Appointing a curator
When a company threatens to go bankrupt, the choice can be made to make a restart. After the company has been declared bankrupt, an offer is made to the court-appointed curator to buy the assets – the heart of the company – before the trustee will liquidate the estate among the creditors. This transaction is also referred to as an asset-liability deal.
Assets and goodwill at restart
For a successful restart, it is important to obtain the goodwill – the customer base, intellectual property rights or unexecuted orders.
These assets, as well as the inventory and stocks, are necessary to successfully continue under the new legal entity.
Since the bankruptcy trustee benefits from selling the estate in a manner that is most favorable to the bankruptcy trustee, he will be more inclined to accept the offer for the assets if a good proposal is made. A bundled sale of all parts of the company, including the goodwill, usually yields more than the individual sale of these.
The more so because the goodwill is the only asset that, if there is no interest in it, cannot be cashed in by the trustee without the assets. The purpose of a restart is to purchase the aforementioned assets from the company through an asset-liabilities purchase agreement and then transfer them to the new legal entity.
The advantage is that the debts (read: liabilities) remain with the bankrupt company, while the creditors cannot, in principle, recover the debt from the transferred assets in the new legal entity.
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The restart plan
If the company intends to make a restart, a pre-prepared restart plan can be used. This ‘restart plan’ includes a reasoned offer that concerns the necessary assets needed for the business operations of the new legal entity.
The offer may be based on a valuation report from the notary or a business valuation prepared by the accountant, but this can be omitted given the small value of the company.
It is important that this transaction takes place quickly and that it is set up before the restart. Both customers and suppliers will benefit from clarity about the new business operations. By approaching the bankruptcy trustee at an early stage with a strongly substantiated offer, future business operations can be established with greater certainty.
The ‘pre-pack’ and silent administrator
The relaunch can be realized even faster by drawing up a ‘pre-pack’ through a silent administrator.
Even before the company is declared bankrupt, it is being investigated whether a possible restart could be successful. If the company is eventually declared bankrupt, the company can quickly switch with the bankruptcy trustee, who was previously appointed as silent administrator, and roll out the restart plan via the pre-pack.
However, this is not without risks.
Normally, most of the rights and obligations of employees do not transfer to the new company, but his does not apply if the bankruptcy has been settled before the restart. This exception stems from the Smallsteps ruling by the Supreme Court.
As a result, you as a restarter can be tied to the employment contracts of all staff under the new legal entity.
You should also be wary of the potential high costs of appointing a silent administrator who must be paid in advance. In practice, it therefore does not happen very often that small companies make use of the silent administrator.
Where the risk of a ‘pre-pack’ lies in taking over the entire staff, remediation by means of a restart after bankruptcy has the advantage that the entire staff does not have to be taken over. Only those for which there is room in the new company can be offered an employment contract.
Contrary to what is normally the case in a transfer of business, the legal provisions relating to the rights and obligations of the staff do not apply in a bankruptcy situation.
Contrary to what is normally the case with a transfer of undertaking, the legal provisions relating to the rights and obligations of the staff do not apply in a bankruptcy situation.
The same goes for other contracts, such as those with suppliers. These do not automatically transfer to the new acquirer either. For example, the acquirer can determine which contracts are taken over by means of ‘cherry picking’.
It is then important to carefully consider the consequences of the takeover, now that all obligations and rights, including debts, are transferred to the new contracting party.
Bankruptcy lawyer Viotta
Since realizing a restart is quite complex, it is wise to obtain early advice about options for successfully implementing the restart. That is why you should hire an insolvency law attorney who can guide and advise you on the restart process at an early stage. Our lawyers have gained experience by advising on the largest and most well-known bankruptcies. This allows them to act quickly and advise you or your company efficiently.
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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).