ECLI:NL:RBOVE:2024:2031
Filing for one’s own bankruptcy in order to sidestep an employee’s statutory dismissal protection is a classic case of abuse of insolvency law. The District Court Overijssel recently ruled on exactly this.
Facts
The employer and employee were negotiating the termination of the employee’s contract. The employer broke off the negotiations on 25 March 2024 without reaching a settlement. On 26 March 2024, the employer’s general meeting of shareholders resolved to file for its own bankruptcy. Two days later, on 28 March 2024, the bankruptcy petition was filed, and the court declared the employer bankrupt.
Employee’s position
The employee sought to have the bankruptcy order set aside. He argued that the employer was not actually in a position where it had stopped paying its debts, pointing to positive business results in recent years and payments still being made. In his view, the company was, in any event, not beyond saving. He further argued that even if the employer had reached the point of having stopped paying its debts, the decision to file for bankruptcy at that particular moment could not be explained other than as abuse of rights. Indicators of such abuse included: the employer filing for its own bankruptcy, contradictory statements about its financial position, and a restart plan already being in place at the moment bankruptcy was declared.
Employer’s position
The employer argued that it had in fact been in a position of having stopped paying its debts for some time. It had, however, been financially supported by a holding company (its sole shareholder), which allowed it to keep going for as long as it did. The employer also argued that filing for its own bankruptcy in this case was not done to abuse insolvency law, but because it genuinely found itself unable to keep paying its debts.
Trustee’s position
The bankruptcy trustee referred to a report dated 8 April 2023, showing the employer’s liquidity balance at EUR 0 and confirming it had been running at a loss for several years. The trustee also confirmed the indispensable financial support from the holding company.
Ruling
The court held that most of the debts consisted of intra-group debts, and that external creditors could be paid from the available bank balance. The employer was therefore not in a position of having stopped paying its debts. Even if it had been, the court found that the employer had abused its right to file for its own bankruptcy, since the primary purpose of doing so was to terminate an employee’s employment contract.
Click here for the full ruling (in Dutch).
Do you have questions about employment protection in the context of bankruptcy? Please feel free to contact our employment lawyers.
