In vari­ous blogs, we informed you on a num­ber of aspects of the Dutch Scheme of Arrange­ment (“WHOA“).  On 1 Janu­ary 2021, this new act will enter into force.  In this blog, we will set out the pos­sible con­sequences of the WHOA for agree­ments.

 

Ter­min­a­tion by the debt­or

When a com­pany faces fin­an­cial dif­fi­culties, (long-term) oner­ous agree­ments could become a threat to the con­tinu­ity of the com­pany. For example, rent­al, pur­chase and/or lease agree­ments. To amend these agree­ments, one would nor­mally need the cooper­a­tion of the coun­ter­party. If the coun­ter­party refuses to cooper­ate, the WHOA offers the pos­sib­il­ity to uni­lat­er­ally ter­min­ate the agree­ment by includ­ing such request in the restruc­tur­ing plan to be approved by the court.

When the court grants its per­mis­sion, the ter­min­a­tion takes place by oper­a­tion of law on the day the court has approved the restruc­tur­ing plan against a max­im­um notice peri­od of three months.  Any claim for dam­ages res­ult­ing from the early ter­min­a­tion can be included in the restruc­tur­ing plan.  By doing so, the claim for dam­ages can be settled against par­tial pay­ment or oth­er­wise.

To pro­tect the rights of the coun­ter­party who is affected by the restruc­tur­ing plan, the WHOA provides vari­ous safe­guards on which the request for approv­al of the restruc­tur­ing plan can be rejec­ted by the court.  For this top­ic, we refer to our blog below.

An excep­tion is made for employ­ment agree­ments.  Employ­ment agree­ments can­not be ter­min­ated based on the pro­vi­sions of the WHOA and remain sub­ject to reg­u­lar Dutch labor law.

 

Amend­ment, sus­pen­sion and dis­sol­u­tion

On the oth­er hand, the WHOA offers the debt­or oppor­tun­it­ies to pre­serve cur­rent agree­ments. The pre­par­a­tion of any restruc­tur­ing plan is not a val­id ground for a coun­ter­party to sus­pend or ter­min­ate an agree­ment. So called ipso facto clauses or change of con­trol clauses may not be invoked.

The debt­or is also able to request the court to pro­claim a so-called ”cool­ing-off” peri­od when pre­par­ing a restruc­tur­ing plan.  If awar­ded, a coun­ter­party may not amend, sus­pend or ter­min­ate the agree­ment based on a default incurred pri­or to the cool­ing-off peri­od.  Oblig­a­tions that arise dur­ing the cool­ing-off peri­od should be paid.

 

Con­clu­sion

In order to sup­port reor­gan­iz­a­tions of com­pan­ies in dis­tress, the WHOA provides for amend­ment of agree­ments and if such an amend­ment is denied, a ter­min­a­tion of the agree­ment. Fur­ther­more, the WHOA offers the debt­or pos­sib­il­it­ies to pre­serve cur­rent agree­ments that are import­ant to the con­tinu­ity of the com­pany.