But let's start at the beginning. WHOA stands forWet Homologation Private Agreement Act. This law came into force on 1 January 2021 and the idea behind it is to preserve maximum value in companies in financial difficulties. WHOA is there for companies that are fundamentally viable, but are facing too much debt and/or ongoing agreements that stand in the way of health. The debt burden is too high, but at its core the company is therefore viable. It allows companies in financial difficulties to reduce debt and terminate and/or modify squeezing contracts.
Guest article Mr Martijn Janssen
Valuable addition
Until 2021, the playing field for reorganisation consisted of the option of suspension of payments, bankruptcy or offering an out-of-court composition to creditors (where the consent of all creditors is required to reach an agreement). With the WHOA coming into force, restructuring lawyers have a valuable addition to their toolbox for companies. Provided, and I cannot stress this enough, that the company is viable at its core and bankruptcy can be expected in the short term if no action is taken. The so-called reorganisation value in a WHOA must be higher than the value creditors can redeem in bankruptcy.
How?
During a WHOA process, the entrepreneur retains control of the business and can therefore continue to conduct business. The WHOA regulates a forced composition outside bankruptcy. The entrepreneur consults with the creditors and records the agreements in a draft agreement. This has to be voted on and then the court can ratify the agreement. A condition for this is that at least a group of creditors who would receive benefits in bankruptcy agree to the WHOA agreement. Should not all creditors agree, the agreement can still be approved (homologated) by the court. In that case, creditors will thus be forced to settle for, say, a partial waiver of debts or a moratorium on payments. The starting point, however, is that creditors agree to the settlement of their own accord.
Important: cooling-off period
It would go too far to elaborate on all the steps to follow in this article. However, I would like to highlight one important point. After filing a starting statement with the court and starting consultations with creditors on the draft settlement, the court may be asked to make provisions to increase the chances of a successful WHOA process. In doing so, it is important to note that a cooling-off period can be declared. During that period of up to four months, extendable to a maximum of eight months, creditors cannot take recourse against the debtor's assets without the court's authorisation. Attachments can be lifted and the processing of a petition for bankruptcy can be suspended.
Cooling down yes or no?
As a supplier of goods or services, you may not be aware of the trajectory of the company you supply to. The debtor determines how it sets up the WHOA arrangement, and it might say that it offers an offer to only some of the creditors (and not essential creditors, for example). So you may not be informed of this. The debtor (your client) may simply place orders; after all, the aim is to make the fundamentally viable business viable as well. It is therefore important to continue to proactively manage your debtors. Not to let debts accumulate too quickly and for too long, to take collection measures and to keep talking to your debtor. If a cooling-off period has been granted, it is difficult to recover delivered unpaid items. Is there no cooling-off period? Then - if agreed - retention of title can be invoked and the right of recourse (recovering unpaid goods by rescinding purchase agreement).
Stay in consultation
By 2022, there have been a total of about 40 WHOA proceedings. Practice shows that WHOA can certainly work out well. ADO Den Haag is a case in point. As a supplying party, you should always ensure that you work with retention of title and therefore good general terms and conditions. During the cooling-off period, you cannot easily access your stuff The position of smaller SME creditors has incidentally been strengthened with minimum protection. In principle, they must be paid at least 20% of their claim. If small creditors do not agree to an offer of less than 20%, the court will test whether there are compelling grounds to deviate. If the judge does not consider the grounds sufficient to deviate, then the agreement will not be approved. The WHOA obviously has more to it than I discuss in this article. For both suppliers and companies in dire straits, it is important to engage and stay in consultation. There are always specialists who will work with you to find solutions!
