10.6 Abuse of insolvency proceedings

In the chapter on the sub area Abuse of insolvency proceedings (chapter 7), first of all a number of factors are named that put the interest and especially the scope of the phenomenon of abuse of insolvency proceedings into perspective:

Affected employees however have relatively extensive statutory instruments at their disposal to take legal action against abuse of insolvency proceedings, but it is necessary to carefully select the right route each time, especially now that in particular the action to set aside the issued bankruptcy order and to bring an action to the restarter and/or director/shareholder for acting wrongfully seem to be most likely to succeed.

The total range of possibilities creates a richly varied whole, in which the players involved (I refer to employees, legal assistance providers, trustees in bankruptcy/administrators and judges) opt for combinations of the different options, whether relevant or not. Although this leads to complications arising from numerous differences – both formal and material in nature – between labour law on the one hand and insolvency law on the other, given that these legal areas are often so badly attuned to each other, however at the same time the cases that lead to published and specifically in this chapter discussed judgments, rarely have unreasonable outcomes. The bold cases of abuse are singled out and in other cases employees see themselves, although it is painful, confronted with the misfortune other creditors also face when a company can no longer keep afloat. Apart from the tenet of abuse, generally this demands solutions, which I put forward in other chapters. With regard to abuse, I limit myself to the following recommendations.

Abuse of insolvency proceedings would – at least from the labour law point of view – become a superfluous tenet if the sting would be removed from the problem: by abandoning the rules of transfer of undertaking in case of bankruptcy of the employer. If the rules of transfer of undertaking are also declared applicable to bankruptcy (and, in other words, article 7:666 paragraph 1, opening words, and under a. of the Civil Code would be repealed), the employer that considers filing its own bankruptcy order for the purpose of reducing its workforce, would see his room to manoeuvre restricted in such a way, that it will no longer see the benefit of doing so.

However, as long as this is not the case yet, I recommend a less far-reaching change in legislation. In order to maintain the balance between, on the one hand, the appeal of a restart by a foreign transferee and, on the other hand, limiting the possibilities or benefits for an affiliated restart, I also argue that rules on seniority stipulate that years of service are prevented from transferring after a ‘foreign’ restart, but do transfer after an ‘affiliated’ restart, not least when it comes to the (calculation of the amount of the) transition payment. This could be done, among other things, by regulating that the restarter is considered a successive employer as defined in article 7:673 of the Civil Code (the transition payment) “if the ties between him and the bankrupt employer are such that the latter’s acquired insights in the employee’s capacity and suitability based on their experience with the employee, can reasonably also be attributed to the successive employer”. This inevitably raises the question whether it is advisable to do the same with regard to the definition of a successive employer in the 'Ragetlie-rule' and the provisions on succession of fixed-term employment contracts. I answer this question in the affirmative.

Furthermore, I do not consider it necessary to introduce new or other statutory rules. I do, however, argue for a more prominent role for the court in the assessment of a bankruptcy filed by the entrepreneur himself: a stricter admission system. The court may ask questions directly about recent, unsuccessful attempts to reduce personnel costs and about any plans for (the preparation of) a restart. The court can also check whether the works council has been consulted (which could even be heard by default). This way, the sore spot can often already be touched upon in the preliminary stage. If this becomes fixed policy, this does not necessarily have to result in an overload of the judiciary. It is conceivable that, among other things, when the applicants with what I would like to call a high potential for abuse are confronted with a (critical) questionnaire, they would voluntarily decide not to file for bankruptcy.

Finally, as long as article 7:666 of the Civil Code still exists, after bankruptcy both the delegated judge and the trustee in bankruptcy have a responsibility to examine the extent to which the restarter can be forced by agreement to use the regular selection criteria for the acquisition, or to restart.