International Insolvency – The Netherlands – Laurie van Leeuwen

Our firm specialises in insolvency, restructuring and litigation.

When a company is in danger of getting into financial difficulties, it is important to act proactively and decisively. By acting in time, bankruptcy and other adverse consequences can be avoided. Our insolvency specialists assess the situation from a broad, strategic perspective and provide targeted advice on both risks and opportunities. Our extensive experience as advisers and bankruptcy trustees means that we have developed a comprehensive knowledge of every facet of insolvency law. Our clients can be assured that their case will be analysed from every relevant angle. Whatever stage of financial distress a company is at, we provide effective solutions that take full account of its interests.

Our specialists can advise on:

• Identifying legal risks
• Restructuring & refinancing
• Extra-judicial creditor arrangements
• WHOA-proceedings (Dutch scheme of arrangement)
• Debt collection
• Establishing or enforcing securities
• Impending bankruptcy and application for suspensions of payments
• Directors’ liability

During my law studies at the University of Amsterdam, I discovered that I had an affinity for insolvency law. The complexities of insolvency practice and the challenge of navigating bankruptcies particularly appeal to me. Not only because all areas of law come together in insolvency law, but also because an insolvency lawyer is faced with a variety of situations in which he/she has to make swift decisions based on limited information. In addition, financial aspects and stakeholder interests must be taken into account alongside the legal aspects.

I have worked in the field of insolvency since 2015. During this time, I have dealt with a large number of bankruptcies as a bankruptcy trustee, including more complex bankruptcies with cross-border aspects. This involved companies from various sectors, such as a company that focused on creating interactive entertainment in shopping malls around the world, a company that created marketing campaigns for life insurance companies and a well-known SaaS company in the Netherlands. Moreover, I have often assisted bankruptcy trustees in bankruptcy proceedings and have represented them in court.

Within my area of practice, I focus on advising and litigating in the area of directors’ liability. As an attorney, I regularly assist directors who are held liable by a creditor of the company or a bankruptcy trustee. This often involves financial, but also personal, interests. The knowledge and experience I have gained as a bankruptcy trustee is of great value in these cases.

Education:

• Law (specialising in Civil Law) at the University of Amsterdam
• INSOLAD Insolvency Law postgraduate programme (cum laude)
• Financial Economics for Insolvency Lawyers at the Erasmus School of Law

Professional Memberships:

• The Dutch Association of Insolvency Lawyers (INSOLAD)
• INSOL Europe (the international specialist association for insolvency law)
• The Dutch Association for Restructuring (Nederlandse Vereniging voor Herstructurering)

My typical client base consists of companies (mostly SMEs) and entrepreneurs.

In my field, the subject of bankruptcy sales is very topical at the moment. A few months ago, the Dutch draft law on the Bankruptcy Transfer of Undertakings Act (in Dutch: “Wovof”) was again submitted for consultation. This bill and the accompanying ministerial regulation aim to improve the position of employees, particularly in the event of a transfer of an undertaking in bankruptcy. Many insolvency lawyers are critical of the bill, as it is expected to negatively impact the practice of relaunches. I will describe a few of the main objections.

Employees are protected during a business transfer. Pursuant to Article 7:663 of the Dutch Civil Code, the employees of the transferred company become employees of the acquiring party by operation of law. This provision does not apply in the event of bankruptcy. The bill provides that the exception that currently applies to all bankrupt companies will be limited to an exception for companies where the bankruptcy is aimed at liquidation, and for small companies. In (all) other cases, the party acquiring a company will be obliged to take over all employees, unless this is not possible for economic reasons.

A risk associated with the proposed regime is the increased cost and complexity of reorganisation in bankruptcy. If these higher costs cannot be financed from the future cash flows of the viable part of the company, it will no longer be worthwhile for an acquirer to continue with the downsized company. This may be the case when the costs of laying off personnel become so high that, given the valuation of the otherwise viable restarted company, such a long payback period on the required investment arises that a rational investor (the acquirer) will refrain from it. As a result, the proposed regime will ultimately have a negative effect on the labour market and the position of employees, instead of a positive effect.

The hospitality industry, entertainment industry and retail industry have endured a lot in recent years. Many businesses are still struggling with the negative consequences of the COVID-19 pandemic and are unable to repay the debts incurred as a result, such as tax debts, while simultaneously meeting their other payment obligations. In such a situation, it must be considered how best to restructure the debt burden. In my experience, directors of companies in financial difficulty often wait too long before seeking legal advice. Often, it is only when a company’s creditors have commenced litigation, seized assets or filed for bankruptcy that the board decides to seek legal advice. This is unfortunate, as there are sufficient opportunities to reach a solution at an earlier stage. Consider, for example, achieving an extra-judicial creditor agreement or going through WHOA-proceedings (Dutch scheme of arrangement).

In emergency management, we advise the board of a company in financial distress on the do’s and don’ts. It is important that the board is able to make informed decisions, for instance which payments can (still) be made to creditors and which cannot. The board should be made aware of liability risks. Particularly during this period, the board’s decisions should be accurately and properly documented. At the same time, it is important to fully understand the company’s financial position in consultation with the finance team. All efforts should be aimed at limiting risks and maximising the chance of successfully restructuring the debt and turning around the business. We help the board regain control of the situation and proactively take the necessary steps to turn the tide and (where possible) restore the company to financial health.

Our firm is most active in the Dutch jurisdiction. We have observed that the WHOA (the Dutch scheme of arrangement), also referred to as the Dutch scheme, is gaining increasing recognition internationally. One of the key advantages of the Dutch scheme is that it offers a relatively inexpensive and swift process compared to similar schemes abroad. The Dutch scheme offers considerable flexibility in designing restructuring plans and provides various tools for reaching a consensual agreement with a qualifying majority of creditors. Meanwhile, the automatic recognition of the so-called public version of the Dutch scheme in the EU enhances its effectiveness as a cross-border restructuring tool.

We closely monitor all relevant developments in our field and keep clients from other jurisdictions informed through tailored and specific advice. This ensures that they are always up to date with the latest changes and developments that may impact their operations.

The impact of COVID-19 on our practice has led to a significant change in the way we communicate and work. Digital communication tools, such as Teams and Zoom, have become essential for lawyer-client interaction. In addition, courts have continued to implement secure email systems, improving the efficiency of legal processes. An increasing number of lawyers now have the capability to work remotely, either fully or partially, with all the necessary tools to maintain a sound and complete practice. These changes have not only enhanced flexibility, but have also improved access to legal services.

We are also seeing an increasing integration of AI, with such tools as Claude, Perplexity and ChatGPT assisting lawyers with some of their tasks. These developments offer new opportunities to work more efficiently and effectively in a rapidly changing legal environment.

In the coming year, experts anticipate a continued rise in the number of bankruptcies in the Netherlands. The number of bankruptcies is expected to continue to rise, peaking at between 1,700 and 1,900 companies per quarter by 2027. The rise is partly due to high inflation, high interest rates and the repayment of pandemic-related debts. A reversal of this trend is not anticipated for another five years; however, economists are not worried. For instance, the bankruptcy ratio – the number of bankruptcies relative to the number of companies – remains low. This is due to the increase in the number of companies. Another bright spot is the collapse of so-called zombie companies: those with minimal economic value. Once they fall over, more space, labour and capital will be available for healthy companies. This could also allow productivity, which has been declining for years, to rise again.