Coronavirus – Debtor shortcomings – Belgium

• Belgium

• Coronavirus
• Coronavirus - Country overview
• Restructuring and insolvency

06-04-2020

Even in COVID-19 times, companies (and their directors) should not unnecessarily jeopardise the rights of their creditors and the continuity of their activities. Think about paying dividends, and making unnecessary costs, despite the financial problems of the company.

When obvious gross negligence on the part of the company (or its directors) endangers the continuity of the company or of its economic activities and the measure requested is such as to ensure such continuity, the court may, at the request of the public prosecutor's office or of any interested party, appoint one or more judicial trustees.

Debtor shortcomings: obvious gross negligence

The Code of Economic Law does not provide a definition of what is to be understood by obvious gross negligence, but the legal doctrine is of the opinion that it must be interpreted as a factual situation in the company which does not necessarily make a mistake but which threatens its continuity ^[1].

The assessment of whether this is the case will always be a matter of fact and, thus subject to the discretion of the court.

Debtor shortcomings: interested parties

By merely referring to 'any interested party', the legislator opted for a very broad interpretation of this concept. The only requirement is that they must have a direct personal material and/or moral interest in initiating this procedure.

Interested parties are not only the shareholders but can also be the directors, statutory auditors, creditors and even the company's competitors ^[2].

Debtor shortcomings: judicial trustees

If the above conditions are met, the court may appoint a judicial trustee. This decision is motivated and determines precisely the assignment and duration of the assignment given to the judicial trustee. It is also published in the annexes to the Belgian Official Gazette, so that third parties are informed.

Debtor shortcomings: interim administrators

The assignment of a judicial trustee can only be used for a very specific task (and period), in the event of obvious gross negligence.

However, in certain cases, the court may also appoint an interim administrator who will in fact take over the management of the company (for a certain period) if both:

(a) judicial reorganisation proceedings are already underway and the company in question (or one of its directors) has committed a manifestly gross error

(b) when there are substantial, definite and consistent indications that the conditions for bankruptcy are met

These proceedings may be initiated by any interested party and the decisions are published in the annexes to the Belgian Official Gazette.

Contact an insolvency lawyer in Belgium today

Feel free to contact us if you are confronted with a debtor (or competitor) that endangers the continuity of his/her business, resulting in direct material and/or moral damage for you. We will investigate their actions and advice you on the possibilities to counteract this.

^[1]M.C. ERNOTTE en B. INGHELS, “La loi du 27 mai 2013 modifiant diverses législations en matière de continuité des entreprises : ajustement ou rétrécissement ? », JT 2013, 641

^[2]Kh. Antwerp 18 October 2016, TRV 2017, 360-363.