Vol 14 (2017) - Issue 5

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Developments in Dutch Insolvency Law

The Dutch Bankruptcy Act is an old animal. It came into force on 1 September 1896. Although a substantial number of its provisions have been changed or added since its original adoption its main body has remained the same. Consequently much of today’s Dutch insolvency law is developed in case-law, in particular case-law of the Dutch Supreme Court. In 2012 the Dutch government initiated a programme for reviewing the Bankruptcy Act. Several bills were adopted or are pending or under construction.

Three types of proceedings
There are three types of insolvency proceedings. First there is the proceeding for rescheduling debts of individuals. These proceedings aim at making distributions to the individual's creditors followed by a discharge of the debtor. I shall not discuss these proceedings in detail. The second type of proceedings is constituted by the suspension of payments proceedings (surseance van betaling). In these proceedings the court appoints an administrator who needs to consent to all transactions conducted by the management of the debtor. In suspension of payments proceedings it is possible to offer a composition to the ordinary creditors, but such composition cannot impair the rights of preferred creditors such as employees or tax authorities or of secured creditors. Moreover the rules for dismissal of employees are much stricter than in the third type of proceedings, bankruptcy proceedings (to be discussed below). For these reasons only very few restructurings are achieved with suspension of payments and most suspensions of payments are converted into bankruptcy proceedings. So bankruptcy proceedings will be the focus of this article. In bankruptcy the court appoints a trustee who is charged with the administration or liquidation of the estate. The debtor may emerge from bankruptcy proceedings and avoid full liquidation by offering a composition to its creditors. As in suspension of payments proceedings such composition can only affect the debtor's ordinary creditors. Because of its limited use, compositions in bankruptcy are rare, as they are in suspension of payments proceedings.