Profitable yet facing insolvency? The WHOA is your lifeline.

It is the paradox of our time: your business is performing well operationally, turnover is rising, yet the burden of the past — COVID debts, deferred taxes and accumulated rent arrears — is dragging you towards the abyss.

In my practice, I encounter many business owners whose companies are fundamentally sound. They have a positive operating result, but their liquidity is entirely consumed by repayments on legacy debts. Without intervention, insolvency looms. But insolvency is pure capital destruction: inventory fetches nothing at auction, staff are made redundant and creditors receive nothing.

Fortunately, since 2021 there has been a powerful instrument: the Act on Court Confirmation of Extrajudicial Restructuring Plans (WHOA).

The Solution: A Court-Approved Composition

The WHOA allows you to restructure your debts without insolvency. You offer your creditors a composition: they receive a percentage of their claim (for example 20% or 40%) paid out immediately, in exchange for full and final settlement of the remainder.

What makes the WHOA unique is that you do not need all creditors on board. If a majority agrees, the court can 'homologate' (approve) the plan. This compels dissenting creditors — and even preferential creditors such as the Tax Authorities — to participate.

The Cooling-Off Period: Creating Breathing Space

Often the situation is urgent. The Tax Authorities are threatening to seize assets or the bank wants to call in the credit facility. In that case, we initiate the WHOA procedure by filing a Declaration of Intent with the court.

Immediately afterwards, we petition the court to impose a cooling-off period. During this period (typically four months), creditors may not:

• Seize your inventory or bank accounts;
• File for your insolvency;
• Terminate ongoing contracts solely on the basis of pre-existing debts.

This gives us the necessary calm to prepare the restructuring, while your business continues to operate and generate value.

The Calculation: Reorganisation vs. Liquidation

To convince the court, we prepare a comparison. What would creditors receive in insolvency? Often the liquidation value is nil, because the Tax Authorities and the bank absorb everything.

Against this we set the reorganisation value: the value of the business as a going concern. We demonstrate that creditors are better off under the WHOA than in insolvency. This is known as the 'best interest of creditors' test.

Delay is not an option

The biggest mistake business owners make is waiting too long. Once the Tax Authorities proceed to enforcement, it is often too late. The WHOA is a complex process requiring preparation: liquidity forecasts, creditor class divisions and valuations must all be accurate.

If you have a sound core business but an ailing balance sheet, restructuring is both your right and your duty towards your employees and stakeholders.