As of May 1, 2018, Belgium has a modernized Insolvency Act, introducing a new Book XX to the Code of Economic Law. Book XX combines both the Act on the Continuity of Enterprises of January 31, 2009 and the Bankruptcy Act of August 8, 1997. Book XX will apply to all insolvency procedures opened on or after May 1, 2018.
The amendments aim to adapt Belgian insolvency law to the European standards and make it more coherent. Lead by a new mindset on insolvency, the new Act will introduce the following:
- The most notable change is undoubtedly the expansion of the scope of Belgian insolvency law: No longer will insolvency law only be applicable to commercial entities, under the amended Act all ‘enterprises’ (“ondernemingen/entreprises”), including the liberal professions, (most) associations (such as the non-profit organisations “vzw/asbl” and foundations) and even partnerships will be subject to insolvency law. This way, they too will be able to benefit from judicial reorganisations, winding-up procedures, waiver of debts etc., reflecting the changes in neighbouring countries. Public law entities are however still excluded from the scope as they are not considered ‘enterprises’.
- With regard to judicial reorganisations, more emphasis is put on amicable agreements. The new Act strengthens the out-of-court settlements (extrajudicial agreements) by declaring them enforceable. This should make negotiating an amicable agreement more interesting for creditors as well as more bankruptcy-proof when concluded during the so-called suspect period preceding a bankruptcy. On the other hand, the petitioning for judicial reorganisation will no longer be sufficient to stop the execution (public sale) of seized goods that was already initiated.
- Belgian judges will play a more active role in the insolvency procedures and have more extensive powers.
- The digitalization is further being expanded via the “Central Insolvency Registry”. Every insolvency case is filed in this register (www.regsol.be) that was installed in April 2017. This register acts as a database accessible not only for lawyers and judges, but also for creditors and other interested parties. Creditors must file their claims in this online database instead of filing their claims with the court registry. Stakeholders can also check online the status of the court proceedings.
- Initially, it was the aim to also include the pre-pack insolvency (“stil faillissement/faillite silencieuse”), allowing a pre-curator to sell (the assets of) a company before giving publicity to the insolvency into the new Act. However, due to the decision by the European Court of Justice in the Estro-case of June 22, 2017, the minister of justice Geens decided not to include a pre-pack insolvency in the new Act.
- No longer will an insolvency be stigmatized as a failure, but rather as an invaluable experience. The new Act therefore aims to encourage entrepreneurship by giving insolvent entrepreneurs a second chance. This is done by remitting all remaining debt of the insolvent entrepreneur (full waiver of debt) instead of declaring them excusable (“verschoonbaar”).
- Some provisions on liability of (managing) directors are transferred from the Belgian Companies’ Code to the new insolvency Act to further clarify the difference between insolvency and company law and to make them applicable to all directors of the legal entities that fall under the scope of the new Act. The same applies for certain tax and social security debts.
- The new Act also introduces the concept of “wrongful trading”. This means that directors who do not refrain from further trading beyond a certain point in time, can be held liable when they knew (or ought to know) that there was clearly no reasonable prospect of keeping the enterprise alive and avoiding bankruptcy.
With the abovementioned changes, Belgian insolvency law transitions into a new era in which companies will have more and better alternatives, other than declaring insolvent. We eagerly await if these changes will impact Belgian entrepreneurship the way they are intended to.