 6 October 1989, NJ 1990, 286 (Beklamel).
22 Supreme Court 18 February 2000, JOR 2000/56; NJ 2000, 295 (New Holland Belgium/Oosterhof) and Supreme Court 8 December 2006, JOR 2007/38; NJ 2006, 659 (Ontvanger/Roelofsen).
23 Cf. e.g. Supreme Court 26 March 2010, JOR 2010/127; NJ 2010, 189 (Zandvliet/ING).
24 Article 2:138(1) and Article 2:248(1) of the Civil Code regarding public and private limited companies. Such improper management must have occurred within three years of the commencement of the bankruptcy proceedings. See Article 2:138(6) and Article 2:248(6) of the Bankruptcy Code. The scope of the provision is extended to shadow directors pursuant to Article 2:138(7) and Article 2:248(7) of the Civil Code.
25 Article 2:10 of the Civil Code.
26 Article 2:9(1) of the Civil Code.
27 Other circumstances that may be relevant include the nature of the company's activities and corresponding risks, the allocation of tasks within the board of directors, possible guidelines applicable to management, the information available to directors at the time of scrutinised actions and decisions, and the knowledge and prudence which may generally be expected of a director which is sufficiently prepared and performs his task in a diligent manner. See Supreme Court 10 January 1997, JOR 1997/29; NJ 1997, 360 (Staleman/Van de Ven).
28 Supreme Court 10 December 1976, NJ 1977, 617 (Eneca) and Supreme Court 8 July 2005, JOR 2005/230; NJ 2005, 457 (Van Dooren qq/ABN AMRO Bank II).
29 Article 42 of the Bankruptcy Code.
30 Cf. Supreme Court 22 December 2009, JOR 2011/19; NJ 2010, 273 (ABN Amro Bank/Van Dooren qq III).
31 Article 43 of the Bankruptcy Code.
32 Knowledge of the mere likelihood that insolvency proceedings may be opened is insufficient to meet this requirement. See Supreme Court 16 June 2000, NJ 2000, 578 (Van Dooren qq/ABN AMRO Bank I).
33 Supreme Court 24 March 1995, NJ 1995, 628 (Gispen qq/IFN) and Supreme Court 20 November 1998, JOR 1999/19; NJ 1999, 611 (Verkerk/Tiethoff qq).
34 Article 54(1) of the Bankruptcy Code.
35 Supreme Court 7 October 1988, NJ 1989, 449 (AMRO/THB).
36 Cf. Supreme Court 23 November 2018, JOR 2019/27 (Eurocommerce).
37 Article 3:250 of the Civil Code.
38 Article 3:251(1) of the Civil Code.
39 Article 3:251(2) of the Civil Code.
40 Article 2:198(6) of the Civil Code provides that rules included in the articles of association concerning a transfer of shares apply mutatis mutandis to share pledge enforcements or appropriation of shares by the pledgee pursuant to Article 3:251 of the Civil Code.
41 Supreme Court 22 June 2018, JOR 2018/310; NJ 2018, 429 (Bethanie/Rabobank cs).
42 Article 54(1) of the Bankruptcy Code.
43 Cf. Supreme Court 30 January 1953, NJ 1953, 578 (Doyer & Kalff) and Supreme Court 4 November 1994, NJ 1995, 627 (NCM/Knottenbelt qq).
44 Cf. Supreme Court 23 November 2018, JOR 2019/27 (Eurocommerce).
45 See Supreme Court 17 February 1995, NJ 1996, 471 (Mulder qq/CLBN).
46 Article 69(1) of the Bankruptcy Code.
47 Cf. Supreme Court 28 September 2018, JOR 2018/317; NJ 2019, 16 (LM/Van Boven qq).
48 Article 67(1) of the Bankruptcy Code.
49 Supreme Court 19 April 2013, JOR 2013/224; NJ 2013, 291 (Koot/Tideman qq).
50 Supreme Court 16 October 2015, JOR 2016/20; NJ 2016, 48 (DLL/Van Logtestijn qq). This outcome is based Article 132(2) of the Bankruptcy Code and Article 483e of the Civil Procedure Code.
51 See Supreme Court 26 March 1976, NJ 1977, 612 (Keulen and Oliemans qq/Cebeco); Supreme Court 16 October 2015, JOR 2016/20; NJ 2016, 48 (DLL/Van Logtestijn qq) and Supreme Court 13 October 2017, JOR 2018/48; NJ 2017, 454 (Liquidators Eurocommerce/Ontvanger).
52 Supreme Court 23 March 2018, JOR 2018/254; NJ 2018, 290 (Credit Suisse/Jongepier qq).
55 Regulation (EU) 2015/848 of the European Parliament and of the Council of 20 May 2015 on insolvency proceedings.
56 Council Regulation (EC) No. 1346/2000 of 29 May 2000 on insolvency proceedings, OJ 2000, L160/1, Directive 2001/17/EC of the European Parliament and of the Council of 19 March 2001 on the reorganisation and winding up of insurance undertakings, OJ 2001, L110/28 and Directive 2001/24/EC of the European Parliament and of the Council of 4 April 2001 on the reorganisation and winding up of credit institutions, OJ 2001, L125/15.
57 See Supreme Court 2 June 1967, NJ 1968, 16 (Hiret/Chiotakis); Supreme Court 31 May 1996, JOR 1996/75 (Coppoolse/De Vleeschmeesters); Supreme Court 24 October 1997, JOR 1997/146 (Gustafsen qq/Mosk); Supreme Court 19 December 2008, JOR 2009/94 (Yukos I) and Supreme Court 13 September 2013, JOR 2014/50 (Yukos IV).
58 Council regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings ('European Insolvency Regulation').
59 Court of Justice of the European Union 14 November 2018, C-296/17; ECLI:EU:C:2018:902 (Wiemer & Trachte/Tadzher). Reference is made by the Court to its earlier judgment of 12 February 2009, C-339/07, ECLI:EU:C:2009:83 (Seagon).
60  EWHC 2944 (Comm); recognition issues do not appear to have been raised in a prior case of a Dutch company proposing a scheme, Re DAP Holding NV  EWHC 2092 (Ch).
61 Re Magyar Telecom  3800 (Ch).
62 Regulation (EU) No. 1215/2012 of the European Parliament and of the Council of 12 December 2012 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters, OJ 2012, L 351/1.
63 Regulation (EC) No. 593/2008 of the European Parliament and of the Council of 17 June 2008 on the law applicable to contractual obligations, OJ 2008, L177/6.
64 Publication in the Official Journal is expected soon after adoption of the Directive by the Council. See previously the Proposal for a Directive of the European Parliament and of the Council on preventive restructuring frameworks, second chance and measures to increase the efficiency of restructuring, insolvency and discharge procedures and amending Directive 2012/30/EU, COM/2016/0723 final.
65 Proposal for a Directive of the European Parliament and of the Council on credit servicers, credit purchasers and the recovery of collateral, COM(2018)135.