Crises, Creditors and Cramdowns: An evaluation of the protection of minority creditors under the WHOA in light of Directive (EU) 2019/1023

Abstract

Covid-19 has severe economic consequences, leading to an increasing amount of businesses facing overwhelming debts. Since the financial crisis of 2008 the European Union has taken on a more rescue-oriented approach towards bankruptcy, resulting in Directive (EU) 2019/1023. This Directive creates a framework for pre-insolvency restructuring, thereby avoiding unnecessary bankruptcies. Accordingly, pre-insolvency restructuring is a valuable instrument in mitigating the negative economic effects of Covid-19. The Netherlands has recently adopted the Act on the Confirmation of Private Plans (WHOA), National Legislation on pre-insolvency restructuring. In order to balance the rights of secured and unsecured creditors the 20%-rule was adopted. This rule guarantees small-scale Small-to-Midsized (SME)-creditors the right to satisfaction of 20% of their claims in restructuring proceedings. In this paper, I evaluate whether the 20%-rule is in accordance with the Directive. I argue that the 20%-rule is in line with the Directive, but that the overly restrictive system of judicial review under the WHOA hampers its application in practice. Therefore, the Dutch legislator should allow for more room for judicial interpretation on the suitability of the application of the 20%-rule. This more nuanced approach better aligns the 20%-rule with the European Restructuring Directive.

Will the Implementation of the Directive on Restructuring and Insolvency Help the Recovery of the Croatian Markets and Strength the Ability of the Debtors to Respond to New Challenges?

“…However, in almost two years of application of the BA, the number of initiated pre-bankruptcy proceedings was found to be relatively small (273 initiated proceedings), with only 58 cases accepting the restructuring plan and confirming the pre-bankruptcy agreement. 19 Therefore, the aim of the Law on Amendments to the Bankruptcy Law, which entered into force on 2 November 2017, is primarily to facilitate pre-bankruptcy proceedings by prescribing realistic deadlines for taking certain actions in the proceedings. 20 B) and with regard to the reformed 2015 Decree (Annexes A and B).…”

Implementation of the Directive 2019/1023 in the Croatian Legal System: A New Trend of Restructuring in the Croatian Insolvency Law or Another Missed Opportunity?

“…This is achieved by creating a framework that provide effective national preventive restructuring frameworks for viable enterprises in financial distress, the discharge of debt for honest bankrupt or overly-indebted marketers, and the general improvement of the efficiency of related procedures. 28 Therefore, restructuring should enable debtors to overcome economic difficulties and maintain their operations by remodeling or converting their composition or form, including their assets and liabilities, and by operational modifications. Where such activities are not expressly regulated by national law, contractual, and property-related restructuring activities are conducted under the general conditions provided in bylaws, civil regulations and labour law guidelines.…”