What is the WHOA?

The WHOA is a legal framework that allows businesses in financial distress to reach a compulsory agreement with creditors to avoid bankruptcy. This agreement can force creditors to accept a debt restructuring, even if not all of them agree.

When does the WHOA apply?

• The business is facing financial difficulties but is not yet bankrupt.
• Debt restructuring is needed to ensure business continuity.
• A restructuring plan has been drafted and has sufficient support from creditors.

WHOA Procedure

1. Drafting the agreement – The business prepares a restructuring plan incl. valuations and presents it to creditors.
2. Submission to the court – The business requests court approval (homologation) of the plan.
3. Voting round – Creditors vote on the plan, requiring a two-thirds majority within a class.
4. Court homologation – The court assesses whether the plan is fair and reasonable and may approve the compulsory agreement.
5. Implementation of the agreement – Once approved, the plan becomes binding for all creditors.

Consequences of the WHOA

• Creditors may be forced to write off part of their claims.
• The business retains its operations and avoids bankruptcy.
• The plan may include debt-to-equity conversion, extended payment terms, or partial debt forgiveness.

Difference Between WHOA and Bankruptcy

• In bankruptcy, the business is liquidated, whereas the WHOA is designed to facilitate a turnaround.
• The WHOA gives creditors more influence over the outcome than in bankruptcy.
• A WHOA procedure can begin without court intervention, while bankruptcy is always court-declared.

The WHOA is a powerful tool for businesses that remain viable but are temporarily experiencing financial difficulties.