14 May 2025
Directors’ Liability in a Start-up
There are more and more start-ups emerging, some of which unfortunately fail and go bankrupt. But how does directors’ liability apply to start-ups?
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23 September 2024
WHOA functions to prevent bankruptcy of viable companies, but is less effective in reaching SMEs
Three years after the entry into force of the Court Approval of a Private Composition (Prevention of Insolvency) Act (Wet homologatie onderhands akkoord, WHOA), it has been evaluated by a joint research team from the Universities of Groningen and Leiden on the instructions of the House of Representatives.
The study, which GMW advocaten participated in, shows that WHOA broadly does what it is supposed to do: prevent the bankruptcy of viable companies. However, the researchers do note that WHOA is less effective in reaching small businesses in particular. Unfamiliarity with WHOA plays a role as does the cost of WHOA proceedings.
WHOA is effective
The researchers conclude that WHOA functions as the legislator intended: the law strengthens the capacity of companies to reorganise. WHOA’s support facilities, such as the cooling-off period, are also functioning properly. Meanwhile, amicable agreements reached outside the courts, also seem to be on the rise. WHOA functions as a deterrent, making creditors more likely to cooperate with a settlement. However, the researchers also see WHOA trajectories where creditors are inflexible.
WHOA is less effective for smaller companies
Although the legislator intended WHOA to be suitable for small and medium-sized enterprises (SMEs) as well, this does not appear to be the case in practice. Smaller entrepreneurs in particular are not familiar with WHOA and often act too late when faced with financial problems. The high cost of a WHOA trajectory via the courts – and the high court fees of €6,717 per company – also play a role for small entrepreneurs. The cost of legal and financial advice to prepare and implement the trajectory can also add up, especially due to the unfamiliarity with WHOA, which means a lot of time and money goes into properly informing and involving creditors. The researchers therefore advocate lowering court fees and improving the provision of information.
Study provides progress to date
According to the researchers, several dozen WHOA agreements have been reached since the introduction of WHOA. Therefore, the evaluation is actually premature; it is likely that not all bottlenecks are apparent as yet. WHOA is a completely new procedure that needs further elaboration in practice. The researchers therefore recommend a follow-up study in about five years. The economic effects of WHOA can then also be examined in more detail, such as its contribution to job retention.
GMW advocaten
GMW advocaten has extensive experience with WHOA and it has been involved in approximately 15 WHOA agreements. Its involvement has been mainly in the role of advisor offering the agreement on behalf of the company and seeking ratification from the courts, both in large complex agreements of groups of companies and in small WHOA projects of SMEs. The WHOA team of GMW advocaten makes WHOA accessible to SMEs. GMW advocaten’s team of WHOA lawyers is one of the most experienced in the Netherlands. The team knows what they are doing and know how to draft an agreement that is reasonable and acceptable to all creditors involved. They often succeed in reaching an agreement with 100% consent without court intervention.
More information
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