9 September 2024
In Dutch WHOA proceedings, you may have to deal with creditors claiming set-off against amounts they still have to pay to you. Or vice versa: if your claim is involved in a restructuring under the rules of the Dutch WHOA Act, are you allowed to set off new payment obligations? How does that work during WHOA proceedings?
The Dutch WHOA framework does not contain specific rules on asset fixation, as it does in bankruptcy or suspension of payments. But WHOA proceedings do conceptually qualify as insolvency proceedings. Questions that the WHOA legal framework does not provide the answer to can therefore be answered by following the rules that apply to bankruptcy. As with bankruptcy, it is common practice in WHOA proceedings to set a ‘fixation date’, a cut-off date that serves to determine which debts are involved in the restructuring under the WHOA framework and which remain outside it. The date of filing the start-up statement is often used as the fixation date, although this can also be another – if logical – date.
The purpose of restructuring under the WHOA framework is to clean up the old debts in order to avoid bankruptcy of viable company. WHOA proceedings may take some time, and during that time the business continues to run as usual. Continuing to run the business involves necessary costs such as staff salaries, rent, purchase of supplies, gas-water-electricity and taxes. It is important that these costs can continue to be paid during the WHOA proceedings. If they cannot, the restructuring under the rules of the WHOA proceedings cannot continue.
Moreover, a supplier is obliged to make new deliveries during WHOA proceedings: unpaid old invoices cannot be a reason to terminate ongoing contracts. Of course, the company must guarantee payment for those new deliveries. In practice, this is often solved by paying for new deliveries in advance.
In the course of WHOA proceedings, it may happen that suppliers with outstanding receivables become indebted to the company. This could include a sales platform or payment provider who receive funds for the entrepreneur from new sales after the fixation date, or beverage suppliers who become owed packaging when packaging is returned. Can they set off these new debts against the outstanding claim that is involved in the restructuring to mitigate their losses?
The WHOA framework provides no rules on setting off old debts against new claims, or old claims against new debts. This question, too, must therefore be answered according to the rules applicable to other insolvency proceedings and in accordance with the intention behind the WHOA framework. Should set-off of pre-fixation claims against post-fixation debts be possible, the creditors concerned obtain an unjustified advantage over other creditors. As a result, a creditor may not set off debts arising before the fixation date against payment obligations arising after the commencement of the WHOA proceedings. Indeed, debt positions involved in the restructuring freeze on the fixation date.
If the court declares a cooling-off period during the WHOA proceedings, an explicit ban on suspension of creditors’ payment obligations applies. Article 373(4) of the Dutch Bankruptcy Act stipulates that a creditor may not suspend its own obligations to the company just because a restructuring under the WHOA framework is being prepared. Accordingly, taking recourse against the company’s assets is not allowed: setting off pre-fixing date debts against post-fixing date debts falls under this in any case. This ensures that a company in dire straits is not disproportionately disadvantaged in its business operations, thereby increasing the likelihood of a successful outcome of the WHOA proceedings. That successful outcome benefits both the company and the joint creditors.
Do you have questions about WHOA or you need advice about your situation? Don’t hesitate to contact us.
