Bankruptcy Act

TITLE 1 BANKRUPTCY

Chapter 7 Winding-up of the Liquidation Estate

Article 173 Entering into a state of insolvency
- 1. If no draft for a final arrangement with the creditors (composition) was offered at the verification meeting or if the offered draft for such a final arrangement (composition) has been rejected at that meeting, or if the judgment in which the court refuses to sanction such a final arrangement (composition) has become final and binding, the liquidation estate shall, by operation of law, enter into a state of insolvency.
- 2. Articles 98 and 100 will cease to apply when it has been established in accordance with the following Articles that the enterprise of the bankrupt debtor will not be continued or when the continuation of the enterprise has stopped.

Article 173a Proposal to continue the enterprise of the bankrupt debtor
- 1. If no draft for a final arrangement (composition) with the creditors has been offered at the verification meeting or if the offered draft for such a final arrangement (composition) has been rejected at that meeting, the liquidator ('curator') or a creditor who is present at that meeting may propose that the enterprise of the bankrupt shall be continued.
- 2. The creditors committee, if any, and, when the proposal meant in paragraph 1 has been made by a creditor, the liquidator ('curator'), shall give their opinion on such a proposal.
- 3. Upon the request of the liquidator ('curator') or of one of the creditors present at the meeting, the magistrate (''rechter-commissaris'') shall adjourn the discussion and decision on the proposal to a further meeting, which must take place within fourteen days.
- 4. The liquidator ('curator') shall, without delay, notify the creditors who were not present at the meeting of such later meeting by letter, in which also the proposal is revealed and the creditors are reminded of Article 114.
- 5. During this new meeting the claims which were submitted after the time provided in Article 108, under (1°), and which have not already been verified and admitted under Article 127, shall be verified and, where appropriate, admitted. The liquidator ('curator') shall act in respect of these claims in accordance with the provisions of Articles 111 up to and including 114.

Article 173b Acceptance of a proposal to continue the enterprise of the bankrupt debtor
- 1. The proposal referred to in the precious Article, will be accepted if creditors representing more than one-half of the admitted and provisionally admitted claims to which no pledge, mortgage or right of retention is attached, have voted in favour of the proposal.
- 2. In such event, and if there is no creditors committee, Article 75 shall apply accordingly.
- 3. The official record of the meeting shall list the names of the creditors present, the vote cast by each of them, the outcome of the voting and all that has occurred furthermore at the meeting.
- 4. The official record shall be available for public inspection free of charge at the office of the clerk of the court for eight days.

Article 173c Submission of the proposal to the magistrate; notification of the proposal
- 1. Within eight days after the judgment in which the court has irrevocably refused to sanction the final arrangement (composition), the liquidator ('curator') or a creditor may submit a proposal to the magistrate ('rechter-commissaris') to continue the enterprise of the bankrupt debtor; in such case, the magistrate ('rechter-commissaris') shall immediately order a creditors meeting at a date, time and place to be set by him with the purpose to discuss and to decide on the proposal.
- 2. The liquidator ('curator') shall notify the creditors no less than ten days prior to the meeting by letter, in which the proposal is revealed also and the creditors are reminded of Article 114.
- 3. Article 173a, paragraph 2 and 5 and Article 173b shall apply.

Article 173d Request made to the District Court for the acceptance or rejection of the proposal
The liquidator ('curator') and the creditors may request the District Court within eight days after the end of the meeting to proclaim that the proposal has been accepted or rejected after all, if the documents show that the magistrate ('rechter-commissaris') thought wrongly that the proposal was rejected or accepted.

Article 174 Magistrate orders to stop the continuation of the enterprise of the bankrupt debtor
- 1. Upon the request of a creditor or the liquidator ('curator'), the magistrate ('rechter-commissaris') may order that the continuation of the enterprise is to be stopped. The creditors committee, if any, and, when the request was made by a creditor, the liquidator, hall be heard in respect of such request.
- 2. The magistrate ('rechter-commissaris') may furthermore hear each creditor and the bankrupt debtor.

