Belgium proceeds with insolvency reforms with EU Restructuring Directive implementation
Published on 29th Sep 2023
The new law emphasises preventive restructuring, cross-border cooperation and equitable treatment of creditors
The European Union has recognised the need for harmonised insolvency laws across its member states and has taken a significant step forward with the introduction of the new EU Restructuring Directive ((EU) 2019/1023).
This directive aims to establish a common framework for insolvency proceedings, thereby enhancing cross-border cooperation and safeguarding the interests of all stakeholders involved.
On 1 September 2023, the Law of 7 June 2023 transposing the directive entered into force which amended Book XX of the Code of Economic Law. The new law not only implements the directive but also adds a number of new features. It primarily focuses on changing the rules on a number of existing insolvency proceedings, for both out-of-court proceedings and judicial proceedings.
The main insolvency proceedings in Belgium are out of court – amicable agreement – and judicial proceedings, including judicial reorganisation (amicable agreement, collective agreement and transfer under judicial authority), dissolution and bankruptcy.
Among the important new features introduced by the law, if a company faces solvency issues, it can request the court – the so-called "chamber for companies in difficulties" – to summon creditors in order to negotiate an agreement for the outstanding debt (often a payment schedule). If reached, the court will confirm the agreement, which will become enforceable;
Before the new law, the out-of-court agreement, by means of which an agreement is reached with the creditors which can be enforced by the court, was only possible with two or more creditors. As from 1 September 2023, the amicable agreement can be concluded with only one creditor.
As for the judicial reorganisation, a distinction has been made between a public and a confidential procedure, the latter not being published.
The confidential judicial reorganisation can now also be initiated by a creditor or a shareholder of the company, whereas prior to the new law only the company itself could request for the opening of the procedure.
The judicial reorganisation seeking a collective agreement now makes a distinction between small and large companies in terms of approval of the agreement by the court, the so-called homologation. For large companies, the conditions under which the agreement can be homologated are tightenend. For example, from now on the shareholders of the company will have to be involved.
The judicial reorganisation for transfer under judicial authority will now always lead to either bankruptcy or judicial dissolution of the company;
Dissolution and bankruptcy
In line with Dutch law, a pre-pack bankruptcy procedure has been introduced. This means that the court does not immediately declare the company bankruptcy, but first appoints a "prospective trustee" who works with the company for 30 (or 60) days to prepare relaunch of the company after the bankruptcy;
In order to diminish the workload of the courts, the court can order the immediate judicial dissolution of the so-called empty-shell companies.
In order to obtain the advantage of the fresh start (cancellation of any remaining debts after the bankruptcy) a specific request is no longer required.
Osborne Clarke comment
The implementation of the Restructuring Directive into Belgian law signifies a significant step toward harmonising insolvency practices across the EU. The directive's emphasis on preventive restructuring, cross-border cooperation, and equitable treatment of creditors aligns with Belgium's commitment to maintaining a robust and fair insolvency framework. The true impact of these reforms will become apparent as cases unfold and the new framework is put to the test.