The Law of 7 June 2023 transposing the European Restructuring Directive of 20 June 2019 entered into force on 1 September 2023, introducing a number of significant changes to Belgian insolvency law.
The main purpose of this law was to transpose the Restructuring Directive into Belgian law, but the legislators took the opportunity to examine the entirety of insolvency law and to make significant reforms. The central idea was that every possibility should be provided to safeguard economically viable activities of ailing companies. One new element in this context is the recognition of the importance of private procedures – both agreement procedures and preparation for bankruptcy.
One of the main objectives of the Directive is to maximise continuity by requiring Member States to use preventive restructuring frameworks. In Belgium, this framework is the Chamber for Companies in Difficulty. The reform of Belgian insolvency law strengthens and expands this Chamber’s role, in particular as follows:
The extrajudicial amicable agreement has been brought up to date by changes including the scrapping of certain formalities (such as the requirement for two creditors) and the increased importance of confirmation (optional or otherwise).
As mentioned earlier, in addition to the existing public procedures, private agreement procedures are now also being created, in which the collective agreement is divided into a system for SMEs and a system for large companies (with the nuance that SMEs can voluntarily opt for the system for large companies). A company is considered to be large in this context if it is a company, non-profit association or foundation that exceeds one or more of the following criteria for two consecutive financial years:
Where applicable, these criteria must also be examined at group level.
In the case of the private variant, there is no provision for any publicity. Moreover, the private procedure can be initiated not only by the company itself, but also by a creditor or shareholder.
The silent bankruptcy is revived under the name of private preparation for bankruptcy. This means that the court does not immediately confirm a company’s declaration of bankruptcy, but first appoints a ‘future bankruptcy receiver’ who, together with the company, spends 30 (or 60) days preparing for a restart after bankruptcy.
Following the judgments of the Court of Justice, the transfer under judicial authority is now classified as a genuine liquidation procedure. The procedure is therefore usually concluded with the bankruptcy or judicial dissolution and liquidation of the company concerned.
For companies without significant assets (‘shell companies’), dissolution and liquidation becomes a legal alternative to bankruptcy.
Partly as a result of recent Constitutional Court case law, debt cancellation is in principle a consequence of the conclusion of the bankruptcy. This means that a natural person no longer has to submit a formal application to obtain a cancellation of residual debts. However, it also means that the bankrupt party has to wait until then to obtain clarity on this point.
It is clear that the above changes have had (or will have) a major impact on the Belgian insolvency landscape and that there are many more possibilities for entrepreneurs in difficulty to achieve a (discrete) restart of the viable parts of the company.
If you would like more information about these new developments, do not hesitate to talk to your trusted advisor at Grant Thornton.