Article 175 Winding-up and realisation of assets of the liquidation estate
- 1. If no proposal for the continuation of the debtor’s enterprise has been made or if such a proposal has not been made in time or has been rejected, or if the continuation of the enterprise has stopped, then the liquidator ('curator') shall immediately start with the winding-up and realisation of all assets of the liquidation estate without requiring the consent or cooperation of the bankrupt debtor for doing so.
- 2. Nevertheless, the bankrupt debtor may keep the household effects which are pointed out for this purpose by the magistrate ('rechter-commissaris').
- 3. Even if the enterprise of the bankrupt debtor is continued, the assets of the liquidation estate that are not necessary for the continuation of that enterprise may be realised.

Article 176 Public or private sale under execution
- 1. The assets of the liquidation estate shall be sold either by public sale or, with the consent of the magistrate ('rechter-commissaris'), by private sale.
- 2. The liquidator ('curator') shall dispose of assets which cannot be wound-up quickly or which are not suitable to be wound-up at all; the way in which the liquidator ('curator') may dispose of such assets, must be approved by the magistrate ('rechter-commissaris').

Article 177 Making use of the services of the bankrupt debtor against payment
In the process of the winding-up the liquidator ('curator') may make use of the services of the bankrupt debtor against payment of a remuneration to be set by the magistrate ('rechter-commissaris').

Article 178 Convening a meeting with the creditors about the method of the winding-up
After the liquidation estate has entered into a state of insolvency, the magistrate ('rechter-commissaris') may convene a meeting with the creditors, to be set by him at a specific date, time and place, in order to discuss with them, if necessary, the way in which the liquidation estate has to be wound-up and, if necessary, to verify and admit claims which have been submitted after the time referred to in Article 108 under (1°) and which were not yet verified and admitted in accordance with Article 127. In respect of these claims the liquidator ('curator') shall act in accordance with the provisions of Articles 111 up to and including 114. No less than ten days prior to this meeting the liquidator ('curator') will sent a letter to the creditors in which he calls them to the meeting, and in which the subjects that will be considered (discussed) at that meeting are set out, reminding them also of Article 114.

Article 179 Distributions made to the admitted creditors
Whenever the magistrate ('rechter-commissaris') is of the opinion that there are sufficient funds available to make a distribution, he shall order that such a distribution is to be made to the admitted creditors.

Article 180 Distribution plan; percentage distributions
- 1. The liquidator ('curator') shall each time prepare a distribution plan and submit it to the magistrate ('rechter-commissaris') for his approval. The plan will contain an account of the revenues and expenditures, including the remuneration of the liquidator ('curator'), as well as the names of the creditors and the admitted amount of each claim together with the distribution to be received on it.
- 2. The percentage distributions set by the magistrate ('rechter-commissaris') for the unsecured creditors shall be specified. For preferred creditors who have not been paid in accordance with the provisions of Article 57 or 60, paragraph 3, and regardless whether their priority ranking (right of preference) is disputed, the amount for which they are secured shall be reserved from the sale proceeds of the assets to which their priority ranking (right of preference) relates. Where those sale proceeds are less than the total amount of the secured claim, the shortfall or, if the asset to which the claim relates has not yet been sold, the amount of the total claim, shall be reserved, always in the same percentage distribution as for the unsecured creditors.

Article 181 Reservation of percentage distributions for provisionally admitted claims
In the distribution plan the percentage distributions to be reserved for provisionally admitted claims shall be calculated by reference to the total amount of the claims.

