I OVERVIEW OF RESTRUCTURING AND INSOLVENCY ACTIVITY

An overall decrease in the number of bankruptcies has been observed in the past two years. The bankruptcy ratio across all industries in 2015 was one bankruptcy to every 110 active companies, compared with one bankruptcy to every 103 active companies in 2014. Moreover, according to the Belgian Federal Public Service Economy, a decrease of 15.4 per cent in the number of bankruptcies was observed in May 2016, compared with the same period last year. The sectors in which high bankruptcy ratios are still observed are the hotel and catering industry, transport and construction sectors.

This positive evolution is confirmed by a high recovery rate. In June 2016, Commissioner Jourovà stated that, according to the World Bank indicators, recovery rates of 90 per cent had been observed in Belgium. As suggested by him, this can be explained by the fact that restructuring proceedings remain the most common insolvency proceeding in Belgium.

Another interesting fact is that, according to a European Central Bank survey on access to finance by enterprises in the eurozone area, Belgian enterprises have a positive record for access to bank financing. It appears that the reluctance of banks to grant loans that followed the financial crisis of 2008 is over in Belgium. A study conducted in Belgium at the initiative of the Belgian Federal Public Service Economy shows a less positive picture of access to bank financing for small and medium-sized enterprises, especially for micro-enterprises and starters.

Recent market trends in restructuring and bankruptcy proceedings, as well as numbers and figures on formal proceedings, are discussed further below.

II GENERAL INTRODUCTION TO THE RESTRUCTURING AND INSOLVENCY LEGAL FRAMEWORK

In Belgium, insolvency situations are governed through separate laws that all provide for specific types of proceedings. All these proceedings are referred to in Article 2(a) of the EU Insolvency Regulation.2 Transition from one type of proceeding to another is possible during the insolvency process of a company, which often causes some difficulties, as the provisions of the separate laws are not always fully compatible. As such, the law is often criticised, and many have urged that the Belgian insolvency laws be harmonised and unified.

A main distinction is made between proceedings involving the winding up of a company and proceedings aiming at the reorganisation and turnaround or transfer of undertakings of a company.

i Formal proceedings

In Belgium, the formal proceedings as referred to by Article 2(a) of the EU Insolvency Regulation are:

  • a bankruptcy proceedings;
  • b judicial reorganisation through a vote on a restructuring plan;
  • c judicial reorganisation through a transfer of undertakings;
  • d insolvency proceedings for non-commercial individuals;
  • e voluntary liquidation;
  • f judicial liquidation; and
  • g provisional dispossession of the directors.3
Bankruptcy proceedings

Bankruptcy proceedings are governed by the Bankruptcy Law, and involve the winding-up of an enterprise. Only commercial companies and commercial physical persons can be declared bankrupt. Foreign companies and branches of foreign companies in Belgium are not subject to the Belgian Bankruptcy Law unless their centre of main interest is located in Belgium.

Bankruptcy is pronounced upon the fulfilment of the conditions of cessation of payment and the ongoing lack of credit from either creditors or financial institutions. The court makes its decision upon the request of a creditor or the Public Prosecutor, or upon the declaration of the cessation of payment by the debtor.

Directors of a company under an ongoing cessation of payment have a legal obligation to immediately declare that situation to the commercial court, which then decides whether to open bankruptcy proceedings. Absence of such declaration for more than one month following the cessation of payment is criminally sanctioned. The period between the cessation of payment and the opening of bankruptcy proceedings is called the ‘suspect period’, as the debtor or its directors may be inclined to take certain actions that are detrimental to the creditors or in the personal interest of the directors only. Acts and engagements of the debtor after the date of cessation of payment and before the opening of the bankruptcy proceedings are, therefore, subject to clawback actions by the liquidator to have the commercial court declare that the engagements are not binding upon the estate. The law distinguishes between acts that will be automatically declared non-binding by the court (for instance, payments to a creditor before the due date or payments in kind) and less suspect acts that are potentially declared non-binding (mainly acts undertaken towards a creditor who had clear knowledge of the cessation of payments).

