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Friday, 11 July 2014

About bankruptcy filings, silent receivership and lightning-fast second beginnings: in recent Dutch, high-profile bankruptcy cases some things and situations had “a funny smell and flavour”

Since about a year, it has become more common legal practice in The Netherlands to appoint a silent receiver at the time when a bankruptcy seems imminent for a company, but is not yet reality. This happens instead of the old situation, in which a receiver was only appointed when the bankruptcy case had already been filed.

The advantages of silent receivership before the actual bankruptcy seem enormous: 
  • A bankruptcy is traditionally a public relations nightmare for companies in dire straits, as customers, money-lenders and suppliers immediately lose their faith in the company and try to recollect as much from their assets as possible;
  • Candidate customers and common people are shied away by the uncertain ending of a bankruptcy filing, without a clear Plan B;
  • The silent receiver can start the preparations for a second beginning in relative silence, while keeping a low profile: nobody is aware yet of the possible bankruptcy in the first place;
  • Possible takeover candidates can be approached without the public eye watching, which makes the negotiations easier for all involved parties;
  • The second beginning can start very quickly and with the least amount of damage done for all involved parties. Especially suppliers can maintain hope of getting most of their money back, in this situation: possibly without being subordinated to the Dutch Internal Revenue Services and the banks first;
  • Theoretically, the personnel has a better chance to keep their job, when the bankruptcy runs swiftly and follow-up possibilities are ‘just around the corner’. 

To the naked eye, such a silent receivership looks like the proverbial win-win situation: many winners and hardly any losers. During the last few weeks, however, there have been a number of high profile bankruptcy cases and lightning-fast second beginnings, which might shed not such a favourable light at the silent receivership.

The following story comes from Het Financieele Dagblad (

The bankruptcy filing of day nursery company Estro, in which a silent receiver has been used who enabled a swift second beginning, seems the result of a cautiously planned operation.

Well over a month before the bankruptcy filing on July 5, the executive management of Estro moved the headoffice from Amersfoort (in the middle of The Netherlands) to Amsterdam: at least on paper. This was disclosed by FD research.

Due to this ‘paper relocation’, the day nursery company circumvented the jurisdiction of ‘hostile’ court Midden-Nederland, to which the organization earlier belonged.

The company moved to Amsterdam, where the court had showed a positive stance against the appointment of a silent receiver in recent years. The organization preferred a ‘controlled’ bankruptcy, according to two insiders, who speak on basis of anonymity. A silent receiver speaks with all stakeholders about a possible second beginning of a company, before the actual bankruptcy has taken place.

From the data, which have been deposited at the Chamber of Commerce, it becomes clear that – on 3 June 2014 –  the day nursery company changed the regulations of the company at a public notary. The statutory seat became Amsterdam, instead of Amersfoort.

Estro made a swift second beginning eventually, in which the British Smallsteps company maintained 250 of 350 day nurseries. The last owner was the famous American venture capital company KKR. The followed procedure has not been undisputed. At least two major day nursery companies, Partou and SWK Group, had been interested in an integral or partial takeover of Estro. They feel being put offside during the process.

To the naked eye, this looks at least like a second beginning under less-than-optimal circumstances, as seemingly not all possibilities to save / sell (jobs at) the day nursery branches have been tried.

Besides that, the website Das Kapital – where one of my appreciated twitter buddies Joost van Kuppeveld does his magic – came with a story, containing additional information about this bankruptcy:

In the press release we read that HIG Europe is ‘the largest investor in Smallsteps’. And indeed, on July 1st, H.I.G. Capital made a request at the [Dutch]  Authority Financial Markets (AFM) to take over Estro, through its subsidiary European Capital Partners LLP.


And there is something more: Estro was for 75% owned by the private equity funds Bayside Capital and KKR. Remarkable is that Bayside Capital and HIG Capital Europe belong to the same parent company: HIG Capital, a private equity company with $15 billion 'capital under management'. When we combine this with the statements of Partou and SWK that both companies ‘were willing to pay more for the takeover of Estro’, we get a feeling that this operation was only a means to get rid of personnel and poorly operating branches, but maintain the company within HIG Capital.

This does not sound good indeed…

While this was a relative bread-and-butter case of a bankruptcy, in which the majority of personnel members fortunately kept their job [which absolutely does not mean that I try to downplay the situation for everybody who lost his / her job at Estro – EL], there has been a seemingly even ‘nastier’ bankruptcy a few weeks ago.

The Dutch/Belgian online shop [not acquainted to the equally named traveling organization, part of Thomas Cook International - EL] made a ‘flash crash’ on June 24th 2014, only to restart one-and-a-half hour later.

When the smoke lifted, 237 people in Belgium and The Netherlands had lost their job, while the whole executive management – most of them being also key personnel members of private equity company ‘Axivate’, which took over the Dutch/Belgian ‘’ online store in 2012  kept theirs.

Their story was that Axivate couldn’t keep ‘’ afloat, in spite of the ‘millions and millions of Euros’ that it allegedly invested in the online shop. 

This was the reason that they had to fire the vast majority of the fixed personnel of and subsequently restart the company with 15 hands personnel only and services, that would be rendered by external suppliers from the online business.

A Belgian labour union representative, Bart Leybaert of labour union ‘BBTK’, did not buy this story of at all and approached the Dutch media. The following news item came from BNR News Radio, a few weeks ago:

The executive management of intentionally bankrupted the company and prepared this bankruptcy maticulously. This is stated by the Belgian labour union BBTK.

According to Bart Leybaert of the Belgian BBTK labour union, there is circumstantial evidence for this statement. “Very visible to the objective eye and – as a matter of fact – a smack in the face for the dismissed personnel: hardly one day after the bankruptcy filing at the Court of Justice in Breda, the new website has been put online. We all know that the creation of a professional website takes more than one day”.

