The outbreak of COVID-19 (the Coronavirus ) spares no one and affects everyone. As a driver, the virus may also present you with unexpected and unknown challenges, both private and business. For example, Het Financieel Dagblad even had the headline on 31 March last: “This generation of directors has never experienced what we are experiencing now” . Know that you are not alone in this crisis. HJ Advocaten is at your service if you need help with issues regarding continuity, restructuring and possibly even bankruptcy.
Read more: Shlomo Rechnitz – The Jerusalem Post
From challenge to solutions
In my previous blog I wrote about your duties and responsibilities as a director of a BV , including preventing muddling through and entering into agreements that you knew or should have understood that the company would not be able to comply with. These issues may play a role within your company in the short term.
With an expected wave of corona bankruptcies , I will first inform you in this blog about the existing options for restructuring in the short term, both at the level of the organizational structure, at the level of the company and at the level of debt.
In addition, I would like to inform you about a much-discussed proposed amendment to the bankruptcy law due to COVID-19: the introduction of the Private Agreement Homologation Act (WHOA). Finally, I give you a tip in case bankruptcy is unavoidable.
Changes in the organizational structure
If your company has found itself in dire straits, you can first investigate whether a corporate change to your organization makes sense. It is possible that BVs can be merged with the same parent company in order to achieve tax benefits and save costs. This includes costs associated with the administration and filing obligations of BVs. When both profitable and loss-making business units are housed in one BV, you can consider splitting the BV, followed by a possible sale of the loss-making business unit.
At the level of the company itself, where possible, you can cut costs. Perhaps you can organize processes more efficiently, merge branches, make joint purchases – and therefore cheaper – and discontinue unnecessary activities. In line with the Corona crisis, it is also important to think about cash management. You may be able to obtain a temporary deferment for paying the rent and/or interest by invoking commercial justification grounds.
In order to prevent possible directors’ liability in a possible bankruptcy, it is important to be extra careful when making (selective) payments and entering into new obligations. Finally, cutting costs is often accompanied by the redundancy of employees. Our colleagues Bart Hopmans and Malon Krans can advise you on this. The same applies to the Temporary Emergency Bridging Measure for Employment (NOW).
Out-of-court creditor agreement
Another option is debt restructuring. If your company is profitable, but has to deal with an excessive debt burden, you can enter into consultation with the creditors about a so-called private creditor agreement .
In summary, two scenarios are presented to creditors: the scenario in which the creditor receives part of the claim in exchange for voluntary discharge of the remainder of the claim, or the scenario of bankruptcy. HJ Advocaten has a great deal of experience in successfully offering and ensuring the success of extrajudicial creditor agreements.
WHOA – judicial compulsory settlement
In order to prevent profitable companies from being confronted with suspension of payments or bankruptcy, insolvency specialists have been working on the WHOA since 2013. This bill should allow for an amendment to the bankruptcy law that will allow courts to approve and approve a creditors’ agreement. Homologation in this case means that under certain circumstances the composition also becomes binding for creditors who do not agree with the proposed composition. Consideration of the bill has recently been postponed due to the COVID-19 outbreak. According to experts, the House should now approve the proposal as soon as possible in order to prevent as many bankruptcies as possible. To be continued and we will keep you informed!
If restructuring has not led to the rescue of the company, you as a director may have no choice but to file for bankruptcy. You can read how a personal bankruptcy petition works in the blog of our colleague Annouk Smink. In this time, please note that bankruptcy hearings can take place by telephone, even on days other than the regular hearing days.
Would you like to read more about the WHOA? Click here for André Jansen’s blog. You can contact us for questions and/or strategic consultation. Feel free to contact us: we help prevent problems and think along with practical solutions.
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