Generally, the market was considered slow in the past 12 months, and this resulted in many sponsors focusing on their existing portfolio and activity being weighted towards incremental debt processes, re-pricings and the occasional covenant re-set or waiver. This seems more related to global political and economic conditions than local conditions. Private credit is generally considered to have kicked off in the Netherlands from 2014. Whilst the Dutch market initially took a number of years to really discover the private credit market, from about 2016, it has grown significantly and proven resilient.  Even in the relatively slow last 12 months, the private credit market in the Netherlands has seen new providers coming into the market, with established players also exploring new asset classes. Software, healthcare and accounting were among popular sectors.

In the past few months, the authors have not seen many broadly syndicated loans or high-yield transactions in the Netherlands, although some well-known Dutch issuers were active in the market. Generally, given the size of transactions in the Netherlands, the market is more weighted towards private credit and/or bank club transactions, with only the larger transactions being considered in scope for the syndicated loan or high-yield market. Syndicated transactions have also been seen in which one or more private credit providers commit to provide a significant part of the debt prior to the launch of syndication, and the collaboration between the syndicated market and the private credit market is increasingly common.

Private credit has been the preferred form of acquisition financing in the Netherlands for some time, including the last 12 months. Depending on market conditions, however, sponsors will look to the syndicated loan market for larger transactions.

In the Netherlands, private credit was initially considered to be expensive debt, as pricing was higher than pricing for bank debt. In recent years, the pricing difference between private credit and bank debt narrowed and sponsors have been opportunistic in having higher leverage and financing add-ons with all debt or mostly debt and the perception of private credit as expensive debt largely faded.

On some transactions in the Netherlands private credit providers will either co-invest in the equity or provide PIK (payment-in-kind) financing, which may or may not have an equity-linked component in the pricing or fee structure. Please also refer to 4. Tax Considerations in this respect. PIK financing will often be structurally subordinated and will benefit from limited security with no overlap with the security package for the senior financing. The security will often be limited to shares in an entity above the single point of enforcement for the senior financing and claims on such entity. There will typically not be intercreditor arrangements between the PIK financing and the senior financing.

Private credit providers are mostly focused on sponsor-led transactions, but there are a number of private credit funds which regularly transact with founder-owned companies, either from specific strategies or from general leveraged lending strategies. Whether more private credit providers will consider founder-owned companies or financing them from leveraged lending strategies will in part depend on the pressure to deploy capital.       

Recurring revenue-based financing is provided by private credit providers in the Netherlands, typically in relatively small deals.

It is difficult to point to a typical size limit for private credit transactions in the Netherlands as there are not many deals in the market which will test this limit, given the number of private credit providers which can take very large tickets. The ability to take a large ticket will of course also depend on the fund’s available capital and/or the status of new fundraising. These limits and any challenges in new fundraising are, however, not Dutch specific as the vast majority of private credit providers active in the Netherlands are international funds.

Dutch Regulators and Private Credit

The Dutch regulators (the Dutch Central Bank and the Authority for the Financial Markets) are not specifically focused on regulating private credit lenders. They are awaiting the implementation of the European Directives AIFMD2 and CRDVI, but are not developing any initiatives in parallel.

AIFMD2

The current European Directive on Alternative Investment Fund Managers (AIFMD) requires fund managers to comply with a variety of prudential and conduct of business rules. These rules are general in nature and apply to business operations and dealings with investors generally. AIFMD also contains rules which are specific to investment techniques (such as leverage) and which are specific to certain asset classes (such as private equity) but are silent on loan origination. AIFMD has, however, been amended (to include loan origination among other matters) but is yet to be implemented across the European Union. It is referred to as AIFMD2 in its amended form.

AIFMD2 introduces a range of rules on loan origination. These include subject matters such as:

• implementing policies, procedures and processes for the granting of loans;
• implementing policies, procedures and processes for assessing credit risk;
• loan concentration of 20% of the fund’s capital (called and uncalled contributions) to a single borrower of a certain type;
• leverage restrictions (175% for open-ended funds and 300% for closed-ended funds); and
• prohibition to grant loans to the fund manager (or its staff) or to its delegates, to the fund’s depositary (or its delegates), or to group companies.

