Eight tips to assist a trustee

On June 5, the Supreme Court issued a ruling from which we can all learn lessons again. If you as a creditor have a claim, which you fear you will have to write off, because of the debtor's bankruptcy, you can try for your own success to hold the director liable, but you can also ask the trustee to do so. I list eight tips, but I start with the case itself.

The case: trustee does not tackle director

A trustee in bankruptcy sees that the director of the bankrupt BV has not published the financial statements. There are also other question marks about the policy pursued by the director. The trustee investigates the possibilities of taking recourse against the director of the bankrupt BV. The outcome of that investigation is (apparently) that the trustee does not consider it expedient to hold the director liable.

The trustee's assessment is (apparently) such, that the possible benefits from litigation do not outweigh the costs thereof, in relation to the good and bad chances of the proceedings to be instituted against the director. Therefore, the trustee decides to submit the bankruptcy for dissolution for lack of assets.

So far, nothing out of the ordinary. This happens almost daily, I would estimate. Even I, when I act as trustee, occasionally have to "let a director walk" despite the fact that he or she has acted (in my view) culpably. Simply because a won proceeding will only turn out to be a nice legal, as well as a Pyrrhic, victory. The director of the bankrupt BV cannot pay the claim. He or she cannot comply with the judgment. No payment is made (or less than the costs of the proceedings were) and so the creditors have actually gained nothing at all!

After the trustee in this case nominated the bankruptcy for dissolution, the bankruptcy judge forwarded that nomination to the court. The court indeed decided to dissolve the bankruptcy for lack of assets. The director escapes. Some creditors did not agree and requested (successively) the Court of Appeal and the Supreme Court to undo the dissolution of the bankruptcy, but were twice refused. The bankruptcy remains terminated and the director definitively escapes.

Eight tips to assist a trustee

If, as a creditor, you want the trustee to sue a director for apparent mismanagement or other culpable actions, you can do a number of things:

1. Enter into the conversation with the trustee. An open door, yet it is not often stepped through. A (good) trustee's door is always open to creditors. Do you want to tell your story to the trustee? What blame do you place on the director? Call or email the trustee and ask for an appointment. A preliminary meeting with your own lawyer to put the accusations in a legal container beforehand can speed up the case.
   
2. You can apply to the trustee to invoke the Trustee's Guarantee Scheme under which the trustee can get a further recovery investigation and a further legality investigation funded by the Ministry of Justice.
   
3. You can ask the trustee to contact the IRS and FIOD to ask if there is any relevant information there.
   
4. You can point out to the trustee the possibility of litigation financing through the free market. There are several parties active in the Netherlands that finance proceedings. I know them and have worked with process financiers on several occasions. It can also be a good solution for the trustee.
   
5. You can also make your own loan to the estate to conduct recourse or liability investigations. Make good arrangements for that, of course, so that if the outcome is good, you will be the first to be repaid for that loan, with an interest rate that properly reflects the risk of not being repaid on the loan.
   
6. Report to the bankruptcy judge. If the previous steps are unsuccessful, you can turn to the bankruptcy judge, who oversees the trustee's handling of the bankruptcy. The bankruptcy judge can order the trustee to take certain actions. In cases like this, the bankruptcy judge may also invite the creditor and the trustee to a meeting. Why does the creditor think the director should be addressed? And why does the trustee think not? Or why does the receiver think that is not appropriate? Why doesn't the trustee apply for a guarantee scheme from the Ministry of Justice to deal with the (alleged) bankruptcy fraud ?
   
7. You can request the creation of a creditors' committee. Such committees are not often established, but it can still be a useful tool. A major drawback is that individual creditors often have very little information about their debtor, or the course of events. But many creditors together know much more than an individual creditor. The creditors' committee can gather information to help the trustee, but the creditors' committee can also provide guidance to the trustee. Especially in a bankruptcy with many relatively smaller creditors, a creditors' committee can be useful. Think of ponsi-like bankruptcies, bankruptcies of (internet) fraudsters, of pyramid fraud or investment fraud.
   
8. Finally, a rather rigorous step is to ask the court to dismiss the trustee in question and have another trustee appointed. For me personally, that is a last resort and is also only applied in exceptional situations. Nevertheless, it too may be worth considering, especially if you fear particular bias on the part of the trustee or contrary interests of the trustee.

The alternative: still tackle the driver himself

In this earlier blog, I also gave some tips on how to adjust a trustee. But also on how you can tackle the administrator yourself. That has the advantage that you are much more in control. It has the disadvantage that you bear the costs yourself (unless you choose litigation funding). The biggest advantage is, that if you win the case and recover taken, you do not (in principle) have to share the proceeds with the trustee or other creditors. Would you like to discuss the chances of such a case? In an hour or so of sparring about what happened, I can give you a probability estimate!

Would you like to see a trustee adjusted or address a director yourself? Do you have questions about the options? Feel free to contact me.