The European Commission's Expert Group's 2003 final report entitled "Best Project on Restructuring, Bankruptcy, and a Fresh Start" states that the Netherlands has fully adopted 16, almost fully adopted 20, and partially adopted 5 of the World Bank's Principles and Guidelines for Effective Insolvency and Creditor Rights Systems. According to a 2005 PricewaterhouseCoopers (PWC) report, the Netherlands' current Bankruptcy Act provides for insolvency to be handled by either bankruptcy or moratorium, with the latter having been originally intended to serve as a rescue mechanism for insolvent but nonetheless potentially viable firms. The PWC report adds that, due to peculiarities of the Dutch legislative system, the moratorium has ceased to optimally serve its original purpose, and even where at least partial rescue is the intended outcome, bankruptcy is the more popular proceeding. A two-phase reform program has been introduced to address this and other shortcomings in Dutch insolvency law. According to the World Bank's "Doing Business" snapshot of closing a business in the Netherlands in 2008, it takes 1.1 years to close a business, at a cost of 4% of the insolvent firm's estate, with a return to the creditors averaging 86.7 cents on the dollar. This compares to the average situation for member states of the Organization for Economic Cooperation and Development, where it takes 1.3 years, costs 7.5% of the estate, and returns 74.1 cents on the dollar.

General Overview

According to the European Commission's Expert Group's 2003 final report on the "Best Project on Restructuring, Bankruptcy, and a Fresh Start" project, the Netherlands have fully adopted 16, almost fully adopted 20, and partially adopted 5 of the World Bank's 2001 Principles and Guidelines for effective Insolvency and Creditor Rights Systems. A 2005 report by PricewaterhouseCoopers (PWC) noted that the Netherlands' Bankruptcy Act governs insolvency proceedings. This Act was subject to a modernization initiative by the Dutch government in 1999. To begin, a proposed amendment to the act was submitted that encompassed noncontroversial changes to the original legislation. A second amendment was planned that would take on the more controversial aspects of the intended reforms. The Bankruptcy Act recognizes both bankruptcy and moratorium as possible formal proceedings for dealing with insolvent companies. One consideration motivating the reform of the Bankruptcy Act was to restore the moratorium option to its intended purpose: to enable the rescue of financially troubled firms.

The first Dutch Bankruptcy Act took effect in 1896, and has undergone several changes since then, according to the AKD Prinsen Van Wijmen 2002 report. Most recently, reforms have been inspired by the example of other European Union nations, which have made the rescue of troubled but still viable firms a high priority. The two-phase approach to this reform (noted above) was adopted in an attempt to expedite the reform process. According to the 2005 PWC report, the moratorium was a procedure whereby a debtor might attempt reorganization, find new financing, reach understandings with existing creditors, and otherwise continue in business. Successful employment of the moratorium procedure occurs only infrequently, and instead the process usually leads to formal bankruptcy. Conversely, according to the same report, the bankruptcy procedure has at times enabled the preservation of at least some viable portions of insolvent firms. Because of specific elements of Dutch bankruptcy legislation prior to the proposed reforms, the utility of the moratorium process is somewhat compromised, making the bankruptcy procedure the more attractive option, even in circumstances where the preservation of at least part of the business is desired. As a result, bankruptcy remains the principal insolvency procedure used in the Netherlands.

The PWC 2005 report asserts that both bankruptcy and moratorium are aimed to serve the interests of the creditors, but adds that the Dutch court system also views social considerations as being important, and in some cases may take precedence over the individual needs of creditors of an insolvent firm. The PWC report recognizes several shortcomings in the Dutch insolvency legislative regime. Specifically, there is a problem regarding the treatment of laid-off employees under the moratorium procedure. Also problematic is the right accorded to the tax authorities to foreclose third-party assets found on the premises of a debtor firm in some circumstances, which may interfere with the more desirable outcome of at least a partial rescue of the troubled firm.

As a member of the European Union (EU), the Dutch courts are subject to the provisions of Articles 16 and 17 of the EU Insolvency Regulation. Thus, Dutch courts extend recognition of insolvency proceedings filed in other EU member states (excluding Denmark). The 2005 PWC report also notes that insolvency proceedings filed in Aruba and the Dutch Antilles are recognized by Dutch courts as well. However, the Netherlands holds no other international insolvency agreements, and in the absence of a formal insolvency treaty with other countries, the Dutch courts have preferred not to recognize externally initiated insolvency proceedings.

The World Bank's "Doing Business" snapshot series surveys 178 countries on three aspects of closing a business: time required to complete the procedure (in years); cost of closing (expressed as a percentage of the debtor firm's assets); and return to creditors (in cents on the dollar). For the Netherlands, as of 2007, these figures are 1.1 years, 4%, and 86.7 cents on the dollar. For purposes of comparison, the average figures for member states of the Organization for Economic Cooperation and Development are 1.3 years, 7.5%, and 74.1 cents on the dollar.