The management or board of directors is dispossessed of their power, and a liquidator appointed by the court takes over all powers under the control of a supervisory judge and the commercial court. Depending on the matters involved, the supervisory judge and the commercial court have to approve certain actions of the liquidator, inter alia, settlements that the liquidator wants to conclude to terminate disputes. To fund the operations, the liquidator can engage the estate. Debts ‘of’ the estate are immediately payable, contrary to debts dating from before the opening of the bankruptcy proceedings (termed debts ‘in’ the estate). The liquidator must ensure, under his or her personal liability, that the necessary funding is available in the estate and that the engagements taken are not detrimental to the creditors.

Upon the opening of the bankruptcy proceedings, all claims against the debtor are halted. Enforcement is suspended and interest calculation is stopped.

The liquidator realises the assets of the debtor, then distributes the proceeds, taking into account the privileges and securities of the creditors. The opening of bankruptcy proceedings triggers a concursus creditorum. Proceeds are distributed according to the legal rank of the creditors. Creditors of a same rank are treated on a pari passu basis.

Creditors having a right in rem can be entitled, under certain circumstances, to enforce their rights directly, not being subject to the bankruptcy proceedings and even without the intervention of the liquidator. However, this is rarely what they want. In general, creditors prefer that the liquidator undertakes all necessary actions, and then pays out these creditors taking into account their rights in rem.

Creditors of the estate are paid out of the estate prior to creditors in the estate.

Taking into account the interest of the estate, ongoing contracts can be terminated or continued by the liquidator. Creditors are entitled to force the liquidator to make such decision within one month following their request.

In cases where the activities or a part of these can be continued and transferred to another entity, the liquidator can be authorised by the commercial court to continue such business. This is subject to the condition that the continuation is not detrimental to the creditors. That is rarely done, as the liquidator is personally liable for the loss of value for the creditors should the transfer of undertakings not be successful or should the continuation of the business generate more costs than profits. Therefore, liquidators will require financial guarantees from candidate purchasers that wish the liquidator to continue the business while the transfer is negotiated.

The typical legal instrument to transfer undertakings from an insolvent company is a judicial reorganisation under the authority of the court. A transfer of an undertaking after bankruptcy is also an alternative, and opinions are divided as to whether the judicial reorganisation or the bankruptcy is the most efficient procedure.

Liquidation proceedings can take a long time, as they cannot be closed as long as legal proceedings regarding disputes are ongoing.

Judicial reorganisation

A judicial reorganisation aims at saving an enterprise, or at least its viable activities, thereby avoiding the stigma of bankruptcy. Judicial reorganisations are governed by the Law on the Continuity of Enterprises.

A company that is unable to meet its obligations and that is potentially threatened by enforcement by its creditors can apply for judicial reorganisation. Bringing the request before the court already provides a temporary protection and, when opening the reorganisation proceedings, the court orders a suspension of the debt existing at the time of the opening of the proceedings for an initial maximum period of six months. This period is meant to grant the company the time needed to execute measures to allow it to realise its turnaround. Such measures can be the reduction or restructuring of the debt and other economic measures to improve the business.

Three types of judicial reorganisation proceedings are available. The simplest type of proceeding involves the conclusion of an amicable agreement with two or more creditors who are parties to the agreement. Sometimes a restructuring, reduction or rescheduling of the debt with a few creditors can be sufficient to turn around the company without the involvement of all the other creditors.

The second type of proceedings involves all creditors, and is therefore more burdensome. It comprises the drafting of a restructuring plan and the approval by a positive vote of all the creditors. The plan must be approved by half of the number of creditors representing half the amount of all claims. Equal treatment of all creditors is not mandatory. Creditors can be put into different categories and treated differently, and the reduction of the debt of one category (at a minimum of 15 per cent of the amount) can allow the debtor to offer a higher dividend to another category, thus winning its positive vote. Equal treatment of all creditors within one category is, however, necessary. Transformation of debt into capital as part of the plan is also possible.

