Cram down
A cram-down is a judicial power to impose a restructuring plan on dissenting creditors, provided that the statutory conditions are met.
The cram-down, which is particularly relevant in the Netherlands under the WHOA, enables the court to homologate a private restructuring plan even where not all classes of creditors have approved it. This prevents one or more creditors from blocking a restructuring.
The mechanism is designed to promote the continuity of viable businesses and to avoid unnecessary insolvencies. Homologation is subject to strict conditions, including a fair allocation of value and adequate protection of the interests of dissenting parties.
In practice, the cram-down is applied principally in complex restructurings involving multiple creditors where unanimity cannot be achieved.
“The court applied the cram-down, thereby enabling the restructuring plan to be homologated notwithstanding objections from a minority of creditors.”
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