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Coronavirus – Judicial reorganization – Belgium

  • Belgium
  • Coronavirus
  • Coronavirus - Country overview
  • Restructuring and insolvency

03-04-2020

Temporary protection against creditors

In these uncertain times, companies are confronted with a severe decline in their turnover, often resulting in cash-flow problems. Through the judicial reorganization procedure, these companies can apply for temporary protection against their creditors.

The purpose of the judicial reorganization procedure is to preserve, under the supervision of the court, the continuity of all or part of the company's assets or activities.

It allows the company to be granted a suspension in order to either:

(1) obtain an amicable settlement

(2) obtaining the creditors' agreement on a reorganization plan

(3) authorize the transfer of all or part of the assets or activities to one or more third parties

Procedure for judicial reorganization

A request must be addressed to the enterprise court, accompanied by an extensive list of documents (e.g. an explanatory note, a state of assets and liabilities, a list of creditors, etc.).

The company shall be protected immediately after submitting the request. As long as the court has not ruled on the request for judicial reorganization:

- the debtor cannot be declared bankrupt, or be legally dissolved

- no realization of the debtor's movable or immovable property can take place as a result of the exercise of a means of enforcement

The court shall deal with the request for judicial reorganization within a period of (15) fifteen days following submitting the request. The representatives of the company shall be heard and after hearing the report of the delegated judge, the court will decide by judgment within a period of eight days.

If the conditions appear to be met, the court declares the judicial reorganization procedure open and determines the duration of the suspension, which may not exceed six months.

Judicial reorganization: period of suspension

During the period of suspension, no means of enforcement may be continued or applied to the company's movable or immovable property, nor can the company be declared bankrupt (except on the debtor's own declaration).

Notwithstanding any contractual provision to the contrary, the request for or opening of the judicial reorganization procedure does not terminate the contracts in progress or the terms and conditions of their execution.

However, as from the opening of the proceedings, the company may unilaterally decide to suspend the performance of his contractual obligations for the duration of the suspension with a notice to the co-contracting party, if the reorganization of the undertaking so requires.

The company can also request an extended suspension (max. 12 months from the judgment granting the suspension).

Judicial reorganization in Belgium explained

a. Amicable settlement

The purpose of the amicable settlement procedure is to conclude an agreement between the debtor and all creditors, or at least two creditors, in order to restore the financial situation or to reorganize the company. The amicable settlement does not affect the rights of creditors who are not a part of the agreement.

There is also the possibility of an out-of-court amicable settlement with creditors, whereby the formal procedure of judicial reorganization does not have to be followed. In that case, the company cannot benefit from the suspension. The advantage of an out-of-court amicable settlement is confidentiality, as it is not published.

b. Collective agreement (reorganization plan)

The purpose of the collective agreement procedure is to obtain creditors' agreement on a reorganization plan. During the suspension, the debtor works out a plan consisting of a descriptive and a determining part. The descriptive part of the plan describes the state of the company, the difficulties it is experiencing and the means by which it intends to overcome them. The descriptive part of the plan sets out the measures to be taken to satisfy creditors (a payment proposal for all creditors which may not be less than 20% of the amount of the principal claim). All listed creditors, even if they voted against the reorganization plan (a special majority is required), are bound by the provisions of the reorganization plan.

The following cannot be included in the reorganization plan:

  • a reduction or waiver of claims in the suspension arising from work performance with the exclusion of tax or social security contributions or debts
  • a reduction or remission of criminal fines

The implementation period of the plan cannot exceed five years from its approval.

c. Transfer of all or part of the activities

The transfer under judicial authority of all or part of the activities may be ordered by the court in order to ensure their preservation. The judgment ordering the transfer appoints a judicial officer to organise and execute the transfer in the name and on behalf of the debtor. It determines the object of the transfer or leaves this provision to the discretion of the judicial officer.

The above overview is only a brief summary of the judicial reorganization procedure. Please note that some exceptions may apply to your specific situation.

Do not hesitate to contact us if you would like to receive more information.

Contact a judicial reorganization lawyer in Belgium today

For more information contact

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