As stated in our March newsletter in the article about payment deferrals, Febelfin announced that the financial sector had undertaken to automatically grant enterprises a payment deferral for existing credit agreements, provided that certain conditions were met. This deferral plan was published as a “Charter” on Febelfin’s website.
Inapplicability of the payment deferral Charter to non-banking lenders
The Charter does not clearly define affected lenders: it refers to “banks”, but Febelfin members without banking licences are also involved in B2B lending. Are they included?
Given the soft-law nature of the payment deferral instrument (i.e. a “charter” issued by the financial-sector representative body), it was somewhat clear that the Charter did not apply to non-Febelfin members. Moreover, automatically applying the Charter to all Febelfin members was also questionable given that only some members were consulted by the government or expressly agreed to the terms of the Charter.
Febelfin has confirmed to us that only banks have agreed, and are therefore obliged, to grant such a payment deferral under the Charter (provided that the applicable conditions are met); Febelfin’s non-bank members are excluded. This means that lenders without banking licence are entitled to refuse their business borrowers’ requests for a payment deferral.
Unilateral termination for non-payment prohibited until 17 May 2020 (all lenders affected)
In addition, there is an increasing number of protective measures to help companies affected by the health crisis. Significantly, a royal decree of 24 April 2020 entitled “Royal Decree No. 15 on the temporary suspension of enforcement and other measures in favour of companies during the COVID-19 crisis” (“Royal Decree”) provides, inter alia, that all companies falling within the scope of Book XX (Insolvency of companies) of the Code of Economic Law whose survival is threatened by COVID-19, and whose payments were not suspended on 18 March 2020, are entitled to a temporary deferment between 24 April 2020 and 17 May 2020. Specifically, this means that a creditor under any contract (including credit, factoring, leasing and similar agreements) concluded before the Royal Decree entered into force cannot terminate such contract unilaterally or by judicial means simply because of the failure to pay a due debt. This applies to a wide range of creditors and lenders (unlike the Febelfin Charter, as discussed above).
This measure does not mean that debtors have a right to default on their outstanding debts. This is particularly important given that any interested party can ask the President of the competent court of enterprises to rule that an enterprise is not eligible (in whole or in part) to such temporary deferment. The payment default must be the result of the health crisis. Therefore, as well as considering the interests of the applicant, the President will take into account, among other things, whether, as a result of COVID-19, the debtor’s turnover or business activity has fallen sharply, whether there has been total or partial recourse to “economic unemployment” and whether the public authority ordered the debtor’s business to close.
Lenders should take this new temporary prohibition into account if their debtors do not pay their due debt by 17 May (such as for credit not covered by the Charter or for non-payment of interest, which still accrues during the deferral period).
Benoît Vandervelde, Partner, Brussels
Florence Berchem, Junior Associate, Brussels
