In mid-July 2023, the bicycle manufacturer VanMoof was declared bankrupt. The company’s customers are now the victims: some have unrepaired bicycles, while others never received a bike. Many customers want their money back, but in bankruptcy, they are at the back of the queue as “ordinary creditors” for distributing funds. Erik de Kloe, Assistant Professor of Corporate Law and Insolvency Law at Erasmus School of Law, was a guest on Dr Kelder and Co program on NPO Radio 1. He discussed VanMoof’s bankruptcy and his research on the role of creditors in the bankruptcy process.
When a company stops paying its debts, the court can declare the company bankrupt at the request of the creditors or on its request. The liquidator is responsible for distributing the entire estate of the company and handling the bankruptcy further after the declaration of bankruptcy. During the distribution of the estate, the liquidator determines the lawful order in which creditors can claim their share. “The banks are right at the front,” De Kloe explains. “The tax authorities are also significant creditors. And yes, the smaller creditors have little say and generally get little money from a bankruptcy.” So, VanMoof’s customers will have to wait to see if they will get any of their money back.
Weighing of interests
De Kloe investigated the practical influence of creditors on the bankruptcy process: “I looked at how one can influence the settlement of the bankruptcy, and my conclusion is that this influence is quite limited.” The liquidator can handle a bankruptcy in various ways, says De Kloe: “For example, in the case of VanMoof, there may be different bidders who want to take over the company. Perhaps one bidder wants to pay more, but the other wants to take over more employees. The creditors are a significant interest that the liquidator must take into account, but in my opinion, and there is debate about this, the liquidator must also consider other interests, such as the interests of employees, customers, or in the case of a hospital bankruptcy, the interests of patients.”
Flash bankruptcy
What sometimes happens before an imminent bankruptcy is that preparations are made to handle the bankruptcy faster and more efficiently. De Kloe continues: “One of the things I also investigated is the pre-pack or the flash bankruptcy. In this case, the bankruptcy is actually prepared before the declaration of bankruptcy, and when the company or enterprise is declared bankrupt, the business is immediately sold, or the affairs are settled. For a hospital, this is a great way. If the hospital can be sold, you can immediately tell everyone that we have a restart and are just continuing. This way, you can also ensure a safe transfer of patients to other hospitals.”
From De Kloe’s research, two important recommendations follow: “Firstly, the liquidator should provide more and more timely information about the bankruptcy settlement. The second recommendation is that the liquidator should sit down with creditors and other parties involved in such a bankruptcy to bring those different interests to the table and discuss them.”
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Click here for the fragment of Dr Kelder and Co from NPO Radio 1 (in Dutch).