Insolvency Law

Bankruptcy can be requested by a) the entrepreneur himself (self-declaration), b) by a creditor whose claim remains unpaid, or c) by the Public Prosecution Service (for example, when there are many victims).

For a bankruptcy judgment based on self-declaration, the following must be met:

1. There must be 2 or more debts, of which 1 is due (the payment term has expired).
2. The company must be in a state of having ceased to pay.
3. For a BV (limited liability company), the shareholders must have decided to request bankruptcy (for a sole proprietorship or partnership in some cases the marital partner must also co-sign).
   
   

The proper court for the self-declaration depends on the location of the company’s registered office. On the rechtspraak.nl website, you can check which region (district) the company falls under. You can also fill out and download the ‘Self-declaration bankruptcy’ form via the same site. The last page of this form precisely states which documents, sometimes originals, must be included. For a self-declaration, it is not mandatory to engage a lawyer, nor does a lawyer need to be present at the hearing. However, you, as the entrepreneur, must be present at the hearing. If you don’t want to experience any delays in filing your own declaration, we do recommend consulting a lawyer (briefly).

If a creditor requests bankruptcy, a judge will determine whether the bankruptcy application is justified. The entrepreneur will receive a call to attend a court hearing. To defend yourself, you must appear. If you choose not to attend the hearing, there’s a significant chance that the company will be declared bankrupt (in absentia).

Both the creditor/applicant and their lawyer must appear at the hearing themselves. If no one appears on behalf of the applicant at the hearing, the request can be dismissed by the judge. The hearing is not public.

During the hearing, the judge asks questions to check if the request can be granted. In this case, it is essential that the debtor:

1. Has at least 2 debts, of which 1 is due.
2. Has at least 2 creditors.
3. Has ceased to pay.
   
   

During the hearing, you can, possibly with the assistance of a lawyer, defend yourself. We always advise drawing up a written defense. It’s crucial to demonstrate that the claim is unjustified and that the company is not in a state of having ceased payment, but that it’s merely a temporary payment incapacity situation.

If, despite the defense, bankruptcy is still pronounced, you can appeal the bankruptcy declaration. The case is presented for a new review to the Court of Appeal. This must be done within 8 days of the decision, and the mandatory assistance of a lawyer is required. If you still disagree with the decision of the Court of Appeal, there’s an option to go into cassation (also within 8 days). A cassation appeal is a request to the Supreme Court of the Netherlands to annul a previous decision of a Court of Appeal. Here too, mandatory lawyer assistance is required.

In case the company is declared bankrupt by a default judgment (because you weren’t present at the hearing), you can object to this judgment with the same judge. This must be done within 14 days of the decision. Mandatory lawyer assistance is required.

If no objection, appeal, or cassation is lodged, or if they are rejected, the bankruptcy becomes final. All decisions for the company are made by the trustee. The trustee will investigate whether a restart (see below) is possible and may continue the company for a short time. The company’s administration will also be closely examined, and the company’s management will be addressed. This includes checking whether the administration has been properly maintained, annual accounts have been deposited, and/or any notable transactions (legal actions) occurred shortly before the bankruptcy date. To avoid unexpected and often unpleasant surprises, we recommend having a risk analysis conducted by an external party (accountant/tax specialist or lawyer) before deciding to apply for bankruptcy.

Restart

A trustee will always try to achieve a restart of the bankrupt company. In this way, healthy parts are saved, and part of the staff may keep their jobs. Before a restart is realized, the trustee often negotiates with several interested parties. The basic principle is that the party that offers the most money gets the restart. The restarting party, of course, doesn’t have to deal with the bankrupt company’s creditors, as the debts remain behind.

Matters often purchased from the curator include goodwill, intellectual property rights, customer databases, and ongoing orders, but also inventory and stocks. Other matters such as (part of) the staff and loss-making contracts are often left behind.

Considerations for a restart include:

• are ongoing agreements taken over – this requires contractual transfer and cooperation from the counterparty;
• whether goods have been delivered subject to retention of title;
• to what extent is there a case of successive employer-ship or does the taken-over staff enjoy protection;
• are there key suppliers who may no longer want to deliver due to bankruptcy;
• can the rent of the current location be continued in mutual agreement or does the landlord not cooperate;
  
  

Note: The above points must be thoroughly investigated before placing a bid in the context of a restart of the activities of the bankrupt company.