Private Homologation Agreement for the prevention of bankruptcy


Since the global financial crisis (i.e. the Covid 19 outbreak and the current nitrogen policy), insolvency and restructuring law have been at the forefront of initiatives in Europe. Especially the subject of a compulsory settlement outside of formal insolvency proceedings has been the focus of attention in Europe for quite some time. There is currently no Dutch statutory regulation for a compulsory agreement outside of bankruptcy. At present, a private debt restructuring agreement outside of bankruptcy can only be concluded if all involved creditors and shareholders agree. This means that one opposing (minority) creditor or shareholder is able to obstruct the debt restructuring, which in turn often leads to (unnecessary) bankruptcy.

The increased importance of a compulsory agreement outside liquidation was recognized by the European Parliament when it effectuated the Restructuring Directive (EU 2019/1023) on July 19, 2019 (the “Directive“). The Directive obliges EU Member States to introduce an effective pre-insolvency restructuring proceeding with the aim of rescuing viable businesses (which will also contribute to the preservation of employment) and preventing formal insolvency proceedings. As a consequence of the aforementioned obligation, the legislative proposal “Act Homologation of Private Agreement” (Wet Homologatie Onderhands Akkoord, or abbreviated “WHOA“) has been submitted to the Dutch Senate (Eerste Kamer) on May 26, 2020. The WHOA will be embedded in the Dutch Bankruptcy Act.

Private Homologation Agreement

Under the WHOA, a company can offer its creditors and shareholders a private agreement outside bankruptcy regarding debt restructuring. As a condition of such agreement, the company should face the threat of an insolvency procedure. The Dutch court can then approve, i.e. homologate, this agreement. The homologation ensures that creditors and shareholders who have not agreed can nevertheless be bound by the agreement if the relevant decision-making and its content meet specific requirements. The process can be initiated by the company or, via a restructuring expert who is appointed by the Dutch court on the request of the company, creditors, shareholders and/or employees’ representatives (“Restructuring Expert”). A formal declaration must be made within the Dutch court to initiate the process.

The agreement can be applied to all creditors and shareholders. An agreement that is limited to one or more groups (classes) of creditors and/or shareholders is also possible. The agreement may envisage (i) an adjustment of the rights and position of creditors and/or shareholders, (ii) clearing debts, (iii) debt for equity swap and/or (iv) changing or terminating regular agreements (except for employment contracts). Creditors and shareholders must be divided into different classes if their rights vis-à-vis the debtor are too different (i.e. unsecured, preferred and/or secured creditors). In such event, each class must receive a proposal tailored to that class. The agreement must also contain certain information, such as, amongst others:

  1. the classification of the creditors and shareholders and the criteria on the basis of which the division of classes is made;
  2. the financial implications of the proposal for each class of creditors/shareholders;
  3. the reorganization value that is expected to be realized by the agreement; and
  4. the expected liquidation value in the case of a formal insolvency procedure.

Vote on Agreement

All creditors and shareholders whose rights are affected under the agreement are entitled to vote. Voting occurs per class. At least one class of capital providers should approve the agreement to proceed with the homologation process. A class is deemed to have agreed to the agreement if the creditors/shareholders who voted in favor of the agreement together represent a two-thirds majority of the total debt or issued capital of the respective class. In addition, the approving class should consist of creditors/shareholders that are entitled to a cash distribution in the case of an insolvency procedure, unless none of the classes are expecting a distribution. Voting does not have to take place during a physical meeting and can be done electronically. If a party votes in favor of the agreement, this party loses its right to oppose against the agreement at a later stage. In addition, the company must draw up a report in which it states the voting results (“Voting Report“).

Court Approval

If one class of capital providers has approved the agreement, the company or Restructuring Expert can request for approval/homologation of the agreement to the court. The court will assess and approve the agreement within 8-14 days after (i) receipt of a request thereto and (ii) the deposit of the Voting Report with the registry of the court.

To approve the request, certain requirements must be met: (i) the agreement is necessary (i.e. threat of insolvency); and (ii) the decision-making process has been executed correctly (i.e. correct class division of creditors, all affected creditors have been duly informed and given the chance to vote).

The court may reject the request to approve the agreement, if:

  1. the agreement is deemed unfair;
  2. the position of a creditor under the agreement has a lower value compared to its position in a bankruptcy situation (‘Best Interest of Creditor Test‘);
  3. the allocation of the reorganization value among the various (and ranked) stakeholder classes is not in line with their legal ranking; or
  4. small businesses (i.e. less than 50 employees) creditors receive less than 20% of their claim.

