As requested by practitioners for several months, the legislator has finally amended the Belgian Code of Economic Law to complete the range of tools available to companies in distress to allow them achieve their financial recovery. The publication of these amendments in the Belgian Official Gazette took place on Friday 26 March 2021, making them effective immediately.
The main amendments are as follows:
- Failure to submit documents upon filing of the petition for judicial reorganization is no longer a ground for inadmissibility. Companies in distress are also no longer required to submit all the required documents at the time of filing the petition. However, these documents must still be filed before the hearing at which the case is examined. These documents must nevertheless be lodged prior to the hearing at which the petition will be reviewed.
- It is now possible to draw up preparatory agreements prior to the judicial reorganization, which is a real breakthrough and presents a genuine practical interest.
In practical terms, companies in distress may now seek from the Companies Court the appointment of a judicial representative (which can even be proposed by the company) to facilitate the subsequent reorganization. Both the simplicity and the confidentiality of the procedure are attractive : the appointment of the representative is not published so that the company's stakeholders will not be made aware of it.
The representative then enters into negotiations with one or several creditors with a significant leverage: the representative may seek the intervention of the Companies Court to obtain payment terms. In its decision, the Companies Court can suspend the creditors' judicial proceedings even if they hold a court decision or an enforcement order against the company in distress.
Once an amicable settlement has been reached or a reorganization plan that appears to be acceptable to creditors has been drawn up, the representative may ask the Court to order the opening of the reorganization procedure. This procedure is streamlined since creditors' vote on the reorganization plan takes place within 3 months of the opening of the procedure.
In principle, the possibility of reaching preparatory agreements only lasts up to 30 June 2021. However, this possibility could potentially be extended thereafter, as the relevant Minister is expected to assess the appropriateness of the measures by 15 June 2021 at the latest.
- Finally, from a tax point of view, write-downs and bad debt provisions on contracting parties for which a reorganization plan has been approved or a settlement has been reached are now exempted from tax. This measure, which constitutes a useful amendment to the Income Tax Code, was taken in order to motivate the contracting parties of companies in distress to agree to write-downs and bad debt provisions.
These new tools therefore offer real prospects for the reorganization procedure by limiting the drawbacks of this procedure to a minimum. Nonetheless, anticipation remains key to a successful reorganization procedure.
Jean-François Goffin - Partner, Brussels
Virginie Frémat - Partner, Antwerp
Grégory De Sauvage - Senior Associate, Brussels