AIFMD2 is not going to impose any specific licensing requirements for fund managers which are already authorised. They may need to apply for a variation of permissions but will otherwise only need to ensure compliance with the new rules.

These new rules are in relation to the business operations of the fund. They will not give the fund any regulatory permissions to grant loans to specific types of borrowers. That is a different matter and AIFMD2 is therefore without prejudice to local rules on corporate and consumer lending which will continue to apply.

AIFMD2 should be implemented by 16 April 2026.

CRDVI

The current European Capital Requirements Directive (CRD) provides for a harmonised regime on banking business (including lending) across the European Union. CRD has, however been amended among other matters to include lending from outside of the European Union but is yet to be implemented across the European Union. It is referred to as CRDVI in its amended form.

CRDVI introduces rules on lending by non-EU credit institutions (ie, banks) to European borrowers and will require such non-EU credit institutions to set up a branch office in the country of the borrower and obtain authorisation locally (exemptions are available). Other types of non-EU-based lenders should remain unaffected provided they do not meet the materiality requirements of qualifying as a credit institution under CRDVI. Private credit funds should therefore not be affected in the Netherlands. CRDVI implementing legislation is, however, still to be published in the Netherlands.

CRDVI should be implemented by 11 January 2027.

Regulatory Framework in the Netherlands for Lending

Private credit lenders only require a licence if they lend to consumers (ie, natural persons not acting in the course of a business or profession). Other forms of lending (generally referred to as “corporate lending” are not regulated. This general rule applies to Dutch and non-Dutch lenders. As private credit lenders typically do not lend to consumers, they do not require a licence or other form of regulatory approval.

Private credit funds are regulated in the European Union under the AIFMD. The rules that apply pursuant to AIFMD are, however, only in relation to the business operations of the fund manager and do not cover the extension of credit. That is a separate matter. Private credit funds which are authorised under AIFMD will therefore not automatically be permitted in the Netherlands to extend credit to consumers but will only be able to grant loans to borrowers who do not qualify as consumers.

Taking Security Over Assets Located in the Netherlands

Taking security over assets located in the Netherlands is not subject to any local licensing or regulatory approval requirements.

The primary regulator for private credit activity in the Netherlands is the Authority for the Financial Markets, but only in relation to consumer lending. Corporate lending is not regulated and there is therefore no regulatory authority which regulates the corporate lending market.

There are no restrictions on foreign investment in private credit funds in the Netherlands. Foreign investment taking place by way of loans to the private credit fund will be subject to the leverage restrictions as they apply to the fund. There are no foreign investment restrictions that apply directly to the lender.

Foreign investment taking place by way of an equity investment will be subject to private placement rules as they apply in the jurisdiction of the equity investor. There are no foreign investment restrictions that apply directly to the equity investor.

There are no compliance and reporting requirements in the Netherlands for private credit providers that engage in corporate lending only (ie, to parties other than consumers). Regulated credit funds are subject to the regulatory reporting requirements as these apply to investment funds (but not subject to any standalone corporate lending reporting requirements).

There are no specific concerns on club lending by private credit providers, neither is this a priority of the national competition authority in the Netherlands. However, club lending is subject to applicable EU and national antitrust rules and, accordingly, private credit providers should not use a club lending occasion for purposes of (tacit) collusion on other (competitively sensitive) matters.

Common Structures

The most common structures (disregarding any holdco financing or equity co-investments) are either a combination of senior term debt and a super senior revolving facility or a combination of senior term debt and super senior term and revolving facilities.

Revolving Facilities

Revolving facilities are typically only provided by private credit providers for a certain bridge period.

Delayed Draw Facilities

Delayed draw facilities are common in the Netherlands and feature on the majority of deals. In first-out last-out (FOLO) structures, the super senior lender or super senior lenders will often be allocated part of the delayed draw facility (which then is converted into a super senior delayed draw facility) alongside their participation in the drawn term debt (which is then converted into super senior drawn term debt).