Other reasons for distrust, according to Leybaert, were the separation (in advance) of good and poor credit, the handover of trustworthy customers to a subsidiary of Neckermann and the fact that the whole executive management has remained in position after the bankruptcy.

Leybaert is handling the interests of the Belgian employees, who have been fired. The onlineshop has been declared bankrupt on Tuesday. Only a few hours after the bankruptcy, an agreement was reached about a second beginning for the company, in a drastically reduced format. The labour union wants the curator of the bankruptcy to start an investigation into possible fraud.

Andreas Ezinga, the managing director of and one of the partners in private equity company Axivate, which owned (and still owns) at the time of the bankruptcy, frantically denied the accusations of Bart Leybaert:

‘This is of course a scandalous remark and not based on any fact whatsoever. Of course it is very sad for all the people involved. A large share of the employment disappears, so I can actually imagine that there is sadness, anger and annoyance.

And with respect to the quick deployment of the new website: we had a so-called pre-pack, which means that one has a few days to look with the silent receiver at the possibilities [ for a second beginning – EL]. This means that the website has not been built within 24 hours. And we are very experienced with internet companies, which means that we have the expertise to deploy such a website very quickly’.

That same day I have made personal contact with Bart Leybaert of Belgian labour union BBTK, out of curiosity. Although Bart did not present a real ‘smoking gun’ of bankruptcy fraud yet, he gave me some additional information about the case. He collected this information at his Belgian union members among the 237 personnel members of

In bullets, his findings were:
  • The same people that formed the management before the bankruptcy, form the new management after the event;
  • Good credits have been transferred to Vesting Finance, in the weeks before the bankruptcy (a Dutch factoring company);
  • Bad credits remained at Neofin, a Dutch/Belgian subsidiary operating under Belgian law;
  • The customer database, which generally yields most money for an online shop, has been transferred to private equity company Axivate. This was disclosed by the privacy disclaimer of the old website (which is not visible anymore);
  • Hardly one day after the official bankruptcy, the new website was ready;
  • The stock of Neckermann has been sold – presumably to Axivate – at a ‘token’ price;
  • The acquiring party of has been founded on 19 May 2014, which means that this Nemo webshop itself does not have any provable experience in online sales;
  • Axivate is planning to maintain the website with only 15 people and a few commercial service suppliers, where earlier 237 people had been involved.

I checked the statements of Bart Leybaert as thoroughly as I could and I found that is held by a host of private limited companies: all at the same address of a small company building in Amsterdam (where also Axivate itself is established) and all part of either Axivate itself or the holdings behind Axivate.

Some of these private limiteds – especially the online store ‘Nemo Webshop’, which ‘took over’ – have indeed been founded only weeks before the bankruptcy of took place: in case of Nemo webshop, this was the earlier mentioned 19 May 2014. I cannot say that this is unusual or even suspicious, but it is at least remarkable.

What is also remarkable – in my humble opinion – is trying to run a large online store with only 15 personel members, where earlier almost 240 personnel members had been involved. One of my past jobs was at an logistical company, in which I cooperated with people from the departments Purchases, Sales, Warehouse and Bookkeeping. 

This job learned me that it is impossible to host a large online shop with 15 man, unless you outsource everything to third parties and just maintain the ‘façade’ of the shop, as an empty shell. This is more or less confirmed in the story by Sprout (see the aforementioned hyperlink).

And there is more: as some of my readers might know, I am a professional software tester with more than 16 years of working experience. So what I can say something about with even more authority, is the corporate website of, which was deployed one day after the bankruptcy.

I checked out this website on the 26th of June and I agreed with Bart Leybaert that it is nearly impossible to develop such a website in a day (see first red and bold text). Even in a week – assuming that the management of Axivate/Neckermann had a little more leeway, due to the silent receiver working within the company –  it would be quite a challenge to develop it (see second red and bold text).

However, what is even bothering me more is that the fact that now – more than two weeks after the bankruptcy declaration on 24 June 2014 and my initial check of the website on June 26th – the website of still looks clumsy and unattractive: not the website of a commercial juggernaut, but rather of a ‘mom-and-pop store’ going online for the first time.

More items are now on display at the website, but for instance the ‘shipping information’ is still under construction, as-of today.  

To me this:
  • a. proves that it is indeed impossible to build / finish such a website within one week as Bart Leybaert already stated in his interview with BNR and – especially bothering to me –
  • b. I have a sneaky suspicision that is treated as ‘an old soldier’, who does not die, but silently fades away.

The Dutch expression for this situation  is ‘sterfhuisconstructie’: the healthy parts of a company are sold or traded and the unhealthy parts are left ‘in the company’ to die in silence. Of course, I can be mistaken, but it surely looks like that.

This brings me to the conclusion of this article: a silent receivership can be a blessing indeed for companies, which are intrinsically healthy, but went through a considerable amount of tough breaks. 

Due to the relative silence in the weeks before the bankruptcy, the company can make a quick and swift restart and find the path to success again, without having to be split up, sold or terminated.

However, the silent receivership – and bankruptcy in general – may not be used as a cheap means for:
  • ditching personnel without: 
    • a social plan; 
    • receiving any damage fees; 
    • having any rights and prospects;
  • sending the suppliers and money-lenders on the road-to-nowhere with their bills, claims and possessions.

Therefore the Dutch government and the Public Prosecution should be much more focused on abuse of the loose Dutch bankruptcy laws ( as in ‘often loose for the limited companies filing for bankruptcy’) and especially the silent receivership, which can make it even easier to sweep abuse of bankruptcy laws under the carpet. 

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