Since the beginning of this year, the Act on the Liquidation of Undertakings has been in force and that is just in time for companies that are fundamentally sound but have to take a temporary liquidity bump. Many companies will be directly or indirectly affected by (the measures around) COVID-19. They may have made use of the possibility of deferring payment of taxes, deferring payment of interest and redemptions or other creditors. Obviously, these obligations must be met at some point, but will they be?
JBR Corporate Finance has recently been involved in a WHOA proceeding as counsel to a large company affected by COVID-19 measures, including a mandatory closure during lockdown periods, and thus has gained extensive experience with the proceeding.
The WHOA allows companies to offer their creditors and possibly also their shareholders a private settlement that will structurally reduce their debts, defer obligations or change certain rights.
In order to go through such a procedure, the company must file a statement with the court stating that it is in the process of preparing a settlement. A public or closed procedure can be chosen, whereby in most cases the first option will be the best in order to maintain internal and external peace. Support by a lawyer is required as well as the appointment of a restructuring expert.
Without going into all the legal and procedural aspects, we will discuss a number of important elements.
Our conclusion is that the WHOA is an excellent tool for improving the prospects of a troubled company relatively quickly.
* This article is intended only as an outline of the possibilities offered by the WHOA.