Restart of a company

Restart of a company

Restart after bankruptcy

If a company has payment problems, and it seems that the tide cannot be turned, sometimes an attempt is made to save the business activities with a so-called restart. The company is first, at the request of the shareholders or otherwise, declared bankrupt. The court then appoints a trustee who has to liquidate (wind up) the assets and divide the generated yield among the creditors. The shareholders, the board of management and/or third parties that want to implement a restart, offer the trustee a purchase price for the assets they need for a restart. It is mostly essential, in any case, to obtain the goodwill, such as the customer database, the intellectual property rights, but also, for example, orders not yet carried out. These assets in fact form the essence of the company. Other assets required for a successful restart can be the inventory and stock.

Dutch lawyer about restart

Often there is a so-called prearranged restart plan. This means that the restart was extensively prepared before bankruptcy was declared. In such a case, the trustee receives a bid on the required assets shortly after bankruptcy was declared, often with adequate substantiation. Such substantiation can be given, for example, based on a valuation report or a business assessment drawn up by an accountant. Such reports are often not submitted for companies of relatively low value. If the trustee estimates that acceptance of the offer received brings higher yields than when the assets are sold separately (by public auction or otherwise), he will be inclined to accept the offer. After all, his duty is to cash in the assets of the company as advantageously as possible.

Goodwill, stock and inventory

Mostly, the added value of a restart is in the value of the goodwill. This is, after all, the only asset that cannot be sold if no party is interested in taking over the business activities. Where there is no question of a restart, the trustee shall sell the inventory and the stock by public auction. Sometimes items are sold privately if this gives a higher yield.

Assets transaction with trustee

If there is restart due to bankruptcy, the assets are purchased with an assets transaction of the trustee. This means that the assets, against payment of the purchase price, are transferred from the bankrupt legal entity to another legal entity. The debts will remain with the bankrupt legal entity and creditors, in principle, cannot recover the debts from the restarting party.

The employees of the bankrupt company

An additional advantage of rationalization by restart is that there is no obligation to take over all the employees. The choice can be made to only offer an employment contract to those employees for whom there is a place. This option is possible because the legal stipulation that all rights and obligations of the employees are transferred to the acquiring company when a company is taken over, does not apply to bankruptcy situations.

Contracts not automatically transferred

Also, other contracts than employment contracts are not automatically transferred to the acquirer in restarts after bankruptcy. The advantage is that the acquirer himself can determine which contracts he might want to take over. He will have to review carefully what the consequences of taking over the contract are. In a contract takeover, all rights and obligations connected to the contract are transferred to the new contracting party, so including possible debts.

Dutch law firm AMS: specialist in restart

It is clear that to make a successful restart, many issues have to be addressed. We would advise you to ask for the advice of an insolvency law specialist at an early stage. The Dutch insolvency lawyers of Dutch law firm AMS in Amsterdam have a great deal of experience in this area. As they are often appointed as trustees in bankruptcy, they can well advise you on a possible restart.