Dekker proposes new scheme for restructuring business debts
Businesses that are at risk of going into liquidation due to overindebtedness, but are still involved in viable business activities, will soon be able to sign a private agreement with their creditors and shareholders about debt restructuring. The court can approve the agreement. This is stated in draft legislation submitted to the House of Representatives by Sander Dekker, Minister for Legal Protection. The scheme forms part of the 'Reassessment of Insolvency Law' programme and aims to facilitate the restructuring process for businesses.
'This scheme will help to save businesses and secure their future. This also contributes to the preservation of employment.'
The agreement links all the creditors and shareholders involved in the agreement together. Creditors or shareholders who have not agreed can nevertheless be bound by the agreement if the relevant decision-making and its content meet specific requirements. The term 'compulsory agreement' is therefore also used.
In the Netherlands, there are no legal provisions for a compulsory agreement outside liquidation. A private debt restructuring agreement can currently only be concluded if all creditors and shareholders agree to it. This means that, if only one or several creditors or shareholders are being awkward, the business can still go into liquidation. It may also be the case that those who do wish to cooperate – in order to prevent liquidation – take responsibility for a disproportionate share of the restructuring costs. The current regulations are therefore ineffective, even though there is an urgent need for a workable scheme in practice.
Dekker’s bill strengthens the amicable debt restructuring process and keeps the option of a compulsory agreement open as a 'last resort'. 'The mere existence of an effective and efficient scheme that leads to a quick final decision by the court can prevent the need to actually include the court,' says Minister Dekker in his explanation.