Belgium's Chamber of Representatives has approved (14 March 2021) a bill modifying the current insolvency laws with respect to – and alongside other minor changes – judicial reorganisation, pre-packaged insolvency and fiscal reform.
A number of legal reforms have been expected since the start of the year to avoid a wave of bankruptcies following the end of the moratorium on bankruptcies on 31 January 2021.
The reforms aim to enhance and simplify the reorganisation procedures under Belgian insolvency law, as well as to protect healthy companies that were unexpectedly affected by the coronavirus crisis.
Firstly, the bill lowers the threshold for a judicial reorganisation and in particular relaxes the strict admission requirements to be admitted to the procedure. The obligation to immediately file certain documents with the petition for judicial reorganisation is now more flexible. Certain documents can be added later or not at all. These measures aim to reduce the bureaucratic burden of a judicial reorganisation for businesses and reduces the thresholds.
Secondly, the bill addresses the preparatory agreement or "pre-packaged insolvency". The purpose of this new procedure is to confidentially test the possibility of an amicable or collective settlement "in the shadow" of formal insolvency proceedings.
The debtor is assisted by a court appointed mandate holder who can facilitate the discussions and negotiations with certain creditors. Unwilling or malicious creditors can be confronted with conditions or deadlines of up to four months after an contradictory procedure.
Once an amicable or collective agreement is within reach, a smooth transition to a formal judicial reorganisation is envisaged, which can then be completed quickly, given that the preparatory work has already been done. The benefits are obvious: no publications in the Belgian Gazette and no public hearings prevent the insolvency issues from becoming public knowledge and so clients and suppliers are not deterred from doing business pending the procedure.
Thirdly, the bill provides for tax equalisation of depreciation and provisions on claims, regardless of the type of insolvency proceedings, including amicable out-of-court settlements.
Osborne Clarke comment
Most of the above measures enter into force on 26 March 2021 but will already be out of force on 30 June 2021, although this last date can be postponed by Royal Decree.