On June, 20 2019, the European Parliament adopted a new directive harmonising insolvency law at a European level for the first time.
It was a long wait before the process of transposition into Belgian law finally came to fruition with the adoption in May 2023, and the publication of the law on June, 7 2023.
The law, whose guiding principle is “efficiency”, will come into force on September, 1 2023.
It is an important step towards modernising the insolvency law, which has the advantage of combining private and public interests by broadening the range of tools available to distressed companies and giving them additional means to restructure, while at the same time protecting the Belgian economy.
Taking into account the delay in transposing the European directive, the measures that eased access to the judicial reorganisation procedure as a result of the pandemia have been extended for a last time until September, 30 2023. Please refer to our contribution of April, 16 2021 "Easier access to the JRP provides ..." .
1. The amendments
The main objectives of this major legislative reform are the following:
- to ensure that any company experiencing financial problems has access to an effective restructuring system, particularly at the preventive stage, with the aim of avoiding insolvency;
- to give individuals in bankruptcy a better second chance;
- increase the effectiveness and reduce the duration of restructuring and insolvency procedures.
1.1 Preventive system
Insolvency law is not limited to bankruptcy. The best insolvency procedure is the insolvency procedure that is avoided.
With this in mind, the first pillar of the reform is to ensure that any company experiencing financial difficulties has access to an effective restructuring system, which at a preventive stage makes it possible to avoid an irremediable insolvency situation, thanks to a broadening of the tools made available by the law.
This involves, among other things, revising and improving the “confidential procedure” conducted before the Chamber of Companies in Difficulty of the Commercial Courts ("Chambre des Entreprises en Difficultés des Tribunaux de l’entreprise” or “CED" or “Kamer van Ondernemingen in Moeilijkheden” or “KOIM”).
The CED/KOIM will be given a considerably expanded role, including a role as mediator, enabling it to reach an agreement between the debtor and its creditors as far as possible.
The aim is to encourage prior recourse to this procedure in order to provide greater assistance to companies in difficulty, and to avoid lengthy and costly procedures that benefit neither companies in difficulty nor their creditors.
1.2 Reform of the PRJ/PGR procedure
The consequences of the transposition of this directive into insolvency law by collective agreement have already been briefly discussed in our contribution of October, 21 2022 "The restructuring Directive and its impact on ...".
From September, 1 2023, a number of provisions governing the PRJ/PGR will undergo a significant transformation.
These changes concern both public judicial reorganisation by amicable agreement and by collective agreement (“Procédure réorganisation judiciaire (PRJ)” or “Procedure gerechtelijke reorganisatie (PGR)”, as well as their public and private variants, and are in line with the objective of efficiency pursued by the European legislator.
1.3 Transfer of businesses
The third pillar of this reform concerns the transfer of businesses.
Transfers may be carried out as part of a PRJ/PGR, under the supervision of the judge. The new law introduces a major innovation in this area. At the end of the procedure, once the transfer has taken place, the fate of the company is now legally settled and organised either towards bankruptcy or towards liquidation.
Transfers organised in confidence in preparation for the bankruptcy of a company are now regulated. The legislative insertion of the concept of "silent bankruptcy" was discussed a few years ago, but was finally rejected.
1.4 Privilege of liquidation/dissolution over bankruptcy
Another aspect of the reform concerns insolvency proceedings as such.
The new law is designed to favour dissolution and liquidation over the often inefficient and time-consuming bankruptcy procedure.
1.5. Encouraging a fresh start
Finally, with a view to encouraging entrepreneurship, the legislator has also placed a second chance policy at the heart of its reform.
The chances of a fresh start will be maximised for natural person businesses that have been declared bankrupt, through the write-off of their debts, which will henceforth be granted automatically without the need for an application.
The transposition of the "Restructuring Directive" considerably reshapes the Belgian landscape of corporate insolvency law.
The adaptation of existing regulations, the adoption of new measures and the introduction of new tools are promising.
The objectives of this reform are ultimately in line with a general trend that has emerged in recent years, across all sectors, and which, in the pursuit of a certain efficiency, favours conciliation between parties with interests that are a priori divergent, as may be the case here between a debtor and his creditors.
From September, 1, distressed companies and their advisers will have to substantially revise their approach to restructuring, both in the context of a PRJ/PGR and in the run-up to bankruptcy when this is unavoidable.
Other contributions will follow in the coming weeks, and will focus on the specific key points addressed by the legislative reform.
If your company is facing financial difficulties, and/or you are considering restructuring your activities, do not hesitate to consult our specialists: email@example.com or +32 (0)2 747 40 07.
Easier access to the JRP provides extra oxygen for struggling businesses
The Restructuring Directive and its impact on Belgian judicial reorganisation by means of a collective agreement