Alexander Hansebout May 12 2017 Changes to insolvency regime proposed ALTIUS | Insolvency & Restructuring - Belgium Alexander Hansebout Insolvency & Restructuring IntroductionBroader entrepreneurial conceptCentral Bankruptcy Register'Silent' bankruptciesHarmonising liability actionsCommentIntroductionThe Belgian insolvency regime comprises the Bankruptcy Act 1997 and the Business Continuity Act 2009. The government has recently undertaken steps to modernise and broaden its insolvency legal framework.On April 20 2017 the government submitted a proposal to Parliament intended to introduce a new chapter to the Code of Economic Law. The proposal will update the Bankruptcy Act and the Business Continuity Act.Some of the implemented and upcoming changes are discussed below.Broader entrepreneurial conceptThe proposal will broaden the scope of application of the Bankruptcy Act and the Business Continuity Act (for further information please see "Broadening scope of insolvency legislation").Rather than applying only to merchants, all entities that are involved in commercial or entrepreneurial activity are eligible to benefit from the Bankruptcy Act and the Business Continuity Act.This change also includes non-profit organisations and liberal professions. Special focus has been placed on these liberal professions to safeguard their professional secrecy obligations during insolvency proceedings.Central Bankruptcy Register Bankruptcies that have opened since April 1 2017 are registered and managed through the Central Bankruptcy Register (CBR).The CBR functions as an online platform. It replaces the previous hard copy registers kept by the commercial courts.Creditors seeking to file a bankruptcy claim must do so through the CBR. A €6 fee must be paid to file a bankruptcy claim through the CBR.In principle, filing claims on paper is no longer possible. An exception has been made for foreign creditors that are not represented by a legal professional and Belgian natural persons. In such cases, the claim can be transferred to the bankruptcy administrator, who, with the commercial courts' help, will upload the relevant documents to the CBR.The courts, public prosecutors, bankruptcy receivers, bankrupt entities and creditors should have access to bankruptcy files. Their right of access will be further determined by royal decrees.The evaluation of the claims introduced by a bankruptcy will also be managed through the CBR. Reports concerning the inventory of assets and the evaluation of introduced claims will be kept in the CBR system. Communications between bankruptcy administrators, public prosecutors and the courts will also be made via the CBR.In general, the CBR should lead to a more efficient bankruptcy process and expedite such proceedings. Bankruptcies opened before April 1 2017 will not be included in the CBR.'Silent' bankruptciesThe government proposal also proposes a form of 'silent' bankruptcy. As in other EU countries, these proceedings would give companies the option of preparing a transfer of their business discretely and without any publicity.In its request to the court for silent bankruptcy, the company would have to demonstrate that the chances of selling its assets for a good price would be increased or that more employment could be preserved. If accepted, the court will appoint a pre-bankruptcy administrator for 15 days. The latter will evaluate the feasibility of the company's proposal.The pre-bankruptcy administrator will be appointed as the bankruptcy administrator in the subsequent bankruptcy. However, the company can still apply for protection under the Business Continuity Act.Silent bankruptcies should increase the company's chance of continuing its business activities as:the concerned economic actors (eg, financial institutions) will not be immediately notified of the company's difficulties; andthe pre-negotiated agreement will be swiftly implemented once the bankruptcy has been opened.Harmonising liability actionsThe government proposal includes updated mechanisms that should make it easier for the bankruptcy administrator and creditors to initiate liability proceedings against the former directors of a bankrupt company.Such individuals must prove that the former directors committed serious mistakes which contributed to the company's bankruptcy. The proposal adds that fiscal fraud is such a serious offence.The initiating creditor's lawyer's fees are reimbursed from the proceeds of the proceedings. Further, a special mechanism is implemented to provide a portion of the dividend to unsecured creditors. However, this liability scheme does not apply to smaller companies.A new liability regime has been proposed regarding social security and tax debts that remain unpaid when the bankrupt company's directors have already been involved in two bankruptcies during the previous five years.CommentThe government proposal will be discussed in Parliament in the coming weeks and could be accepted before the summer recess. The CBR is already in operation.For further information on this topic please contact Bart Heynickx or Alexander Hansebout at ALTIUS by telephone (+32 2 426 1414) or email ([email protected] or [email protected]). The ALTIUS website can be accessed at www.altius.com.