The third type of proceedings consists of a transfer of undertakings. It is essentially meant for situations where no restructuring plan can be expected to be accepted by the vote of the creditors. The viable part or parts of the activities can be transferred to one or more other legal entities. The price to be paid for (the parts of) the undertakings is presumed to be higher than the price a liquidator would obtain in bankruptcy proceedings. Therefore, this type of insolvency proceedings is deemed to be beneficial for the creditors and is preferred over bankruptcy. In this type of proceedings, the activities and assets are transferred free of charges: all rights of creditors, including rights in rem, are transferred to the price paid for the transfer.

In most cases, when all viable activities have been transferred, the debtor company will be an empty shell or an entity without any viable activity. It will have to be liquidated through bankruptcy or voluntary liquidation. As such, this third type of judicial reorganisation is to be considered as a liquidation proceeding rather than as a reorganisation proceeding in the sense of the EU Insolvency Regulation. In some cases, however, not all viable parts are transferred, and the price paid for the transferred part of the undertakings may provide the surviving company with the necessary funding for a successful turnaround. In such case, no liquidation or bankruptcy will follow the judicial reorganisation.

New debt arising after the opening of the reorganisation proceedings for new services or deliveries, whether through new contracts or through existing contracts, is not suspended and is immediately payable by the debtor. This is logical, and ensures that suppliers of goods or services will still perform. To offer a maximum incentive to contractors of the debtor to continue their commercial relationship, the law expressly provides that should such debt nevertheless not be paid and should bankruptcy of the debtor occur, the creditor concerned will be considered as a creditor of the estate in the bankruptcy proceedings. A major concern arises when, in such case, the value present in the estate appears not to be sufficient to pay all debts of the estate created by the application of this provision. Such situation does not necessarily point to any responsibility of the debtor. Indeed, it is difficult (if not impossible) for the debtor in the course of the reorganisation proceedings to predict whether bankruptcy will follow and how much value will be available in the estate.

This provision in the law could be used as a basis for debtor-in-possession financing. New loans granted to the debtor following the opening of the reorganisation proceedings, which would not be paid back, could be considered as debt of the estate. In cases where this funding would have been used to increase the value of the assets, the creditor would even be preferred over the existing creditors, having rights in rem on said assets.

Insolvency proceedings for non-commercial individuals

Insolvency of non-commercial individuals, which aims to reduce their debt, falls outside the scope of this chapter.

Voluntary liquidation

In principle, voluntary liquidation is meant to terminate the activity of a solvent company. A voluntary liquidation is governed by the provisions of the Belgian Companies Code. A company under a liquidation proceeding can appear to be insolvent during the course of the proceedings; in such case, previously, the company would necessarily have to be declared bankrupt. However, because of the evolution of the jurisprudence of the Court of Cassation, the voluntary liquidation can be continued if this is not detrimental to the creditors. A voluntary liquidation can be insolvent from the beginning if the creditors consent to the proceeding, or if at least the creditors are better off with the voluntary liquidation than with bankruptcy proceedings. Over the past few years, many voluntary liquidations were continued although insolvency appeared after the opening of the proceedings. Moreover, voluntary liquidations of companies are now also conducted although they are clearly insolvent from the opening of the liquidation proceedings if this is more advantageous to the creditors than a bankruptcy.

Voluntary liquidation is triggered by the shareholders deciding to dissolve the company, and is a deliberate choice of the shareholders not to opt for bankruptcy proceedings and to prefer a voluntary liquidation. The general assembly of shareholders appoints one or more liquidators who may be former employees or directors of the company or external liquidators. After its dissolution, the company is deemed to exist merely for the purpose of its liquidation. The legal capacity of the company is reduced to the acts needed to execute and terminate the liquidation. Each year, the liquidator must submit the annual accounts of the company to the general assembly, and must clarify the reasons why the liquidation has not yet been completed.

Creditors’ rights in an insolvent voluntary liquidation are comparable to their rights in bankruptcy proceedings. The main difference resides in the fact that the liquidator (often a former employee or director of the company) is less independent than a court-appointed liquidator in bankruptcy proceedings. The court-appointed liquidator will be less likely to refrain from investigations and possibly legal action against the board of directors of the company. 