Key documents are a commitment letter, a term sheet and a precedent facilities agreement and, after the initial commitment phase of the transaction, a facilities agreement and intercreditor agreement. A precedent intercreditor agreement is often designated in the initial commitment phase, but it will depend on the selection of any super senior lender how effective that designation is, given that the relationship between senior lenders and super senior lenders (also in the facilities agreement) is not standard and still developing. A number of the provisions which are relevant for this relationship will typically be included in the facilities agreement and others in the intercreditor agreement

FOLO

FOLO transactions are quite common in the Netherlands and the relationship between senior lenders and super senior lenders is dealt with in the same manner as transactions in which there is only senior term debt and super senior revolving debt. Less common in the Netherlands is to allocate senior term debt to a super senior revolving lender.

External Factors

Documentary terms for private credit transactions are not typically Dutch-specific and the drafting of private credit documentation in the Netherlands therefore changes with the international market.

There are no specific restrictions on foreign lenders in respect of providing private credit or taking security, other than as set out in 2. Regulatory Environment and 4. Tax Considerations. It is worth noting that the vast majority of private credit providers which are active in the Netherlands are not Dutch entities.

There are no specific Dutch law restrictions on the use of proceeds from private credit transactions by a borrower. The drawdown period for private credit facilities will typically be longer than the drawdown period for bank financing, so that has to be taken into account from a timing perspective.

Whether debt buybacks by the borrower or sponsor are permitted will depend on the requirements of the private credit provider and sponsor precedent. A number of private credit providers require that the documentation does not permit debt buybacks. In any event, if debt buybacks are permitted, the documentation would cater for appropriate disenfranchisement.

There are no recent legal or commercial developments that have required major changes to legal documentation for private credit transactions.

Please see 1.5 Junior and Hybrid Capital.

Payment in Kind

Typical senior term debt will often cater for a PIK toggle allowing the borrower to capitalise interest or part of the interest for a period of time (which may or may not be limited), either at a premium or not.

Amortisation

There are no Dutch law reasons for a private credit provider to require amortisation. Transaction documentation may cater for the ability to incur incremental debt in certain currencies with de minimis amortisation.

It is typical in the Netherlands for senior term debt (initial term debt and delayed draw facilities) to benefit from call protection for a period of one to two years, with different mechanisms, including make-whole provisions and fees expressed as a percentage of the amount prepaid. There are no specific concerns with call protection provisions as a matter of Dutch law.

As a general rule, the Netherlands does not impose withholding tax on payments of principal, interest and other (debt financing-related) payments, provided that such payments are made on instruments qualifying as debt for Dutch tax purposes and are made between unaffiliated parties on bona fide arm’s length commercial terms. As such, provided that a private credit provider is not affiliated to a borrower and instruments qualify as debt, such payments by a borrower should not be subject to Dutch withholding tax.

A person should be considered an affiliated entity of a borrower if (i) that person has a qualifying interest in the borrower, (ii) the borrower has a qualifying interest in that person or (iii) a third person has qualifying interest in each of them. Generally, the term “qualifying interest” means a directly or indirectly held interest, individually or jointly as part of a qualifying unity (kwalificerende eenheid – effectively a group collaborating with a withholding tax avoidance motive), that gives the holder of such interest definite influence over the decisions of the entity in which the interest is held and allows determination of its activities.

In affiliated situations, the withholding tax is only due if (i) the person who is considered the recipient of the payments is situated in or acting from certain jurisdictions included on the list of low-taxing and EU-blacklisted jurisdictions published annually by the Dutch government or (ii) there is an abusive or hybrid mismatch situation. The withholding tax rate is currently 25.8%.

In typical lending transactions there rarely is affiliation between a credit provider and a borrower. Therefore, it should typically not be necessary for private credit providers to specifically manage or mitigate Dutch withholding tax risk. Nevertheless, generally speaking, to mitigate any residual risk of abuse or hybrid situations, credit is often provided through a corporate entity with sufficient economic substance. This can become more relevant where it concerns debt with equity features or where an equity interest is held alongside the debt (either by the private credit provider or an affiliate), which is something more often seen with private credit providers than with commercial banks. In these situations, careful consideration must be given on a case-by-case basis, as such equity features or interests potentially impact the withholding tax position (either directly or upon for example future conversion). This is also true from the perspective of the borrower where it concerns deductibility of payments for Dutch corporate tax purposes.

