Bankruptcy reformed... for a while
Bankruptcy reformed... for a while
May 2021 – The government has twice decided to block bankruptcies via a moratorium. Creditors could then not realise their claims by having the debtor declared bankrupt. The second moratorium ended on 31 January 2021. The government has now passed a law reforming the whole procedure.
More flexible access to judicial reorganisation
The moratorium is not reinstated, but rather (temporarily) replaced by a relaxation of the access to judicial reorganisation. This relaxation is mainly reflected in a less strict procedure.
A judicial reorganisation could be defined as an agreement between the company in difficulty and its creditors. Such an agreement must be approved by a juge-commissaire.
In principle, the judicial reorganisation file must be complete in order to be submitted. If certain supporting documents are missing, the application will be rejected. Things have changed: the applicant is now given the opportunity to complete his file. This is a temporary measure that will end on 30 June 2021, but can be extended by the government.
The former four-month period for ordering an examination by a rapporteur is also temporarily extended to eight months.
Pre-package agreement
The possibility of a preparatory agreement, also known as a pre-packaged insolvency or simply a pre-pack, is a novelty. In the Anglo-Saxon business world, this term is used for secret bankruptcy settlements.
What does it mean in Belgian law?
We could define it as an amicable agreement or as the extrajudicial preparation of a reorganisation plan. The agreement with the creditor comes into being without suspension of the means of execution. However, a judicial representative is involved from the outset, so that the agreement can quickly lead to the approval of the recovery plan.
This preparatory (and also secret) agreement makes it possible to avoid a major drawback of the classic judicial agreement: damage to reputation. Indeed, the judicial reorganisation procedure starts with a publication in the Belgian Official Journal. In a "pre-pack", the announcement of the fact that the company is in difficulty coincides with the publication of the reorganisation plan (which then still has to be approved by the court).
At the same time, the standstill period can - if agreed - be very short, which also has a positive influence on the workload of the company's courts.
As in the judicial reorganisation procedure, it is required that the continuity of the business is threatened 'within a short period or in the long term'. This means that the debtor can in fact switch from this pre-pack procedure to judicial reorganisation quite quickly (with the main consequence of the suspension of claims). This is why a delegated judge is also appointed in addition to the judicial representative.
If it is likely that the reorganisation plan will be approved (there does not have to be an agreement already), the president can submit the plan to the court, which can then declare the judicial reorganisation procedure by collective agreement opened by the court and close it quickly.
Note that this measure is also temporary: the legislation should already cease to apply on 30 June 2021. However, the government may extend the measure (which is very likely). But many advisors hope that the pre-pack will be permanently included in Belgian legislation.