Article 182 Imputation of the general costs of bankruptcy
- 1. The general costs of bankruptcy shall be divided over each part of the liquidation estate [i.e. in proportion to the amount which each creditor receives], with the exception of any part which, after a foreclosure (sale under execution) in accordance with Article 57 or Article 60, paragraph 3, second sentence, belongs to creditors whose claims are secured by a pledge, a mortgage or a right of retention or to persons who are entitled to a limited real property right or to lessees (tenants and agricultural lessees) whose rights have been expired or have ceased to exist due to the foreclosure (sale under execution), but including the amount paid to the liquidator ('curator') pursuant to such a foreclosure (sale under execution) for the benefit of a creditor who is ranked prior to one or more of the before mentioned creditors.
- 2. The exception referred to in the preceding paragraph shall also apply to aircraft sold by a creditor himself in accordance with the provisions of Article 59a.

Article 183 Publication of the distribution plan
- 1. After the distribution plan has been approved by the magistrate ('rechter-commissaris'), it shall be available for inspection by the creditors free of charge at the office of the clerk of the court for a period of ten days.
- 2. The liquidator ('curator') shall ensure that each of the admitted and provisionally admitted creditors is notified in writing that the distribution plan is deposited as described in the previous paragraph, with mention of the amount that is reserved for him.

Article 184 Objections raised against the deposited distribution plan
- 1. During the period referred to in the preceding Article, each creditor may raise an objection against the distribution plan by lodging a petition stating his reasoned objections at the office of the clerk of the court who shall issue a receipt to him.
- 2. The petition of objections shall be attached to the distribution plan.

Article 185 Hearing at the District Court in regard to raised objections
- 1. If an objection is raised as referred to in the previous Article, the magistrate ('rechter-commissaris') shall, immediately after the end of the inspection period, set the date on which it shall be heard in open court at the District Court. The order to this effect shall be available for public inspection free of charge at the office of the clerk of the court. The clerk of the court shall also give written notice thereof to the petitioners and to the liquidator ('curator'). The day set for the hearing may be no more than fourteen days after the end of the period referred to in Article 183.
- 2. On the set day, the magistrate ('rechter-commissaris') shall provide a written report at the hearing in open court, whereas the liquidator ('curator') and each of the creditors may submit, either in person or through a representative authorized by written procuration (proxy) or through an advocate (solicitor admitted to the Bar), grounds in defence of or against the distribution plan.
- 3. The District Court shall proclaim its well-substantiated court order on the same day or otherwise as soon as possible thereafter.

Article 186 Objections raised by a creditor whose claim is not (fully) admitted on account of his own inattentiveness
- 1. A creditor whose claim has not been submitted for verification and a creditor whose claim has been admitted for an insufficient amount, although this is done in accordance with his own submission, may also lodge a petition to raise an objection against the deposited distribution plan, provided always that he has submitted his claim or the not admitted part thereof to the liquidator ('curator') at least two days prior to the day on which the objections shall be heard in open court, and that a copy thereof is attached to the petition and that he requests the District Court in his petition to admit his claim after all (in full).
- 2. Verification shall then take place in accordance with Articles 119 and following at a hearing in open court where the petition is considered, and this before the start of that hearing.
- 3. If objections are only raised with the intention to be admitted as creditor and no other creditors have raised any objections against the distribution plan, then the cost of proceedings shall be borne by the inattentive creditor [he only lodged the petition because he had failed to submit his claim in time or for the full amount].

Article 187 Appeal in cassation; binding effect of the distribution plan
- 1. Within eight days after the District Court has rendered its court order on a petition as meant in the previous three Articles, the liquidator ('curator') and each creditor may file an appeal in cassation (appeal to the Supreme Court) against that court order.
- 2. This appeal in cassation must be made by a petition lodged at the office of the clerk of the Supreme Court. The presiding judge shall immediately set the date and time of the hearing, which must take place within twenty days. The clerk of the Supreme Court shall, without delay, notify the clerk of the District Court which rendered the court order on the raised objections.
- 3. The before mentioned appeal in cassation shall be heard in open court. The liquidator ('curator') and all creditors may participate in the hearing.
- 4. The distribution plan shall become binding upon expiry of the period meant in Article 183 or, if objections are raised against it, as soon as the court order on these objections has become final and binding.

