Restart with pre-pack: opportunities for the private limited company in the Netherlands

Financial problems can affect any company. For a limited liability company (BV) sliding toward bankruptcy, a pre-pack can be a valuable alternative. This special construction, based on the British model of pre-packaged administration, makes it possible to quietly prepare a quick restart.

Although the pre-pack does not yet have an explicit legal basis in the Netherlands, the method has been used in practice for years. It offers companies the opportunity to strategically restructure without immediate reputational damage.

What is a pre-pack and why is it used?

A pre-pack is a bankruptcy-oriented restructuring in which assets of a company are transferred to a third party – often a party affiliated with the original company – shortly after bankruptcy. What is unique is that preparations for this take place before the bankruptcy is declared. This gives the opportunity to retain the business (or parts of it) and limit debts.

This form of restart is usually chosen by the management of a limited liability company that expects to be unable to meet its obligations in the short term. By using the pre-pack, there is time to work quietly with a prospective trustee to make an asset transaction that can be completed immediately after bankruptcy.

How does the pre-pack procedure proceed in the Netherlands?

In practice, a request to appoint a prospective receiver is made to the court, without public announcement. This prospective receiver investigates whether a sale or relaunch within bankruptcy is possible. During this silent phase, the company retains full control; the prospective receiver may only act with the consent of the board.

The court usually appoints a receiver from an established list, with a limited period of time – usually between 11 and 15 days – to identify restructuring options. After this preparation period, the company files for bankruptcy. The trustee then reports to the court, after which – with the approval of the bankruptcy judge – the prepared asset transaction takes place.

Legal framework and developments

The legal basis for pre-packs has not yet been definitively settled. Nevertheless, many courts accept the use of this procedure. To clarify and protect the parties involved, the legislature is working on a formal legal embedding through the Continuity of Enterprises Act I (WCO I) bill.

There is also an important labor law issue: the transfer of undertaking. For a long time it was unclear whether staff in a pre-pack could claim the same rights as in a regular takeover. The Transfer of Undertaking in Bankruptcy Bill should eliminate this lack of clarity and clarify the position of employees in legal terms.

The advantages of a pre-pack for entrepreneurs

One of the biggest advantages of the pre-pack is the speed with which a restart can take place, immediately after the bankruptcy ruling. Because the transaction is prepared in advance and takes place quietly, damage to the company’s image is limited. This retention of trust among customers, suppliers and investors is often crucial to the survival of the company.

In addition, a pre-pack usually results in lower costs than a regular bankruptcy resolution and can be handled more efficiently, especially for companies with a strong brand name or valuable intellectual property.

Need legal advice about a pre-pack?

Do you doubt whether a pre-pack is suitable for your company? Or would you like to know more about the legal possibilities in the event of imminent bankruptcy? Our team of bankruptcy and corporate law specialists is ready to assist you. Feel free to contact one of our attorneys by email, phone or fill out the contact form for a tailored advice and a clear analysis of your situation. We are happy to think along with you.