Dutch Supreme Court clarifies boundaries of forced financing under the WHOA

The WHOA enables debtors to propose a restructuring plan that can alter the rights of creditors and shareholders, even if some object. This tool is designed to facilitate viable restructurings and prevent holdout creditors from blocking necessary agreements. However, the Supreme Court has now clarified that the WHOA does not extend to compelling creditors to provide new financing or to honour existing credit commitments under materially changed conditions.

In the case at hand, a consortium of banks had provided substantial credit facilities to a Dutch shipbuilder. The restructuring plan, which was approved by a majority of creditor classes, included provisions that would have required dissenting banks to continue financing the company, despite changes to the underlying agreements. The Supreme Court ruled that such obligations fell outside the scope of the WHOA. The Act only allows for the modification of existing rights, such as reducing claims or rescheduling payments, but not for imposing new or extended duties on creditors to provide additional funds.

This decision is highly relevant for international practitioners and clients involved in cross-border restructurings. It underscores the importance of distinguishing between the alteration of creditor rights and the imposition of new obligations. While the WHOA remains a flexible and powerful restructuring instrument, its reach is not unlimited. Creditors cannot be forced to inject new money or maintain credit lines beyond their original terms, safeguarding their autonomy and risk assessment.

For GGI members and their clients, this ruling offers clarity on the Dutch restructuring landscape, and highlights the need for careful structuring of multi-jurisdictional workouts. The Supreme Court’s approach aligns with international best practices, ensuring the Dutch regime remains both effective and predictable for all stakeholders.

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Michiel Teekens is a Partner with TeekensKarstens advocaten notarissen (TK). He is an international corporate and commercial litigator and Chair of the International Law team of experts in TK. He also serves as European Regional Chair of the GGI Litigation & Dispute Resolution (LDR) Practice Group.