During the first corona wave, the Belgian legislator already provided several protective measures for companies in difficulty including a moratorium on bankruptcy and a temporary curtailment of attachments (see RD No 15 of 24 April 2020). The Belgian legislator also jumped in during the second wave by adopting a second moratorium that expired on 31 January 2021 (see Article 71 of the law of 20 December 2020). These temporary measures were therefore necessary to avoid a tsunami of bankruptcy proceedings and give companies temporary breathing space.
However, the aforementioned measure has had the effect of keeping several “zombie companies” alive, which is not desirable.
As a result, the federal government decided not to extend the moratorium but to allow a relaxation of the judicial reorganisation procedure.
Today, therefore, companies are no longer automatically protected against bankruptcy.
This new aid measure, the details of which are not yet known, is aimed at relaunching companies by temporarily protecting them from their creditor(s) and devising a plan to systematically eliminate debts.
The Economic Law Code provides for three types of proceedings: (i) an amicable agreement with one or more creditors, (ii) a collective agreement with the creditors, or (iii) a transfer of part or all of the business under judicial authority.
For the time being, companies still have to rely on the ordinary regulation contained in the Economic Law Code as the federal government has not yet concretised the elaboration of the relaxation.
Such a procedure can bring significant benefits to companies and should be considered sooner rather than later. However, it is also not without risks for company directors. After all, in the event of an erroneous judicial reorganisation, directors may end up paying for all debts in a subsequent bankruptcy. It is therefore crucial to assess the state of the business and make an informed decision in favour of one or the other procedure.
Appropriate guidance and advice are crucial here.
Is your company in trouble or do you have further questions about the impact of these measures? If so, be sure to contact your regular contact at Quorum or email firstname.lastname@example.org.
Let’s get through this together!