Vol 11 (2014) - Issue 5

Article preview

A Response to the Financial Crisis: Recalibration of Bankruptcy Law

1. Introduction
The current Dutch Bankruptcy Code (Faillissementswet) entered into force in 1896 and replaced the provision regarding bankruptcy in the Code of Commerce of 1838. Over the years the Dutch Bankruptcy Code has undergone some changes, but it has fundamentally remained the same.
The last few years, however, there have been calls for change. These calls primarily focus on increasing the availability of corporate rescue mechanisms. The Dutch Secretary for Safety and Justice has taken an interest in these calls and by letter of November 26, 2012 has announced the legislative program 'Recalibration of Bankruptcy Law'. At the same time the European Commission calls for a new approach to business failure and insolvency in its recent non-binding Recommendation. As such, the overall tendency in bankruptcy reform in light of the financial crisis is towards more of a rescue culture.
This article gives an overview of both current Dutch bankruptcy law and the legislative program as announced by the Secretary. Some attention is also devoted to the recently presented non-binding Recommendation of the European Commission.

2. The current Dutch Bankruptcy Code
2.1 Bankruptcy
The Dutch Bankruptcy Code provides for three separate procedures: i) bankruptcy (faillissement), ii) suspension of payments (surseance van betaling) and; iii) Debt Restructuring Natural Persons.

2.1.1 Bankruptcy: liquidation
The rules regarding a bankruptcy procedure are laid down in Section 1 through 213 DBC. The procedure starts with the filing of petition at the relevant District Court. A debtor will be declared bankrupt if he no longer pay his debts. This entails – in case of an involuntary bankruptcy – that there at least two claims that remain unpaid, of which at least one is due and payable. After the debtor has been declared bankrupt by the court, a trustee (curator) will be appointed. The task of the trustee is administering the estate. The directors no longer have the authority to act on behalf of the debtor and will have to follow instructions from the trustee. The duty of the trustee is to maximise the value of the estate for the benefit of the joint creditors.