Law on Restart after Bankruptcy (bill WOVOF): What Does it Mean for Entrepreneurs?

The new Business Transition in Bankruptcy Act (WOVOF) will have a major impact on business restarts from bankruptcy. Whether you want to relaunch with your company out of bankruptcy, or you want to buy a business unit out of bankruptcy, in either case the impact of this new law is significant.

In this article, we explain what to expect and why it is important to be prepared for it in a timely manner.

What does the bill entail?

The bill WOVOF aims to protect the rights of employees in a relaunch after bankruptcy. The main change? If you take over a bankrupt company, you must offer all employees of that company an employment contract, and at the same terms of employment as they had with the previous employer.
This means:

• No “cherry picking”: you may not choose only the best or cheapest employees.
• No lower salaries or worse working conditions: the conditions remain identical to what the employees were used to.

No free choice in employees

An important aspect of the WOVOF is that, as a relauncher, you no longer have a free hand in whom you do or do not offer an employment contract. A reverse principle of redundancy applies: employees who would normally be the last to be laid off must be offered first.

Only in exceptional cases are you allowed to make your own selection, and even then this is only allowed for up to 10% of the employees.

Limited possibilities for deviation

However, there are some exceptions and opportunities to deviate from this principle:

1. Reorganization within 26 weeks: If you can prove that within six months after the relaunch there will be business economic reasons to reorganize, you may still waive taking over the employees. However, you must provide good justification for this.
2. Consultation with unions: If unions agree, you can make arrangements to adjust working conditions. However, the FNV has indicated that it is very reluctant to cooperate.
3. No labor-intensive sectors: For certain sectors, the bill may be less applicable. It will mainly be relevant to sectors where there is a high degree of labor intensity. In other words, where the labor force is an important element.

Why this bill?

The purpose of the bill is to prevent employees from becoming the brunt of a relaunch. In the current situation, restarts can often select only the “best” employees and leave others empty-handed. With the WOVOF, the government wants to create more balance between the interests of employees and the possibilities of entrepreneurs to revive a bankrupt company.

The implications for you as a business owner

The WOVOF means a significant change in restart practice. Whereas at present you still have a relatively large amount of freedom to determine how you proceed with a relaunch, you will soon be bound by strict rules regarding the takeover of personnel.

What can you do?

Are you planning to take over a bankrupt company, or do you expect to do so in the future? Then it is important to seek legal advice in time. First of all, you will need to determine what the relevant sector is and whether it is a labor-intensive activity. Next, it should be examined whether it is not likely that in the foreseeable future a reorganization will be necessary for economic reasons. With our expertise in labor law, corporate law and bankruptcy law, we are ready to support you in this complex matter. Contact Myrddin van Westendorp today for a no-obligation consultation.