Insolvency Law

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What to do when your business faces financial difficulties?

When a business encounters financial trouble, it can be a distressing time for everyone involved. As a business owner, it’s essential to take action promptly. The sooner you address the situation, the more options you have for resolving the problems.

The specialists at CROP Legal have extensive experience in advising on solutions to get your business back on track. And if bankruptcy becomes unavoidable, we have the expertise to advise you in this process.

Would you like to learn more or do you need help with a specific issue? Feel free to contact one of our insolvency law experts, Michiel Appelhof or Julie Gilleit.

At CROP, we regularly advise parties involved in (potential) bankruptcies, such as creditors, shareholders, or directors. Some of the areas we provide advice on include:

Refinancing solutions
Restructuring strategies
Restart scenarios
Debt collection
Liability issues
Out-of-court liquidations
Creditor arrangements and WHOA processes
Retention of title agreements
Secured transactions

What are the options when bankruptcy is imminent?

If you, as an entrepreneur, are facing financial difficulties, it’s essential to seek advice promptly. We can, for example, try to negotiate an arrangement with your creditors (potentially using the Dutch WHOA) or explore the possibility of a business restart.

What is the WHOA?

The WHOA (Act on the Confirmation of Private Plans) can be a solution for companies on the brink of bankruptcy. The WHOA provides an option to force creditors to accept a settlement before bankruptcy occurs. Naturally, the proposed agreement must meet legal requirements. With this settlement, creditors are partially paid, and the debt burden can be reorganised. This allows the business to continue operating in a healthier state. Often, this is a better alternative to bankruptcy for all parties involved.

What is fraudulent preference (paulian action)?

The law states that if it is evident to a company (or its directors) that bankruptcy is unavoidable, it is not allowed to act in a way that disadvantages the creditors of the company. For instance, you may not sell a company vehicle at a low price to a close associate shortly before bankruptcy. The trustee can nullify fraudulent transactions, effectively reversing them.

My debtor has gone bankrupt, what should I do?

If you have a claim against a person or business that has been declared bankrupt, you can file your claim in the bankruptcy proceedings. The trustee will include your claim in the process of settling the bankruptcy.

My business is bankrupt. Am I liable as a director?

This depends on the legal structure of the business. If you operate under a partnership, creditors may pursue your personal assets. If you chose a private limited company (BV) or public limited company (NV), the general rule is that directors are not personally liable for company debts.

However, this can change if you, as a director, have acted improperly. Examples of improper conduct include failing to file the annual accounts with the Chamber of Commerce on time or not maintaining proper financial records. If there is evidence of mismanagement, you could be held liable for outstanding debts following bankruptcy proceedings.

What is a retention of title?

A retention of title ensures that, as the seller, ownership of the sold goods only transfers to the buyer once the purchase price is fully paid. If the buyer goes bankrupt, the retention of title remains enforceable. This allows you, as the seller, to reclaim the sold goods.