Article 188 Effect of a transfer of registered property that is sold by the 'curator' under execution
- 1. When a registered asset is transferred on the basis of a public or private sale under execution made by the liquidator ('curator'), and the liquidator ('curator') has actually received the involved purchase price from the buyer, all mortgages established on that asset and all limited property rights that cannot be upheld (invoked) against all admitted creditors shall cease to exist.
- 2. Upon request, the magistrate ('rechter-commissaris') shall issue to the buyer a certificate which shows that these mortgages and limited property rights have ended. This certificate may be registered in the public registers for registered property, either at the time of the transfer or afterwards. It shall then authorise the keeper of the public registers to delete the relevant registrations.
- 3. Article 578 of the Code of Civil Procedure shall apply when the liquidator ('curator') sells under execution any ship that belongs to the liquidation estate.

Article 189 Distribution for provisionally admitted claims; distribution when a priority ranking is disputed
- 1. The amount reserved for a creditor whose claim has been provisionally admitted shall not be distributed as long as no decision has been made in respect of his claim. If the final result is that he has nothing to claim or that his claim is reduced, the funds which have been reserved for him shall be used, either in full or in part, for the benefit of the other creditors.
- 2. Distributions reserved for claims with regard to which the prior ranking (right of preference) is disputed and, to the extent that these exceed the percentage distributions on unsecured claims, shall be retained until a decision on the priority ranking (right of preference) has been taken.

Article 190 Already made distributions deducted from the amount of the sale proceeds secured by priority ranking
If any asset in relation to which a creditor upholds a priority ranking (right of preference), is sold after a distribution has been made to him pursuant to Article 179 in connection with the last part of Article 180, then the amount for which he is ranked with priority (has a right of preference) in regard of the sale proceeds of that asset, shall be distributed to him only after deduction of the percentage distributions which he already received on such amount.

Article 191 Claim admitted after the first distributions because it was not submitted in time
- 1. A creditor whose claim has been admitted after the first distributions were made, merely because he had failed to submit his claim in time, shall be paid in advance from the still available assets of the liquidation estate in proportion to the amounts already received by the other admitted creditors.
- 2. If a creditor as referred to in paragraph 1 maintains a priority ranking (right of preference), then he has lost this priority (preference) insofar as the sale proceeds of the asset to which his priority ranking (right of preference) relates, have been reserved already on an earlier made distribution plan for other creditors with a priority ranking (right of preference).

Article 192 Start of distribution payments
After expiry of the period for inspection meant in Article 183, or after the judgment on a petition to raise an objection against a deposited distribution plan, the liquidator ('curator') must, without delay, start the distribution of the amounts set for this purpose. Amounts not distributed within one month thereafter and amounts reserved pursuant to Article 189 shall be deposited in custody in the manner required by law.

Article 193 End of the bankruptcy when the final distribution plan has become binding
- 1. As soon as the admitted creditors have received the full amount of their claims or as soon as the final distribution plan has become binding, the bankruptcy shall end, except for what is provided in Article194. The liquidator ('curator') shall make an announcement of the end of the bankruptcy in accordance with Article 14.
- 2. One month after the bankruptcy has ended, the liquidator ('curator') shall render account for his administration to the magistrate ('rechter-commissaris').
- 3. Any books and documents which the liquidator ('curator') has found in the liquidation estate shall be surrendered by him to the debtor against issuance of a proper receipt.

Article 194 Amounts becoming available for distribution after the final distribution was made
If amounts have been reserved pursuant to Article 189 and, after the final distribution is made, it becomes clear that these amounts can be distributed to other creditors than the one for which they were reserved, or if, after the final distribution was made, it appears that there are still assets of the liquidation estate available which were unknown at the time of the winding up, the District Court shall order the liquidator ('curator') to proceed with the winding up and distribution of the available funds on the basis of earlier made distribution plans.