Judicial liquidation

Under specific circumstances, and independently of whether the company is insolvent, the court can order the liquidation of the company and appoint a judicial liquidator. A judicial liquidation is governed by the provisions of the Belgian Companies Code.

The commercial court can order the judicial liquidation of a company for serious reasons upon the request of any shareholder or any interested stakeholder. Moreover, if the value of the net assets of the company has fallen below the minimum capital amount, any interested stakeholder is entitled to ask the court to order the dissolution and liquidation of the company. In cases where the company did not file its annual accounts for three consecutive years, any interested third party or the Public Prosecutor can request that the company be liquidated under court supervision, unless this situation is resolved before the liquidation has been ordered.

Provisional dispossession of the directors

In cases where a company is virtually bankrupt, and serious doubts arise that the debtor or its administrators got away with the assets of the company, the commercial court can, based on article 8 of the Bankruptcy Law, suspend the debtor’s rights and appoint a provisional administrator to represent the debtor. The court can act ex officio or upon request of a creditor. This suspension will automatically end after a period of 15 days unless the provisional administrator or the creditor files a request with the court to have the company declared bankrupt.

A similar provision is provided for in the Law on the Continuity of Enterprises, it being understood that the aim of the appointment of the provisional administrator is to contribute to the company’s turnaround and not its liquidation.

ii Informal proceedings

Formal proceedings entail negative publicity, and in most cases add to the difficulties of a company that is already in trouble. Therefore, the legislator has put a strong emphasis on informal proceedings. The absence of negative publicity also creates an incentive for the management of the company to undertake action at an earlier stage of the distress, thus increasing the chances of success.

Chamber of the court in charge of commercial investigations

The court, being an instrument of the state of public service to the business community, conducts research to detect companies in distress on the basis of specific economic indicators. The directors of these companies are invited to explain to a judge in charge of commercial investigations on a confidential basis the company’s situation and the measures they will adopt to turn the company around. If the response of the directors is not satisfactory, the court can inform the Public Prosecutor, who can initiate insolvency proceedings.

Amicable agreements (without judicial reorganisation proceedings being opened)

In cases where the company is not threatened by enforcement by the creditors and a suspension of the debt is not necessary, an agreement to rearrange the debt or to take other measures concluded with a few carefully selected creditors may be sufficient to turn the company around. The amicable agreement presents several advantages: the negotiations can be kept confidential; not all creditors should be alerted to the distress of the company; and there is no court involvement, and thus no long and costly proceedings to be put in place.

The reason why, prior to the adoption of the Law on the Continuity of Enterprises, creditors would not engage in such negotiations is that they feared possible clawback actions by the bankruptcy liquidator should the turnaround not be successful and the company is afterwards declared bankrupt. The Law on the Continuity of Enterprises provides legal protection for such amicable agreements under specific conditions. In cases where bankruptcy proceedings are opened within six months following the amicable agreement, the bankruptcy liquidator will not be entitled to engage in clawback actions based on Article 17, 2° or on Article 18 of the Belgian Bankruptcy Law. This means that the liquidator will not have the possibility to challenge the agreement for the reason that payment to a creditor was done before the due date of the claim, thereby preferring one creditor over the others (Article 17, 2°). Nor will the liquidator have the right to challenge the agreement for the reason that payment was received by one creditor, who was clearly aware of the distress of the company, to the detriment of other creditors who did not receive payment (Article 18). No protection is granted for gifts and payments in kind whose value is higher than the debt (Article 17,1°), for agreements by which an existing creditor adds new security to previous debts (Article 17, 3°) and against legal action of the liquidator based on the Actio Pauliana.

The conditions to obtain this legal protection are that the amicable agreement must expressly be qualified as such in the agreement and that express mention is made that the agreement aims at the improvement of the financial health of the company. The amicable agreement also has to be filed at the court.

Company mediator

Article 15 of the Law on the Continuity of Enterprises provides for the possibility to have a mediator appointed by the president of the commercial court or the president of the chamber of commercial investigations to facilitate the negotiations regarding the turnaround of a company. The law is silent about the precise mission of the mediator, which can be decided by the court on a case-by-case basis.

