Entry Into Force of Amendments to Law on Continuity of Enterprises

The Law of 27 May 2013 amending various laws relating to the continuity of enterprises (Wet tot wijziging van verschillende wetgevingen inzake de continuïteit van de ondernemingen / Loi modifiant diverses legislations en matière de continuité des entreprises; the “Law”) entered into force on 1 August 2013 (See, VBB on Belgian Business Law, Volume 2013, No. 3, p. 9, available at www.vbb.com). The Law forms part of the reform of the judicial reorganisation procedure, and is designed to allow companies that are temporarily unable to pay their debts to continue trading and/or to transfer (part of) their activities while saving jobs.

The Law does not amend the fundamental principles of the current judicial reorganisation procedure, but instead, aims to ensure better prevention and detection of enterprises facing difficulties. The Law also makes applying for protection under the judicial reorganisation procedure more burdensome, so as to reduce abuses. The Law thus:

extends the scope of application to farmers (natural persons) and extends the discharge system to spouses, former spouses and legal cohabitants;
improves the access to file by creating an electronic file with an extended content. The debtor must now also communicate its electronic correspondence address to be used during the procedure;
strengthens the role of the external accountant, the independent tax advisor, the external accredited accountant and the statutory auditor: when they discover facts likely to jeopardise the continuity of the debtor’s enterprise, they must inform the debtor. If, within one month, no appropriate measures have been taken to ensure the continuity of the company for a period of 12 months, the external accountant, the independent tax advisor or the auditor (not the external accredited accountant) may notify in writing the President of the Commercial Court who may request their recommendations, as well as the possible measures taken by the debtor;
attempts to end abuses, including untimely, reckless or misleading requests, thereby improving the protection of creditors and employees by requiring that all documents (including a recent statement of assets and liabilities not older than three months, an estimate of the expected revenues and costs during the reorganisation period and the proposed measures) are filed together with the initial request in order to allow the Court to immediately have a reliable summary of the applicant’s circumstances;
strengthens the prevention of distortion of competition and ensures that the system is not rendered ineffective by statutory provisions or specific practices affecting the rights of creditors;
provides for an increased procedural cost amounting to EUR 1,000 to be paid up-front. The entry into force of this cost requirement will be determined by a Royal Decree at the latest on 31 December 2014;
provides, in case of a judicial reorganisation by collective agreement, that the payment proposal for all creditors must amount to at least 15% of the claim, except in case of a precise and valid reasoning. Creditors are also informed of the purpose and duration of the judicial reorganisation as well as the position of other creditors;
protects the rights of the creditors in case of a new judicial reorganisation between three and five years following a previous judicial reorganisation;
protects the workers by requiring that the judicial reorganisation plan does not reduce or abandon claims arising out of the performance of work prior to the start of the procedure;
requires compliance with the collective labour agreement (collectieve arbeidsovereenkomst / Convention collective de travail) No. 102 relating to the maintenance of workers’ rights in the event of a change of employer as a result of a transfer under judicial authority;
regulates and reinforces the position of the works council and the committee for prevention and protection at work in case of a transfer under judicial authority;
allows the Court to terminate, at any time, an ongoing judicial reorganisation procedure when it appears that the debtor fails to save the company; and
amends the timing of the procedure by providing for the following deadlines: (i) the investigation chambers should provide a report on the debtor’s situation within four months; (ii) the Commercial Court has to examine the request to open a judicial reorganisation within 14 days; (iii) the Court has to make its decision as to whether to allow or reject the reorganisation plan within 14 days; (iv) a request for an extension of the suspension period must be filed at the latest 14 days before the expiration of the initial suspension period; (v) the plan for a judicial reorganisation through a collective agreement must be submitted at the latest 20 days before the Court date; (vi) the creditors must submit their objections to the reorganisation plan at the latest 14 days before the Court date; and (vii) an appeal against a judgment allowing a reorganisation plan relating to a collective agreement must be lodged within 15 days.