Vol 5 (2008) - Issue 6

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A Critical Examination of the Preliminary Bill for a New Dutch Insolvency Act

Introduction

The current Dutch Bankruptcy Act, the main legislation in the Netherlands in the area of insolvency, dates back to 1896. At present, there are three insolvency regimes under Dutch law, i.e. (1) bankruptcy, (2) suspension of payments and (3) the debt restructuring regime for individuals.

These three regimes provide for independent and separate statutory procedures, each intended to serve a different objective. Bankruptcy is organised as a liquidation procedure, the aim of which is to liquidate the debtor’s assets and to divide the proceeds among the creditors. Suspension of payments, on the other hand, is intended to serve as a restructuring procedure, whereby the debtor is offered a period during which to reorganise its business, restructure its debts and satisfy its creditors. During suspension of payments, non-preferential creditors are stayed from enforcement against the debtor’s assets, but there is no stay on other legal proceedings. The debt restructuring regime for individuals is intended to be a liquidation procedure, but is also aimed at giving the bona fide debtor the possibility of making a ‘fresh start’, as his debts are discharged.

In the course of the twentieth century, the suspension of payments procedure came to be regarded by many experts as highly inadequate. Nowadays, if formal statutory proceedings (under the Bankruptcy Act) are chosen for restructuring purposes, bankruptcy is usually preferred. In practice, bankruptcy has turned out to be a far more effective procedure for restructuring than a suspension of payments.

In 2003, the State Committee for Insolvency Law (also known as the Kortmann Committee) was appointed to advise the Dutch government and parliament on legislation in the field of insolvency law. Although the Committee was asked only to advise on possible changes to the existing legislation, it took a broader view of its responsibilities and drafted a complete preliminary bill for a new Insolvency Act (the ‘Preliminary Bill’), published on 1 November 2007, together with a 207- page explanatory memorandum (the ‘Explanatory Memorandum’). The Minister of Justice decided to ask for comments on the Preliminary Bill by means of an internet consultation, which closed on 15 September 2008. However, as it turned out, a large number of insolvency experts have given their views in contributions to the legal journals, rather than through the internet consultation. Only a minority of these comments is favourable; the majority is moderately critical and a rather large minority is very critical.

One uniform insolvency procedure

Under the Preliminary Bill, the separate regimes of bankruptcy, suspension of payments and debt restructuring for individuals will be amalgamated into one uniform insolvency procedure. The basic procedure will be the same as the present one for bankruptcy (apart from the requirements for opening the proceedings) with a few elements from the debt restructuring regime for individuals. The suspension of payments regime is, in effect, to be abolished.

Alignment with developments in other countries in the field of insolvency law

The Committee observes at the beginning of the Explanatory Memorandum that it is important to take developments in other European Union member states into account. Recent legislation in other member states shows that there is hardly any harmonisation of insolvency legislation within the EU.