The benefits of such appointment are multiple. The combination of the confidentiality of the measure, the expertise, independence and credibility of the mediator, and the fact that the decision-making power of the management is not affected, make it a strong instrument.

The Belgian legislator is the first in Europe to expressly introduce mediation in its insolvency legislation. The main difference between mediation in general and the mediation aimed at in the framework of the Law on the Continuity of Enterprises is that the scope of the activity of the company mediator is broader than in ordinary mediation. Parties in the mediation are not necessarily involved in a dispute. There may just be functional tensions (for instance, where one party, a bank or a creditor in general is expecting payment and the other cannot pay). Tensions can also exist between the company’s directors or management and the shareholders. A company mediator can help to find a solution while respecting the interests and needs of all parties involved.

iii Taking and enforcing security

Depending on the assets available, different types of securities can be granted to creditors. A mortgage on real estate requires a notarial deed of mortgage and registration in a public register. The registration duties and notarial fees are determined by the amount of the secured debt. A pledge on shares needs to be registered. A statement of the pledge or notification should be entered in the company’s share register. A pledge on receivables (bank accounts, receivables, contractual rights) is effective and enforceable, and binding upon third parties, as soon as it is entered into. To make a pledge on receivables binding upon the underlying debtor, a notification is legally required. A pledge on intellectual property requires filing with the appropriate intellectual property office or offices. A pledge on the whole business is possible in favour of financial institutions only. The business comprises all instruments and assets needed to run a commercial activity. The pledge covers all these assets and instruments, with a limitation of 50 per cent of the stock. A pledge on a business must be registered in the public mortgage register to be binding upon third parties.

Creditors can also benefit from privileges granted by the law without any contractual provision being required. That is the case for numerous creditors, for instance, employees, the State Treasury and the Social Security. The law distinguishes between general and specific privileges. General privileges grant priority to the creditor on all moveable or immoveable assets (depending on the law). Specific privileges grant priority to the creditor over only one asset, but are higher ranked than general privileges.

The law determines the priority of claims of creditors in a concursus creditorum (for instance, in the case of bankruptcy). First in rank are the costs and debts incurred by the liquidator during the bankruptcy proceedings, including the liquidator’s fees. Second in rank are the creditors benefiting from a specific privilege, followed by those creditors benefiting from a general privilege. Last in rank, if any proceeds are still available, are the unsecured creditors.

iv Duties of directors of companies in financial difficulties

In limited liability companies, shareholders and company directors are not personally liable for the debts of a company. As they have an active role in the administration of the company, however, directors can be held liable for shortcomings or torts committed during their mandate. The Belgian legislator provides for a well calibrated system of liabilities, depending on the type of obligation that the director failed to respect.

III RECENT LEGAL DEVELOPMENTS

The Belgian Bankruptcy Law was adopted in 1997 and has not undergone significant modifications since. The Belgian law on reorganisation, called the Law on the Continuity of Enterprises, was adopted in 2009 and was slightly amended in 2013. The aim of this modification was the better prevention and detection of companies in financial distress, as well as the elimination of a number of abuses by introducing a legal obligation on the debtor to submit a range of documents as from the filing of its petition; a new financial threshold (costs in advance of €1,000 must be paid as from 1 January 2015 when submitting the petition for the initiation of judicial reorganisation proceedings); and an obligation on the external auditors, accountants and tax advisers to inform the debtor in detail of any significant and corresponding facts that may jeopardise the continuity of the debtor’s enterprise.

A reform of the Bankruptcy Law and the Law on the Continuity of Enterprises may be expected in the future. The main criticism is that these laws are not a perfect match and legal scholars plead for one insolvency act that governs both bankruptcy and reorganisation proceedings (see Section VI, infra). Another criticism is related to the fact that the current legal system for the remuneration of bankruptcy liquidators does not stimulate them to take legal action, such as engaging in legal proceedings on the basis of directors’ liability.

