The coronavirus affects not only people, but also the economy. Despite all government support, many companies face financial difficulties. In this regard, the discussion on amendments to the Bankruptcy Law is becoming more relevant than ever. Lawyers are urging to hurry up, but the deputies are slowing down the process.
Summary:
- Important amendments to the Bankruptcy Law have almost passed through the House of Representatives;
- MPs still insist on toughening the law;
- Lawyers are urging MPs to pass the amendments as soon as possible - the updated law could help many companies during the coronavirus crisis.
This is mainly about the Law on Debt Restructuring in order to prevent bankruptcy (hereinafter - the Law), which cannot be approved by the Parliament in any way due to the fact that the MPs want to carefully assess complex technical issues and focus on additions and amendments to them, which are mainly aimed at protecting the interests of small businesses.
Lawyers believe that the adoption of this Law as soon as possible can prevent the bankruptcy of many large companies. The main concern is that stable companies could end up in debt due to an emergency, and current legal instruments do not fully protect companies.
Private Debt Restructuring Agreement
The reform is mainly aimed at helping companies in an acute crisis and preserving jobs. The bill provides that companies in difficulty can conclude private debt restructuring agreement with its creditors in order to avoid bankruptcy, which will be approved by the court, which means that this agreement will be binding on all creditors and shareholders. It will not be possible to appeal the court decision. In this way, companies will be able to stay afloat and have business activity, increasing the potential for restructuring.
The faster the better?
Lawyers want to start working with the updated law as soon as possible. They believe that the speedy implementation of the Law will help to avoid the loss of huge sums, despite the fact that medium and large businesses will be able to restructure. When a company goes bankrupt, there is enormous social damage. This damage can be significantly reduced if companies are able to offer a restructuring agreement to their creditors. The company will be able to continue working, jobs will be saved, and obligations to customers and suppliers can be partially fulfilled.
Netherlands - headquarters for bankruptcy
Some Dutch lawyers, in particular the attorney Flip Schröurs, are convinced that the innovations in the Law are so good that they will allow the Netherlands to become the center for solving bankruptcy problems. The idea is that companies will move to the Netherlands to restructure their debts here.
Small lenders
The deputies insist on finalizing the bill, they want to make the Law attractive for all businesses, and in particular for small creditors. However, some lawyers question any additional benefits for them, citing the fact that the court will never approve an agreement where the private investment company and the bank would be in collusion, thus creating a completely unfavorable environment for the supplier.
After a wave of lawyers' indignation, a new debate began, the House of Representatives met on Wednesday March 18 to discuss the bill. But, due to the coronavirus crisis and emergency measures taken before April 6, the consideration may be delayed.
Source: Het Financieele Dagblad “Terwijl corona heerst, stokt de hervorming van het faillissementsrech”
Publication Date: 19.03.2020
