Vol 15 (2018) - Issue 6

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The Dutch Draft Bill on 'Dutch Schemes Of Arrangements': A New Tool in Dutch Bankruptcy Law

Synopsis
Dutch (bankruptcy) law lacks the possibility for financially distressed companies to efficiently propose a scheme to their creditors to prevent bankruptcy. Under current Dutch law, the general rule of freedom of contract prevents a debtor to cram down a scheme to its creditors, which could result in a continued existence of the company rather than formal insolvency proceedings such as bankruptcy or liquidation. As such, secured creditors cannot be bound by Dutch schemes. In this article, we discuss a draft bill introduced by the Dutch legislator and which introduces the possibility for financially distressed companies to propose a scheme to cram down their creditors. Inspired by American and English restructuring mechanisms, this draft bill contains elements of both the American Chapter 11 and the English Schemes of Arrangements. Following prior consultation procedures in 2014 and 2017, the Dutch legislator has recently submitted the draft bill to the Council of State for advice. The Dutch scheme is expected to come into force no earlier than 2020.