New bankruptcy legislation in the Netherlands: Draft legislation on pre-pack sales by a ‘proposed trustee’
By Götz Hempel, TeekensKarstens advocaten notarissen
On 4th June 2015, the Dutch Minister of Security and Justice sent the legislative proposal Act on the Continuity of Companies I regarding the introduction of pre-pack sales by a proposed trustee to the House of Representatives (Tweede Kamer) for further consultations.
Inspired by the Chapter 11 proceedings in the United States and pre-pack sales based on UK’s Enterprise Act, Dutch insolvency practice is increasingly looking for possibilities to effectively restructure failing companies rather than liquidate them. For the past couple of years there have been a number of successful pre-pack restructurings in the Netherlands. Nevertheless, there is currently no legal basis for the appointment of a silent trustee, which might lead to annulment actions by the later trustee in the bankruptcy.
A so called ‘pre-pack’ is used for the restructuring of a company through a transaction that is prepared as much as possible before a formal request for bankruptcy (faillissement), or suspension of payments (surseance van betaling) is made. The aim of the prepack restructuring is to ensure maximum preservation of the value of the business. Since there is no legal obligation to apply for bankruptcy under Dutch law (as exists in German law, for example), Dutch bankruptcy proceedings are more likely to be focused on the liquidation of a company and the debtor’s assets than on the continuation of the company and therefore, Dutch insolvency law has limited remedies to safeguard creditors’ interests, and preserve jobs and activity.
TeekensKarstens advocaten notarissen, Leiden, the Netherlands
T: +31 71 535 80 50
TeekensKarstens lawyers notaries (TK) is a full service law firm, with a range of expertise that covers all areas of commercial law relevant to our clients, whether listed companies, large medium-sized companies, the (semi-) public sector or individuals. The main office in Leiden is centrally located between Amsterdam, The Hague and Utrecht, and just fifteen minutes from Amsterdam Schiphol Airport.
Götz Hempel, legal counsel at TK, heads the German Desk of the firm and provides comprehensive advice to international clients on cross-border issues and their activities in the Netherlands, focusing on the German speaking and Nordic countries. With ample experience in corporate law his practice concentrates on mergers and acquisitions, (international) joint ventures, restructurings, corporate governance and (cross-border) commercial contracts.
published: September 2015