How does a WHOA process work?
A WHOA agreement is nothing more than a private agreement between a company and its creditors and shareholders. The homologation (i.e., the court’s approval of the agreement) is the final step of a WHOA process. This homologation is only necessary if not all creditors have consented to the proposed agreement. It serves as a lever to persuade creditors to agree to the deal. To achieve homologation by the court, many formalities must be fulfilled.
The key steps are:
- Establishing the enterprise value based on valuation reports.
- A correct distribution of all creditors into different classes.
- Consultation with creditors and shareholders regarding a draft agreement.
- Voting on the agreement by all creditors and shareholders.
- Homologation by the court.
During a WHOA process, the company can request the court to take protective measures, such as lifting imposed seizures, pausing bankruptcy petitions, or granting a cooling-off period. If there are disputes with creditors, for example regarding the valuation of the company or class classification, the court can issue interim decisions.
These various steps are explained in separate articles.
The WHOA Act
Offering a WHOA agreement is a complex process that can only be successfully completed with the right guidance. It is important not to make mistakes in valuations, class distributions, correspondence with creditors, the construction of the agreement, etc. There are many legal grounds on which the court can or even must reject an agreement. Expert guidance is therefore necessary.
The Act on the Homologation of Private Agreements is (still) a new act that came into effect in 2021. GMW lawyers have already gained considerable practical experience with the WHOA as one of the few law firms in the Netherlands. For instance, GMW lawyers facilitated the first homologation of a WHOA agreement in the Netherlands in February 2021, where a company in the events sector reduced a debt burden of over €1.5 million to €350,000. Since then, GMW lawyers also represent shareholders or creditors who are involved in a WHOA agreement by a debtor and act as experts or observers appointed by the court. GMW lawyers have been involgend in more than 30 WHOA procedures, making our office one of the most experienced law firm in this expertise in the Netherlands.