End of bankruptcy
When a company is declared bankrupt, there are a number of options for ending the bankruptcy, such as:
- objection or appeal in which the bankruptcy is annulled;
- a simplified settlement, which means that the bankrupt can choose to offer a bankruptcy agreement to the creditors.
There are several reasons to use the bankruptcy agreement in order to speed up an accelerated settlement of the bankruptcy.
Preferred and unsecured creditors
The bankruptcy agreement is aimed at settlement with the creditors. This does not affect the fact that the preferential creditors continue to retain their right to payment of their entire claim. The rights of the preferred creditors are not restricted in any way.
Preferred creditors can choose to waive this right and join the proceedings as unsecured creditors. It should be clear that preferred creditors do not readily do this.
Reasons for waiving this right are the possibility of voting at the verification meeting at which the bankruptcy agreement is accepted or rejected.
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The voting process
The vote on the bankruptcy agreement takes place by a simple majority vote at a meeting attended by the unsecured creditors.
A condition for adoption of the agreement is that at least half of the amount of the recognised and conditionally admitted claims not covered by priority is represented by the unsecured creditors.
If the bankruptcy agreement is adopted by the verification meeting, it still needs to be ratified by the court, which is called homologation.
The consequence of this ratification is that every unsecured creditor, even the creditors who voted against adoption, are bound by the agreement. This gives it peremptory force and ends the bankruptcy.
If, however, the agreement is rejected by the unsecured creditors or the court, this also ends the option to offer another bankruptcy agreement within the bankruptcy. The bankruptcy will then be continued and settled by the trustee.
Advantages of the bankruptcy agreement
The advantages of a bankruptcy agreement for the creditors:
- the often higher percentage that the creditors are reimbursed;
- the faster, more advantageous settlement of the bankruptcy. For example, the agreement will often be covered financially by a third party. As a result, the financial resources to be distributed to the creditors are greater than the normal division of assets in a bankruptcy.
Process after claim
After the bankruptcy agreement has been approved, the other debts are converted into a natural obligation.
This means that the bankrupt can no longer be held liable by the creditor regarding the claim. However, the remainder may lead to a deductible claim.
Depending on the circumstances of the debtor, it can therefore be expected at a later stage that the debt will be set off against any performance by the creditor. This ends the bankruptcy.
Insolvency lawyers at Viotta
Since the content of the agreement is not predetermined, it is wise to engage a lawyer before concluding the agreement. If you or your company has to deal with bankruptcy or an agreement, we are happy to help. Our lawyers have gained a lot of experience from working on the largest bankruptcies in the Netherlands.
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VIOTTA is a law firm based in Amsterdam, specialising in providing advice in the areas of corporate law, mergers and acquisitions, contract law and corporate & commercial dispute resolution. We advise in transactional matters and litigate in commercial disputes. VIOTTA provides legal advice to its clients on Dutch corporate law matters, such as corporate governance, board structures, directors’ duties and liabilities, joint ventures and other collaborations. VIOTTA advises purchasers, sellers, management and other stakeholders in domestic and cross-border mergers and acquisitions (M&A).