On the brink of bankruptcy? The WHOA may be your way out

What is the WHOA?

The WHOA is a statutory scheme that allows you, as an entrepreneur, to restructure your debts. The scheme is part of the Bankruptcy Act (Faillissementswet, FW). With the WHOA, you can make agreements with your creditors to:

• pay part of your debts
• have part of your debts written off
• pay part of your debts later
• convert debts into shares (in the case of legal entities)

You do not have to make agreements with all your creditors. You divide them into classes (groups) based on their rights and ranking. For example, the Netherlands Tax Administration, banks, suppliers. You offer your agreement to 1 or more classes.

If the court approves the agreement, this is called confirmation. The agreement then applies to all creditors in the class, even if they do not all agree. This is called a compulsory agreement.

Who is the WHOA for?

Businesses of all legal structures have access to the WHOA, from eenmanszaken to BVs. For smaller businesses and self-employed professionals, the consultancy costs for guidance through a WHOA process can be an obstacle.

When is the WHOA suitable?

You can use the WHOA if you have structural payment problems and are facing bankruptcy. You must also be able to offer a concrete and substantiated agreement. And you must be able to show that the agreement is more favourable for your creditors than bankruptcy of your company. The court will assess this when evaluating the request for approval.

2 types of agreements

In a WHOA process, you can choose between 2 types of agreements. Which one you choose depends on the situation of your business.

• Restructuring agreement
  Is your business fundamentally viable? Then you can use a restructuring agreement to restructure your debts and continue doing business. During the process, you remain authorised to run your business. You will not automatically be assigned a curator.
• Liquidation agreement
  Is it not realistic to continue your business? Then you can use a liquidation agreement to wind up your business in a controlled manner. This can be an alternative to bankruptcy. Creditors often receive more in a WHOA process than in bankruptcy.

How does the WHOA work? The most important steps

A WHOA process has fixed legal steps:

1. File a starting statement with the court. This shows that you are preparing an agreement.
2. Assess your financial situation. You draw up an overview of your debts, assets and prospects.
3. Classify creditors into categories. You divide your creditors into groups based on their rights and rank, for example:
       - separatists (mortgage and pledge holders)
       - preferential creditors (such as the Netherlands Tax Administration) 
       - unsecured creditors
4. Draw up a draft agreement and vote per class. You offer an agreement to 1 or more classes of creditors. Each class votes on the agreement. A class agrees if at least two-thirds of the total amount of claims within that class vote in favour.
5. Request for homologation from the court. Application for approval of the agreement. This is done through a solicitor.
6. Implementation of the agreement. Once approved by the court, the agreement is binding. It then applies to all parties involved.

What is allowed and required under the WHOA?

The law sets clear conditions:

• You can decide for yourself which groups of creditors you make a proposal to. Creditors who you do not approach retain the right to full payment.
• Creditors who are small SME entrepreneurs (up to 50 employees) must receive at least 20% of their claim back.
• You can amend or terminate current agreements, such as rental contracts, under certain conditions if the court approves.
• You may not change employment conditions via the WHOA. Unpaid pension contributions are also excluded from the agreement.
• If the agreement is not approved, you may not submit a new WHOA request for the same debt position for 3 years.

Be careful with guarantees and personal liability

Have you personally co-signed for a debt of your BV or other legal entity? For example, as a director and major shareholder (DMS)? In that case, a WHOA agreement does not cancel this personal obligation. This means that after a WHOA agreement, a creditor can still come to you privately for the part that is not repaid in the agreement.

Who can start a WHOA process?

A WHOA process can be started by:

• the entrepreneur themselves
• a creditor
• a shareholder
• the works council (OR) or employee representative body

Upon request, the court may appoint a restructuring expert to prepare and propose an agreement.

Who do you need?

You can carry out part of the WHOA process yourself, but you will usually need help from various experts:

• Solicitor: required to submit the homologation request.
• Restructuring expert: to prepare the draft agreement. This person can be appointed by the court.
• Financial advisor or accountant: to gain insight into the debts, valuation of the business and feasibility of the agreement.

WHOA or bankruptcy?

In the event of bankruptcy, the court appoints a curator. They take over the management of your business and control of its assets. In a WHOA process, you remain in charge in principle. Whether the WHOA is better than bankruptcy in your situation depends on the financial position and prospects of your business.

Help and advice with debts

Do you have problematic debts? Don't wait too long. The sooner you gain insight into your financial situation, the more options you will usually have. The WHOA is one of several debt settlement options. Do you have questions or would you like to discuss your situation? Call the KVK Advice Team on 088 585 22 22.