Insolvency & Restructuring
The board of directors, other decision-makers and all other parties connected with an enterprise, such as lenders, creditors and other potential takeover candidates, will at all times have to consider the risks that are involved when a business gets into financial difficulties or finds itself on the brink of bankruptcy.
There are various circumstances, or a combination of them, that may cause a business to run into financial difficulties. Financial difficulties may be the result of external circumstances, such as, for example, a declining market demand or a rise in purchase prices/prices of raw materials, but they may also be caused by internal circumstances, such as mismanagement or manifestly improper management. An undertaking may of course also be hit by an overall economic recession. Another cause may be the conduct of third parties connected with the business, such as a lender deciding to discontinue a credit facility.|
The term Insolvency & Restructuring covers all issues and problems relating to the difficult financial situation a business or any of its contracting parties may be faced with. When such a situation is becoming increasingly likely, it is not always simple for a company’s board to take timely decisions regarding the restructuring / resizing of a business. This often means that an informal restructuring is not commenced in time, resulting in a reduced chance of success or even failure. In those cases a suspension of payments or bankruptcy may become inevitable. Getting timely advice may avoid problems and save costs.
Court Approval of a Private Composition (Prevention of Insolvency) Act or bankruptcy?
If a bankruptcy situation arises, the trustee will have to study its causes. Such an investigation will focus on the actions performed by the board of directors, other actual decision-makers, lenders and supervisors in the period preceding the bankruptcy. Many businesses ending up bankrupt turn out to have been in a delicate financial situation for a number of years already, their financial position having been weakened year after year on account of a failure to take timely action. Somewhere in that period there comes a moment when assuming new obligations or continuing the business without performing a restructuring is no longer justified. If nevertheless new obligations are entered into or if no timely restructuring measures are taken, there is a growing risk of liability claims. If swift action is taken, it is in many cases still possible to avoid bankruptcy by way of an extrajudicial compulsory composition as provided for by the WHOA. We operate both as a sounding board and as a reference point. We are happy to share our views with you about the course to be taken, while making sure that the management of the undertaking continues to act in compliance with the rules – including in the eyes of a trustee or a court of law.
A director is supposed to know when to restructure the undertaking. This process is invariably fraught with risks and requires proper supervision from a legal expert, something which should also be a point of attention for those charged with the supervision of the business, such as a supervisory board, for it is this body that may afterwards be accused of having failed in the proper supervision of the management conducted by the board of directors. When an informal restructuring is no longer among the possibilities, undertakings are advised to have the scenario of a formal restructuring (court-approved private compositions, a suspension of payments or a restart after bankruptcy) looked into and prepared well in advance. Our longstanding and proven experience enables us to efficiently provide you with an insight into the legal options and liability risks and present you with solid and practical solutions.
Our services include:
- Drafting restructuring plans and analysing the risks involved;
- Advising and assisting directors, shareholders, supervisory directors, lenders, creditors and other parties involved in undertakings that are going through difficult times;
- Preparing and supervising restart scenarios (takeover/assets transactions);
- Supervising the offering of an out-of-court settlement, court-approved private compositions or a settlement involving a suspension of payments or bankruptcy;
- Providing advice on financing schemes, refinancing schemes and financing conditions, security (rights of pledge and mortgage, retentions of title, guarantees, etc.) and preparing the relevant papers;
- The realisation, or actual realisation, of collateral, or, in the interest of the undertaking, preventing collateral from being realised;
- The liquidation and winding-up of legal persons;
- Providing advice and conducting legal proceedings in matters involving directors’ liability, financing issues, the prejudicing of creditors (fraud);
- Providing advice and conducting legal proceedings in matters involving bankruptcies and suspensions of payments;
- Providing advice on the position of the creditor during the WHOA procedure;
- Filing claims in matters involving bankruptcies or suspensions of payments and assisting creditors in claim validation proceedings in the event of claims being challenged by the trustee.