In most countries, insolvency legislation distinguishes between bankruptcy and reorganisation proceedings. In Belgium, bankruptcies are ruled by the act of 8 August 1997 on bankruptcies whereas reorganisations (“gerechtelijke akkoorden” / “concordats judiciaries”) were until recently subject to the law of 17 July 1997 on judicial composition.
The judicial composition legislation of 1997 never lived up to its expectations and was scarcely applied, which in turn led the Minister of Justice at the time, Madame Laurette Onkelinx, to gather a panel of experts to compose a draft law with broader ramifications. This new law was approved and voted by the Belgian House of Representatives on 31 January 2009.
Under the new law, the rules and official procedures have been substantially simplified and the range of instruments aimed at helping companies in distress significantly increased. Conservational measures, more flexible instruments that can be used before a legal proceeding is started have been foreseen and the cost of the procedure has been considerably reduced. The general notion that a debtor in distress maintains control over its company remains unchanged.
How does this new law fit in the framework of other existing insolvency proceedings? What is the rationale behind the law? What are the main features of the new law? The new law provides for the possibility to reach an amicable agreement with some of the creditors. How does this work? A mediator may be appointed on the deliberate request of the company. Does the new procedure also entail the protection of the debtor? How does this affect the current agreements? Is it possible to transfer a business or any part of a business from the company in distress to a third party? If so, under which conditions? What happens to secured receivables under the new procedure?
