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House of Representatives approves bill for the introduction of a pre-insolvency composition
26 May 2020

The Dutch House of Representatives approved the bill for the introduction of a pre-insolvency composition (the so-called: “Dutch Scheme”) with a view to entry into force on 1 July 2020.

The available Dutch options to successfully restructure financially distressed businesses are now about to improve substantially, which is good news in times where many businesses are experiencing financial distress as a result of the Corona pandemic. The Dutch scheme provides an instrument available to domestic and foreign debtors with business activities in the Netherlands through a compulsory composition outside of formal insolvency proceedings allowing them to quickly and efficiently restructure their debts (including those owing to secured creditors and shareholders). The scheme includes elements of a UK scheme of arrangement and the US Chapter 11, but also has some distinct features and costs are likely to be much lower than those of some of its foreign law counterparts. The easily accessible debtor-in-possession procedure can be a swift, final and effective one, with effective measures to guarantee deal certainty and protection of the restructuring scheme put in place, while creditors’ rights are protected in a balanced way. The new Dutch scheme has been long awaited and has been well received amongst market parties (including financial institutions) and practitioners in the field.

The Dutch scheme may have a very material impact on your current financings and investments. Please click here for a short memorandum that discusses its highlights and aims to answer the most important questions you may have.