With some businesses still being heavily impacted by the COVID-19 pandemic, the Belgian government has introduced new measures to mitigate the consequential liquidity and insolvency risks. These follow earlier temporary moratoriums that have expired in the meantime.
The new law was published in the Belgian Official Gazette on 26 March 2021 and is immediately effective as from this date. The three most important novelties are:
1. Confidential “prepackaged” reorganisation
The most notable measure is the introduction of a form of “prepackaged” reorganisation (“voorbereidend akkoord” / ”accord préparatoire”) that serves to prepare formal reorganisation proceedings. Contrary to the latter, the “prepackaged” reorganisation is confidential and does not imply publicity. When a company’s continuity is threatened, it can confidentially and unilaterally petition the president of the court to appoint a court officer (“gerechtsmandataris” / ”mandataire de justice”) to facilitate negotiations with (certain) creditors. The court can also, upon request of the court officer and after hearing the impacted creditors, grant a moratorium for a maximum of 4 months that may consist of imposing payment terms and/or suspension. Once the debtor and one or more creditors reach an individual or collective agreement, the judicial reorganisation proceedings will be opened and handled efficiently on the basis of the earlier agreement.
It is important to note that – unfortunately – the “prepackaged” reorganisation cannot be used to prepare a reorganisation through a transfer of business.
2. Increased flexibility with respect to filing requirements
Furthermore, a second amendment offers more flexibility regarding the opening of judicial reorganisation proceedings. Together with the petition to start judicial reorganisation proceedings, under the old rules certain documents needed to be filed. The preparation of these documents (mainly relating to financial statements) could be very difficult (sometimes even impossible) for a company in crisis.
It is now possible to file the supporting documents until two days prior to the opening hearing and/or file a note detailing why certain documents are unavailable. Also, the absence of any of these documents does no longer result in the automatic inadmissibility of the petition.
3. Tax treatment of amicable settlements
The last measure is a change of the Income Tax Code that must stimulate amicable settlements from the creditor’s perspective. Capital losses on receivables agreed in an out-of-court context are tax exempt in the same way as they would be when resulting from a formal judicial reorganisation.
The application of the first two measures is initially limited in time to 30 June 2021, but it is expected that these will be prolonged.
Please feel free to reach out to any of our lawyers in case you would like to learn more about this topic.