Many companies have gone bankrupt in recent years and it is expected that many more companies will go bankrupt as a result of Covid-19. Everyone has to deal with it, directly or indirectly. What happens if a company goes bankrupt? What is the role of a court appointed trustee? What are the rules of the game, and who else “plays” with them? These questions confront not only bankrupt entrepreneurs, but also those who have to deal with a bankrupt company. That is why we are taking a brief look behind the scenes into the world of the trustee.
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Bankruptcy is pronounced on the person’s own declaration or by a creditor. Bankruptcies in the Netherlands are pronounced on Tuesdays, after which a trustee is appointed by the court in the afternoon. The trustee is called and provided with some information about the company (name, telephone number of director, Chamber of Commerce number). Then the trustee goes to work.
A trustee is appointed to represent the interests of the creditors. That is their main task. The trustee also has other interests to keep an eye on, such as those of the employees. A trustee will want to have a good overview of the company as soon as possible, so that they can quickly ascertain what to do as a priority.
Employees always have priority. Often they have been without a salary for several months and the trustee will (in most cases) want to dismiss the employees quickly. The employees will end up at the UWV (Employee Insurance Agency), which will take over the wage obligations 13 weeks before bankruptcy and in the notice period afterwards. In order to be able to dismiss the staff, the trustee needs permission from the examining magistrate.
The supervisory judge, often referred to as “rc”, is another protagonist. They supervise the trustee. A trustee must always make themselves accountable to the supervisory judge by means of periodic reports. The first report must be submitted within 4 weeks. In addition, the trustee requires the permission (or authorisation) of the supervisory judge for many decisions. This is necessary for the dismissal of the staff, but also for the termination of the lease and sale of assets (such as inventory).
After a first quick inventory, which usually takes place on the day of judgment (or the day after), the trustee will draw up a plan of action. In doing so, they will have to liquidate the assets of the bankrupt company. But they will also have to see who owns those assets. The banks may have a pledge, the tax authorities may attached the property found on the premises. There may be retention of title. In short, the trustee must quickly assess who has which rights. In that context, it is important that the administration is in order and is handed over to the trustee immediately.
The trustee will write to all known creditors and request that they file a claim with the trustee and indicate whether there is a retention of title or other rights. Creditors other than a bank may also have a pledge, for example. A trustee has to make do with the administration they receive from the bankrupt. It is quite possible that a creditor is missing. It is therefore advisable to check the Chamber of Commerce from time to time in case of badly paying debtors, or to see who is bankrupt at www.rechtspraak.nl. The bankruptcies are published there every Friday and the reports can also be found there.
As indicated, a trustee will want to liquidate assets belonging to their “estate”. They can also do this on behalf of the bank. Agreements can be made about this. A trustee usually has addresses of buyers that they can engage for this, but they will also search the market for companies that may be interested. A restart is also possible. Furthermore, a trustee will collect the debtors. It may also be necessary to keep running a company for some time because the chance of a good sale price increases. For this, too, the trustee needs permission from the supervisory judge and must render (financial) accountability.
In short, the trustee’s first weeks are busy.
Most bankruptcy trustees will therefore postpone an investigation into potential directors’ liability until after this first hectic period. Only then can the trustee (often) have a good idea of the company and the policy pursued by the board. If necessary, they will take action and sue a director, whether or not in court. This is also not possible without the permission of the supervisory judge. However, as a director it is very annoying to be confronted with this. I have also written about directors’ liability, but you can always contact me for more information about this topic.
Above I have given you a brief summary of the first – busy – activities of a trustee. A blog does not lend itself to a detailed reading, so if you have any questions, please do not hesitate to contact us.