Stamp Taxes

The Netherlands typically does not levy any stamp, registration or transfer duties or taxes in relation to execution or enforcement of finance documents or related security documents. Dutch stamp duties are typically only due on insurance premiums (insurance premium tax). Dutch transfer taxes are typically only due by an acquirer of (certain rights in rem to) Dutch real estate assets or shares in certain companies owning Dutch real estate. Effectively, this means that transfer tax is not triggered by the execution of a right of mortgage or share pledge, but is possibly triggered on the enforcement of the security rights. In such scenarios, transfer tax should not become due by the security holder but rather by the acquirer of the secured assets, unless the security holder would itself acquire the real estate or shares. The possibility of the private credit provider taking the secured assets itself is, for real estate debt funds, something to take into account upon inception as it creates a variety of tax issues in practice, not only in the Netherlands but also in other European jurisdictions.

VAT

In principle, financial services are exempt from VAT in the Netherlands. Therefore, the provision of debt by private credit providers to a Dutch tax resident borrower or foreign resident borrower lending through a Dutch establishment (or debt secured by Dutch real estate) should be a supply of exempt financial services for Dutch VAT purposes (provided that the place of supply is the Netherlands). However, the applicability of VAT is assessed on a case-by-case basis (depending on the relevant supply). For example, fees for debt collection services supplied by a person other than the originator may be subject to Dutch VAT (if the place of supply is the Netherlands).

Certain Dutch Tax Concerns for Foreign Private Credit Providers

The way in which private credit providers are often structured and operate may create certain Dutch tax risks. Three are especially noteworthy: (i) permanent establishment risks associated with activities (such as loan origination) by persons or teams operating from the Netherlands, (ii) hybridity risks associated with having Dutch investors and (iii) the presence of equity interests generally.

Permanent Establishment Risk

To the extent that the private credit provider or any manager or investment adviser appointed by it carries on part of its activities in the Netherlands, especially where such activities constitute loan origination or more broadly speaking where such activities exceed those of a preparatory and ancillary nature (including where persons in the Netherlands have the authority to contract), it should be determined whether there is a risk for the private credit provider of a permanent establishment (or even residency) in the Netherlands to which (part of) the income from credit provided is allocable and subject to Dutch corporate taxation.

Hybridity Risks

Dutch investors have historically been a source of hybrid mismatch issues (where one jurisdiction considers a vehicle as tax transparent but another as opaque) created for fund-type vehicles in the form of partnerships and contractual funds. Dutch entity classification rules have changed since 1 January 2025, but especially for certain fund vehicles these hybridity issues have not disappeared. Mitigating such issues should be considered in the fund formation phase, for example by requiring Dutch investors to invest through a feeder vehicle.

Equity Interests

As set out at the end of 4.1 Withholding Tax, in situations where an instrument has equity features or the private credit provider or an affiliate also has an equity interest, consideration must be given to the withholding tax position and corporate tax deductibility of expenses at borrower level. Furthermore, private credit providers should consider whether there is a possibility of any individuals having a (direct or indirect) 5% or more interest in the private credit provider and the relevant borrower as that would possibly, even absent Dutch residency or a Dutch permanent establishment, bring the private credit provider in scope of Dutch corporate taxation with respect to income derived from such borrowers.

There are no tax incentives available for foreign private credit providers lending into the Netherlands.

There are no additional tax considerations applicable specifically for non-bank lenders.

Security is available over all assets (save for very limited exceptions). Although very much dependent on the transaction, typical security consists of security over shares (taken by way of a notarial deed if the relevant company is a private company (BV)), security over various types of receivables, security over moveable assets and security over intellectual property rights. Security over real estate assets is typically excluded. Other than security over shares and real estate, which both require a notarial deed, there are limited formalities that apply to taking security in the Netherlands and any applicable formalities are not particularly time-consuming.

Security is typically created to limit operational intrusiveness and unnecessary administrative burden.

