WHOA (Act on the Confirmation of Private Restructuring Plans) Reorganisation Agreement
The Act on the Confirmation of Private Restructuring Plans (WHOA) enables companies, that are at risk of bankruptcy, to impose a compulsory settlement on their creditors and shareholders. The aim of this agreement is to bring about a reduction in debt. The WHOA includes additional measures which enable the establishment of this agreement. Important aspects are the cooling-off period and the option to inject capital into the company, for which security is provided by the company.
Financial support is required during a WHOA process
Apart from legal aspects, economic and financial matters also play a role in the WHOA, including matters relating to the assessment of a company’s viability, the question whether the operational activities are profitable, how much ‘new’ money is required to continue the activities, the scope of the damage as a result of the cancellation of contracts, which financial, legal and operational information will have to be made available to the parties concerned and what the expected return will be of the different categories in the new capital structure, and what form this new capital structure will take. In addition, two values of the relevant company play an important role – the value in the situation of liquidation (liquidation value) and the value in the situation in which the debt burden is reorganised (reorganisation value).
Hermes Advisory has done a lot of preliminary work, in order to be able to effectively support companies, especially now. This support can already start during the preparatory phase prior to negotiations, before the parties concerned are approached and a formal WHOA process is started.
“Although we understand better than anyone that every company and every situation is unique, we have tried to automate (where possible) the WHOA reports that are required, which allows us, especially now, to assist companies in a practical and cost-effective manner”.
In our reports, we focus on the required elements, such as:
- assessment of the company’s viability*
- assessment of the impending insolvency*
- assessment of the required capital injection
- establishing the consequences of changes to, or termination of, reciprocal agreements
- drafting the liquidation value*
- drafting the reorganisation value*
- drafting an indicative new capital structure
- accompanied by the consequences of the restructuring for the parties concerned*
*required for a formal WHOA process
“Our team consists of chartered business valuators and chartered accountants, who are listed in the national register of court experts, and staff who previously worked in financial restructuring and recovery. We speak the language of capital providers and insolvency lawyers and we are powerful sparring partners in WHOA processes.”
From preparing to negotiating, to a formal WHOA process
The WHOA allows the agreement to ultimately be ratified (approved) by the court. However, it is unlikely to come to this. It is anticipated that the WHOA will more likely be used as a means of coercion in negotiations between the different parties concerned and that the court should only be involved as a last resort. Companies would be wise to draw up a financial plan during the phase prior to negotiations, that includes the financial need, the required capital, an insight into the liquidation value, reorganisation and the required measures. If the negotiations do not lead to the required result, a formal WHOA procedure can be started.
Expert Opinions for the purpose of a WHOA process
During the negotiations, or during a formal WHOA procedure, certain financial aspects may come up for discussion between the parties. For example, when assessing whether there is impending insolvency of a company (which is a requirement to enter a WHOA process), or the outcome of the reorganisation value (as a result of which a party concerned is or is not entitled to a portion of the value). In such cases, we at Hermes Advisory provide support in the preparation of expert opinions.