Recently, government introduced a new draft law on the reform of the Bankruptcy Act and the Law regarding the Continuity of Enterprises (LCE).
The draft law still needs to be approved by the Federal Parliament, but it is expected to come into effect no later than 1 September 2017.
The current legislation on insolvency will be made up to date and adapted to European Regulations. Moreover it will be incorporated into the Code of Economic Law to make it a coherent set.
Below is a brief overview of the main new elements of the law.
1. The scope of the insolvency legislation in general will be extended: It will apply to all enterprises, not only to merchants or profit legal entities. Insolvency proceedings (judicial reorganisation (LCE), bankruptcy, etc.) will also be open to the liberal professions, farmers, non-profit organisations, partnerships, foundations and civil law companies having a commercial form. Entities under the form of a foreign company without legal personality participating as such in the legal trade world, such as a trust, will also fall under this legislation.
2. The bankruptcy file is modernised following the implementation of a fully electronic procedure. The Central Registry of Solvency (regsol.be) - which was launched on 1 April 2017 - plays a crucial role.
3. The law introduces a new player, the "enterprise mediator". The latter will intervene in cases where an enterprise considers that its designation can be useful in the context of an amicable restructuring.
4. The draft law contains a number of new rules within the framework of the judicial reorganisation that should make the informal settlement procedure outside the judicial sphere more attractive, but it is still possible to have the Courts’ approval of this settlement, if necessary.
5. A procedure of full waiver of debts replaces the system of excusability of a debtor. Hence, a new start will be possible; the bankrupt debtor acting in good faith will get a second chance to start a new business during the bankruptcy procedure without having to wait for the closing of the bankruptcy.
6. An important new feature of the law is the "silent" bankruptcy, also called the "pre-pack". This allows a company to prepare a genuine bankruptcy in a discrete manner, without publicity. A pre bankruptcy receiver may be appointed, who will be able to discretely look for a buyer of the business, or parts of it. This will increase the chances of a quick handling of the bankruptcy and a higher return for the creditors.
7. A coherent body of rules on the liability of directors is introduced in the event they continue their business even after it is proved that it is definitely bankrupt.
8. Cross-border insolvency: The international dimension of insolvency is highlighted. Cross-border insolvency proceedings will be governed principally by the European Regulation on insolvency proceedings and the existing provisions of the Code of Private International Law are taken into consideration at the occasion of the codification of the Insolvency Law in the Code of Economic Law.
The Belgian courts will have an extended competence in respect of the insolvency procedure to better reflect the economic reality of the company.
It will be possible to initiate insolvency proceedings in Belgium if the debtor has assets in Belgium. Today, this is impossible.
9. Another draft law, that already has been approved by the Parliaments’ Commission, provides that the judicial dissolution of a company will be possible if it has failed to file one single annual accounts in a timely manner (i.e. so-called sleeping company), or if the directors or managers lack sufficient professional skills.
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The legislator's goal is to adapt the insolvency law to current national and international regulations and case law, and to make the procedure more transparent, more efficient and effective.
The draft law gives a definitive solution to a lot of ambiguities or problems that have given rise to disputes. However, the latter will not prevent new disputes in the future.
Nevertheless, a positive element of this new legislation is is that both creditors and debtors in difficulty will have new tools to safeguard the continuity of the enterprise concerned.
We will keep you informed on this.