It is not possible under Dutch law to take a floating charge over the assets of a company. For certain financings in the Netherlands it is customary to create security over various types of assets in a single document, as a close equivalent of a floating charge. For certain types of assets, Dutch law distinguishes between disclosed versus undisclosed security and possessory versus non-possessory security. There is no difference between banks and private credit providers in respect of the terms of the security they require.

Financial Assistance

See 5.4 Restrictions on the Target in relation to financial assistance.

Corporate Benefit

Corporate benefit is a general requirement to be established for any act of a company. Every director of a company has a duty to act in the best interests of the company. This means that every act of the company should provide a direct or indirect “benefit” to the company and should not jeopardise the company’s existence. Corporate benefit is relevant in particular when a company grants guarantees or security either upstream or cross-stream and the benefit is more likely to be indirect. If directors are in breach of their duty, the act of the company may be unenforceable where enforcement under the circumstances would be unacceptable pursuant to the standard of reasonableness and fairness.

Financial Assistance

Financial assistance (for any public company (NV) and its subsidiaries) and corporate benefit (especially for upstream and cross-stream guarantees) issues have to be addressed. Financial assistance issues should be considered if a company guarantees or gives security for a loan that is used to acquire the company or to the refinancing of such a loan. There is no white wash procedure in the Netherlands. In practice, an NV will often be converted into a BV after its acquisition and, assuming certain other requirements are met, financial assistance restrictions do not apply following such conversion. Prior to a conversion, a debt push down is commonly effected to mitigate financial assistance limitations.

Corporate Benefit

See 5.3 Downstream, Upstream and Cross-Stream Guarantees in relation to corporate benefit.

Works Council

Companies or enterprises that employ at least 50 employees are required to have a works council. The works council has the right to advise on or, as the case may be, consent to certain management decisions. Matters on which the works council must be asked to advise include (i) change of control, which is likely to be relevant in the context of security over shares in a company, (ii) entering into an agreement for a substantial loan, either as lender or as borrower, and (iii) granting security (other than in the ordinary course of business) or becoming a guarantor for significant debts of another company.

Hardening Periods

Dutch law does not know the construct of hardening periods but does know the construct of fraudulent preference.

Retention of Title

Both retention of title and extended retention of title are known constructs under Dutch law.

Anti-Assignment Provisions

In 2018, a bill was published which invalidates contractual transfer/pledge restrictions in respect of trade and financial receivables (Wet opheffing verpandingsverboden). The implementation of such prohibition is intended to improve access to credit for SMEs. Currently, due to contractual restrictions, SME trade receivables often cannot be used for their financing purposes. Receivables from bank accounts are excluded from the prohibition.

Security documents drafted for a financing between professional parties will typically permit the holder of the security to terminate the security by a simple notice. This allows for a very straightforward release document, although in practice (often unnecessarily) complex combinations of terminations and waivers are seen. The timing of the release of security can be more complicated in case of an exit by the sponsor and the purchaser obtaining new financing.

The release of security over receivables is often not notified to debtors (even if they were notified of the creation of the security). The release of security over shares should be recorded in the relevant shareholder register. The release of security of real estate should be registered with the Land Registry by a notary.

Dutch law recognises multiple security rights over the same asset. The order or priority of such security interests is typically determined by the order in which such security rights were created. That order can be contractually varied by the holders of the security rights.

Subordination provisions are generally effective in the insolvency of a Dutch borrower.

The most important claims arising by operation of law are tax claims giving the receiver a preferred position in insolvency. See also 7.2 Waterfall of Payments.       

Cash Pooling

Cash pooling is common in the Netherlands and typically documented by way of ancillary facility or separately. The cash pooling provider will require first ranking security over certain receivables and such first ranking security is typically permitted under the facilities agreement.

Hedging

It is typically possible in Dutch transactions for a borrower to enter into secured hedging, which would either rank super senior (up to a limit) or senior (subject only to being permitted hedging and the relevant hedging agreement complying with the terms of the applicable intercreditor agreement).

