Insolvency not all-powerfull

SMART Advocaten regularly receives calls from people dealing with a trustee appointed in an insolvency situation (known in Dutch as a “curator”). From suppliers who have received money from an insolvent company, but also from people who have gone bankrupt or whose company has gone into insolvency and who are concerned that things (i.e. the remaining property) could be managed better.

Contrary to what is often supposed, a trustee in insolvency does not have free rein. He is under the supervision of a supervisory judge (“Rechter-Commissaris”) and before taking important decisions he requires the consent of that supervisory judge, a judge of the court that appointed the trustee.

Creditors and insolvent individuals or companies can, if a trustee refuses to listen to reason, submit an application to the supervisory judge asking for him to order the trustee to take or refrain from taking a particular action. Article 69 of the Dutch Insolvency Act provides that the supervisory judge must issue a decision within three days, after giving the trustee a hearing. If the trustee takes an unreasonable or sloppy approach, such an application may be granted. You should, however, be aware that a trustee has a certain amount of discretion. This means that the supervisory judge will not assess the fine details of whether a decision by the trustee that he considers understandable could have been marginally improved.

A further safeguard of the exercise of care by a trustee is contained in Article 68 of the Insolvency Act, which provides that the trustee must obtain consent from the supervisory judge in certain circumstances including if the trustee wishes to commence legal proceedings, if he decides to satisfy obligations towards a specific creditor, if he terminates a tenancy agreement, if he dismisses staff or if he wishes to satisfy obligations of the insolvent individual or company because a third party holds a pledge or mortgage and the trustee wishes thereby to ensure that the pledge or mortgage ceases to apply.

If a trustee carries out such a legal action without obtaining the required consent, the legal action is still valid (under Article 72 of the Insolvency Act) but the trustee is liable to the insolvent individual or company and the creditors to the extent that they are disadvantaged by the legal action in question. The only situation where this does not apply is with respect to the termination of employment contracts: if the necessary authorisation has not been obtained then any such termination is voidable. This right must be exercised within 5 days after the notice to terminate has been given.

Any decision of the supervisory judge may also be appealed before the district court within 5 days, calculated from the day on which the supervisory judge issued the decision. An exception to this rule is that an appeal against an authorisation for the termination of an employment contract by the trustee may be made within a period of 5 days calculated from the day on which the person submitting the appeal was in a position to know about the authorisation. In many cases, this period will run from the date on which he was in a position to know about the termination of the employment contract.