The WHOA (Homologation Private Agreement Act) is intended as a reorganization tool where each of the creditors is better off than in a bankruptcy situation and thus a business (and thus value) can be preserved.
Of course, a WHOA process must follow a (large) number of rules in which lawyers can assist a business owner. An independent reorganization expert and perhaps a spectator will also need to be hired to manage the entire process.
But what does it come down to in practice?
In order to properly complete a WHOA process, two scenarios must be contrasted, including a solid rationale:
- What does each of those involved receive after a reorganization, and what then is the value of the company?
- What would each of those involved receive if the company went into bankruptcy?
The first question will involve looking at where there will be some remediation, what capital is available and how it could be distributed. Many lawyers, business consultants and accountants are looking into this, and relatively much is still unclear due to the lack of case law and practical experience. Moreover, it will turn out that a lot will be theoretically estimated here and will probably lead to a lot of discussion cq lawsuits.
The other scenario, bankruptcy of the company, is a dark path for many but where more definite milestones can be found, provided the right advisors are engaged. With the right knowledge and experience, the expected proceeds in bankruptcy, the associated costs, and the distribution of net proceeds can be predicted with reasonable accuracy.
For the success of a WHOA process, the lower limit is a sound and substantiated bankruptcy scenario set against a reorganization plan that shows that creditors are better off.
To prevent the discussion from already starting at the lower limit (the bankruptcy scenario), it is advisable to hire an experience consultant for this purpose.
Since its foundation in 1904, the Nederlands Taxatie- en Advies Bureau (NTAB) has been assisting banks and receivers in (imminent) bankruptcies and has knowledge, expertise, experience and an extensive database which allows the lower limit to be mapped with a probability bordering on certainty. In addition – and because of its independence – a report from the NTAB is widely accepted and recognized within the financial and legal community.
The NTAB is also familiar with all professional parties in the restructuring world and through that network is perfectly capable of partnering with all parties for just the part of its own expertise.