Licensing or Regulatory Limitations

With respect to licensing and/or regulatory limitations or holding of collateral, please refer to 2. Regulatory Environment and 4. Tax Considerations. There are no specific limitations.

Shared Security

Security is typically taken to secure a parallel debt which is created contractually and this gives a security agent a claim equal to the claim of the collective lenders, allowing the security agent to take security for this claim, enforce the security and distribute the proceeds of enforcement in accordance with an intercreditor agreement. Dutch law does not know the construct of a trust. If a lender transfers its claim on a borrower, this does not impact the parallel debt and therefore does not impact any Dutch security created to secure that parallel debt. Dutch law also does not know the construct of novation, so there cannot be any novation of any debt claim which triggers any concerns in respect of security for that debt claim.

Enforcement of loans and guarantees can take place by sending a demand for payment, taking into account any applicable contractual agreements. Enforcement of security takes place based on mandatory law provisions and can only be started upon the occurrence of a payment default (subject to other contractual provisions). Such enforcement takes place either by public auction (involving a Dutch notary), or by a private sale. A private sale in enforcement is possible if either the Dutch court grants approval or the relevant pledgor who granted the security does so. The Dutch court approval route is the most common in a Dutch restructuring, which requires a petition to the court together with valuation evidence. Sometimes, the pledgor approval route is taken, but this can only be agreed after the security has become enforceable and usually requires the same valuation evidence as required in a court process. A secured creditor can credit bid in an enforcement.

Security in the Netherlands is most often held by a Security Agent on behalf of the lenders. From an enforcement perspective it does not matter whether the lenders are banks or non-bank private credit providers. Most often in a restructuring, a share pledge enforcement is used to sell the business or do a loan-to-own, and an increase in the market in private credit financings is seen using this share pledge enforcement to implement a restructuring (if it is not possible to do the sale on a consensual basis).

A choice of a foreign law may be upheld in the Netherlands on the basis Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations (“Rome I”). The submission to the jurisdiction of foreign courts may be upheld in the Netherlands. A waiver of immunity of jurisdiction may be upheld in the Netherlands.

If a treaty or EU regulation is in place (eg, Brussels I or Hague Choice of Court Convention) a final judgment obtained in a foreign court against the Dutch company will be recognised and enforced by the courts of the Netherlands without re-trial or re-examination of the merits. However, if no treaty is in place (for example between the Netherlands and the United States), a judgment of a foreign court will not be automatically enforceable in the Netherlands and it will be necessary to relitigate the matter before the competent court of the Netherlands. Dutch courts will generally render a judgment in accordance with a foreign judgment, if certain conditions have been met.

An arbitral award rendered pursuant an agreed arbitration clause shall be enforceable against the Dutch company in the Netherlands subject to the provisions of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (as may be amended) and the relevant provisions of Book 4 Dutch Code of Civil Procedure.

A challenge to enforcement can be done in multiple ways, among which are the following:

• the debtor, sponsor or other stakeholder can approach the Dutch court in a private sale proceeding to oppose, or by a separate proceeding to try and block the enforcement;
• the debtor can file for insolvency including a moratorium; and
• the debtor can start a Dutch Scheme/WHOA proceeding including a moratorium.

In case of an enforcement by way of a private sale with court approval, the court process itself normally takes about six to eight weeks. If there is no opposition to the proposed sale and valuation evidence, then this process can be shorter. The costs of the enforcement are adviser and valuation costs and depend on the circumstances and complexity. The court fees are limited.

In the Dutch market, normally the enforcement of security is used as a pressure point to encourage a consensual solution. Because the enforcement process is relatively simple, albeit it often requires a court process, it is an effective tool to force parties into a consensual solution, which is more cost effective because the court process and valuation evidence (including sometimes a market testing exercise) will not be needed. Also, enforcement has a negative impact on value and the court process and judgment are public.

Enforcement of security can take place outside as well as during insolvency and in both cases the secured creditor can take recourse against the proceeds in full.

Dutch law has two insolvency processes, bankruptcy and suspension of payments. The Dutch court will in such case appoint a trustee in bankruptcy, or an administrator, who will be in control of the process. Although in some cases a sale of a business can be done during insolvency, normally these processes lead to a liquidation of the business.

