As from 1 May 2018, a comprehensive reform of the Belgian insolvency framework entered into force. The old framework consisted of two separate laws governing respectively bankruptcy and judicial reorganization. The new legal framework incorporates both regimes in Book XX of the Belgian Code of Economic Law.
One of the most important innovations is the expansion of the scope of the insolvency regime. Previously the scope of bankruptcy proceedings was limited to commercial entities. The scope has now been expanded to include any “enterprise” (subject to limited exceptions). This means that entities that were exempted under the old regime because of their “civil” character, such as the professions, VZW/ASBL, certain entities without legal personality etc. can now be made subject to insolvency proceedings.
Other important reforms include:
- modernizing of the proceedings, making them largely electronic
- improvement of the legal status of an amicable agreement outside formal insolvency proceedings
- introducing a coherent set of rules regarding director liability
Debtor in possession
One other noteworthy amendment is the protection awarded by the new insolvency regime to security interests granted during a judicial reorganization procedure. Under the old law there was some doubt whether security granted during a judicial reorganization procedure was enforceable against the trustee in subsequent bankruptcy proceedings, in particular in cases where new security was being granted for existing debt which was automatically declared unenforceable. A new provision now affords explicit protection for such security, aiming to improve debtor in possession financings.
Overall, we expect the reforms to be welcomed by Belgian insolvency practice as the new regime is a set of coherent rules that is in line with recent international trends.