Upon court approval, the agreement may bind all creditors and shareholders involved in the agreement. Creditors and/or shareholders who have not agreed to the agreement can therefore be forced to cooperate with the implementation of the agreement. No appeal is possible. With this compulsory private agreement, a bankruptcy can be prevented.


Now that the Covid 19 crisis is expected to bring many companies into financial difficulties, it is certainly important that the WHOA comes into effect quickly. One of the advantages of this new law is that an agreement can be homologated within weeks. To achieve this, good preparation is very important.

The full text of the Dutch legislative proposal of May 26, 2020 can be found here (in Dutch only):

For more information, please contact:

Anna Zhu

Anna Zhu

Giti Navabi

Giti Navabi

Eva Klein Obbink

Eva Klein Obbink

NOW 2.0 – details and practical information

The Temporary Emergency Bridging Measure for Sustained Employment (Noodmaatregel Overbrugging Werkgelegenheid , the “NOW”) has been in force since March 2020. The Dutch government announced new changes to the NOW and an extension of the measure with four months. Applications for the new NOW measure, starting from July 6, 2020, are subject to additional requirements that have been announced by the Dutch government on May 20, 2020 (“NOW 2.0“). In this alert we will inform you of the NOW 2.0 and the requirements for and application details thereof.

NOW 2.0

In view of the expiry of the first subsidy period per May 31, 2020, the Dutch government has decided to extend the NOW for an additional period of four months. The purpose of the NOW remains unchanged; to enable companies with a turnover loss of at least 20% to retain as many employees as possible. For more information on the (original) NOW, please see our blog from April 8, 2020. For calculating the eligible subsidy under the NOW 2.0, the turnover loss is determined over a four-month period starting on June 1, July 1 or August 1. For applicants that apply for the NOW subsidy for the second time, the turnover period must be continuously to the first period. Applications for the NOW 2.0 are open to both companies that have already submitted an application for a NOW subsidy during the previous subsidy period and companies making a first subsidy application.

For both NOW and NOW 2.0, all governmental subsidies received by companies in the context of the COVID-19 crisis are considered as turnover.


The following conditions have been adjusted for NOW 2.0 compared to the (original) NOW:

  • NOW 2.0 is a subsidy for a period of four months instead of three;
  • the reference month for the wage bill is set at March 2020 instead of January 2020;
  • dismissal of employees on economic grounds is allowed. The company will be required to pay back 100% of the compensation it has received per employee instead of 150%. Hence, there is no penalty for dismissal of employees on economic grounds;
  • in case of a notification as meant in the Collective Redundancy (Notification) Act (Wet melding collectief ontslag) or in case of large layoffs of 20 employees or more on economic grounds, the subsidy amount will be cut by 5%. This 5% cut is in addition to the reduction of the subsidy with the wage bill of the dismissed employees. However, if there is an agreement between the company and the labor union, no reduction will be applied to the subsidy amount;
  • companies are obligated to encourage their employees to request development advice or to receive training to preserve their employment;
  • in case a subsidy is granted at or above the amount for which an auditor’s report is required (i.e. EUR 100,000 advance payment or EUR 125,000 final subsidy), no dividend or bonus may be distributed and no own shares may be acquired over 2020 up to and including the shareholders’ meeting in 2021. For operational companies that apply for NOW 2.0 whilst the group as a whole does not meet the 20% turnover loss as meant in article 7 of the NOW 2.0, this threshold does not apply. They must always adhere to the obligation regarding dividend, bonusses and acquiring of shares. For more information on the latter, please see our blog from May 12, 2020. These operating entities are required to have a statement from both the head of the group (as meant in article 2:406 paragraph 1 of the Dutch Civil Code) and the parent company (as meant in article 2:24a of the Dutch Civil Code) prior to the application, stating that these obligations will be met; and
  • the supplement on wage costs to cover employer costs will be increased from 30% to 40%.

Application and determination of the subsidy

The Dutch government is aiming to open the second application period as of July 6, 2020, whereby an subsidy for the wage bill for the period June, July, August and September can be requested. The application period will be open until August 31, 2020.

After the subsidy period, the company will have to request for the final subsidy amount to be determined. Previously, the Dutch government announced that companies who apply for both NOW and NOW 2.0, will have to request the determination of final subsidy amounts simultaneously. This is no longer the case. The company has the option to either request for two separate final determinations, or to request for one final determination for the NOW and NOW 2.0 simultaneously at the end of the NOW 2.0 subsidy period.

We will inform you of any changes or updates regarding the NOW 2.0. If you require any assistance or have any questions, please do not hesitate to contact us.

Pepijn van Egmond, Anna Fredova and Lotte Smit

Pepijn van EgmondAnna Fredova Lotte Smit