During insolvency, a secured creditor can take recourse against the secured assets in full. Any residual claim constitutes an unsecured claim which shall rank pari passu with the other unsecured creditors in the insolvency. All the costs of the estate, including the salary of the bankruptcy trustee, costs for liquidation and potential litigation in relation thereto, investigation of the causes of bankruptcy, rank ahead of unsecured creditors. Also, tax claims and certain employee and rental obligations shall have a prior ranking ahead of the unsecured creditors. In the majority of insolvencies in the Netherlands there is no distribution available for unsecured creditors.

Dutch insolvency proceedings take several years and all the costs of the bankruptcy will be paid, as a preferred claim, out of the estate value. This means that insolvency proceedings are often value destructive. Also, secured creditors can take recourse outside of the bankruptcy proceeding, but unsecured claims will only receive payment (if value is available to them) at the very end of the insolvency proceeding.

Under Dutch law a debtor can initiate a Dutch Scheme/WHOA process to implement a restructuring, which is a cram-down procedure that can involve write-off of debt, extension of maturity dates, debt-for-equity swaps and similar arrangements. The WHOA has become available in 2021, in the same period as the UK restructuring plan, which is a similar restructuring tool. Since implementation, the WHOA was first used very frequently by smaller companies, but since 2023 it is also used by large companies and even in parallel with UK schemes/restructuring plans as well as Chapter 11 proceedings.

Insolvencies are usually value destructive and all costs of the bankruptcy will need to be paid out of the estate. Upon the opening of the insolvency proceeding, a court-appointed trustee in bankruptcy will take over, which means there is loss of control. Furthermore, a trustee in bankruptcy is obliged to investigate the causes of bankruptcy, which include preferential transactions and any form of director and or lender liability claims. Lender liability is not often established in the Netherlands.

Transactions that have been prejudicial to the creditors of the borrower can be voided if certain conditions are met. Most importantly, it must be established that there was knowledge of such prejudicial effect, which is a high threshold. However, there are certain suspect transactions for which a reversal of burden of proof applies, including transactions that are undervalued or intragroup transactions. Those transactions cause a higher risk of being voided, if they have been entered into within one year prior to the insolvency.

Set-off can be applied during insolvency.

Private credit restructurings include both WHOA proceedings and share pledge enforcement processes, which can be implemented without co-operation from the existing equity holders. In case there is co-operation from those parties, the restructuring can be implemented on a consensual basis. Frequently, the preparation of a share pledge enforcement and/or WHOA process is an effective tool to come to a consensual transaction with the existing equity holders.

A debtor can initiate a Dutch Scheme/WHOA process to implement a restructuring, which is a cram-down procedure that can involve write-off of debt, extension of maturity dates, debt-for-equity swaps and similar arrangements. The WHOA can be sanctioned by the Dutch court if two-thirds majority in value in each class has consented to the WHOA plan – eg, cramming down dissenting lenders. If there is a non-consenting class, then there is also the option of a cross-class cram-down. This allows at least one “in-the-money” class voting in favour. The court will only sanction the WHOA plan if the best interest of creditors test is met, and in case of a cross-class cram-down, also the amended absolute priority rule. These requirements include protections for dissenting creditors and are based on valuations. A WHOA can apply to both creditors and shareholders.

A pre-pack insolvency – ie, a pre-arranged sale of a business which is implemented upon the opening of insolvency proceedings, is currently not available in the Netherlands. Balance sheet restructurings are not implemented through insolvency, but by either (i) a share pledge enforcement process whereby subordinated debts can be released through intercreditor arrangements or (ii) a WHOA proceeding. In WHOA proceedings, it is possible to provide support rescue financing and obtain security which is pre-sanctioned by the court so that it cannot be challenged by a subsequent bankruptcy trustee should the restructuring fail.

There are not many notable private credit transactions or ensuing proceedings which are in the public domain. The authors decline to comment on transactions or proceedings, some details of which are publicly known, on the basis of confidentiality restrictions or any involvement they may have had.

See 8.1 Notable Case Studies.

See 8.1 Notable Case Studies.