Crusade against dormant companies: make sure you file your annual accounts on time!

Introduction

By Act of 17 May 2017, the Belgian legislator amended article 182 Companies Code. Under the old regime, the public prosecutor could sue a company in dissolution, if it did not submit its annual accounts for three subsequent years. Today, this term has been brought back to 1 year. In addition, the powers of the Companies Investigation Division of the commercial court have expanded: they allow the CID to notify the court of a company’s non-compliance with its filing obligation, thereby triggering the court’s scrutiny. By amending article 182 Companies Code, the legislator not only wants to reduce the amount of dormant companies, but, more importantly, avoid them in the first place.

Towards a more efficient way of avoiding sleeping companies

At the request of each interested party or the public prosecutor, or after being notified by the Companies Investigation Division, the commercial court can decide upon the judicial dissolution of a company that did not comply with its obligation to timely submit its annual accounts (article 182, §1, first paragraph Companies Code).

The Companies Investigation Division will thus be able to organize its battle against dormant companies more effectively. It no longer has to stand on the side line and wait for the public prosecutor’s initiative, who, in the past, did not consider the application of article 182 Companies Code as one of its priorities.

If the matter is brought before the court by the Companies Investigation Division, the court can grant the sleeping company a regularization period. During this period, the company can remedy its non-compliance and submit its annual accounts. If the court decides not to grant such regularization period, the court orders the judicial dissolution of the company.

If the matter is brought before the court at the request of an interested party or the public prosecutor, the court has to grant the company a regularization period of at least three months. It will refer the file to the Companies Investigation Division. The latter will, after three months, submit a report regarding the (non-)regularization of the companies’ situation to the court, which will then finally decide upon the matter.

At first sight, this new regime seems rather severe. However, the existence of a regularization period and the fact that the claim for judicial dissolution cannot be initiated until seven months have lapsed since the date of the closing of the financial year, should be sufficient to avoid a witch-hunt. Companies indeed still have the possibility to remedy their situation.

The court can now decide not to appoint a liquidator in case of judicial dissolution

Under the old regime, the court had two possibilities once it had ordered the judicial dissolution of the company. Firstly, the court could decide to immediately end the liquidation. This scenario is very rarely applied, since, in the absence of a submitted annual account, the court lacks information necessary for the liquidation of the company. It first had to ask the Companies Investigation Division to investigate the financial situation of the company.

Secondly, the court could determine the manner of liquidation and appoint a liquidator. After the latter terminated its work, the court could order the end of the dissolution procedure.

Since 17 May 2017, article 182 provides a third scenario. The court now has the possibility not to appoint a liquidator, unless this is expressly requested by any interested party, such as a creditor. If no such request is submitted within one year, the debts of the company will automatically be considered as “irrecoverable”, the assets will automatically be attributed to the Belgian State, and the liquidation is deemed to be terminated.

This last scenario is necessary to avoid that courts would be overwhelmed with files on small entities, in which no one has any interest, and of which the assets are usually insufficient to cover the liquidation costs. The court can thus decide not to appoint a liquidator in such case, so that no liquidation procedure is initiated. If no creditor timely claims the appointment of a liquidator, their claims will be qualified as irrecoverable. However, creditors could still turn against possible guarantors, who have guaranteed the payment of the debt of the company.