IV SIGNIFICANT TRANSACTIONS, KEY DEVELOPMENTS AND MOST ACTIVE INDUSTRIES

Each year, 50,000 Belgian companies are facing critical financial distress. According to figures published by Graydon, in 2015, 10,605 companies were declared bankrupt. The number of bankruptcies in 2015 decreased by 6.05 per cent in comparison with 2014. This decrease is a result of a number of initiatives of the courts, especially the courts of Brussels, such as the increased search for and detection of companies in distress; the slight economic recovery at the international level, which has an impact on export-import sensitive sectors; and the effect of the modification in 2013 of the Law on the Continuity of Enterprises. The highest number of bankruptcies is in the catering industry, followed by the building industry.

V INTERNATIONAL

The activities of companies are no longer confined to one country: either the assets of companies are spread over different states or companies have centres of activities established in different countries. Therefore, the number of international insolvency proceedings has greatly increased.

International insolvency proceedings raise two main questions. On the one hand, where should the opening of the insolvency proceedings be requested and which law applies to the insolvency proceedings? And on the other hand, to what extent will a foreign insolvency decision be recognised in another state, and what powers will a foreign liquidator have in another state?

Under Belgian law, these questions are governed by Chapter XI of the Belgian Code of Private International Law, which is enshrined in the Law of 16 July 2004. Article 116 of the Code states that Chapter XI is applicable to both bankruptcies and judicial reorganisations.

However, the scope of the Belgian provisions is quite limited as a result of the adoption in 2000 of the EU Insolvency Regulation, as well as the existence of a range of bilateral and multilateral treaties.

i EU Insolvency Regulation

The EU Insolvency Regulation deals with international jurisdiction, applicable law, recognition and cooperation. It is applicable whenever the debtor has its centre of main interests (COMI) within the EU. The effect of the regulation will, however, be limited to the assets located in the EU.

Jurisdiction of the Belgian courts

The EU Insolvency Regulation distinguishes between main insolvency proceedings, which have universal scope and aim at encompassing all the debtor’s assets, and territorial insolvency proceedings, which cover only the assets located in the state of opening.

Pursuant to the EU Insolvency Regulation, the Belgian courts will have jurisdiction to open main insolvency proceedings if the concerned company has its COMI in Belgium. If a company has an establishment and assets in Belgium, a territorial insolvency proceeding may be opened in Belgium but its effects will be limited to those assets that are located in Belgium.

Law applicable

The law applicable to the conditions for the opening of the insolvency proceedings, their conduct and their closure is that of the Member State of the opening of the proceedings (lex concursus). The EU Insolvency Regulation, however, provides a range of exceptions to the lex concursus, aiming at the preservation of the rights of the third parties that are located in a different Member State to the Member State of the opening of those proceedings.

Duty of information and cooperation

The EU Insolvency Regulation requires the liquidators of main and secondary proceedings to cooperate and exchange information.

Efficacy of foreign judgments

Any decision relating to the opening, the conduct or the closure of insolvency proceedings and decisions deriving directly from the insolvency proceedings or closely linked with them, as well as any preservation measures, shall be automatically recognised in Belgium with no further formalities. The enforcement of these decisions is, however, subject to a prior judicial review by the Belgian commercial courts.

The currently applicable EU Insolvency Regulation will be replaced by the EU Regulation 2015/848 of 20 May 2015 as from 26 June 2017.

If the business centre of the debtor is located outside the EU, bilateral or multilateral treaties will be applicable.

ii Bilateral and multilateral treaties

Besides the EU Insolvency Regulation, Belgium is a party to bilateral and multilateral conventions that deal with international insolvency proceedings, in particular recognition and enforcement issues. Following the entry into force of the EU Insolvency Regulation, the relevance of these treaties has been limited.

If neither the EU Insolvency Regulation nor one of these treaties is applicable, the Belgian rules of private international law will apply.

iii Chapter XI of the Belgian Code of Private International Law

International insolvency proceedings are governed by Chapter IX of the Belgian Code of Private International Law (Articles 116 to 121).

These provisions were inspired by the EU Insolvency Regulation and the UNCITRAL Model Law. However, some specificities exist.

Jurisdiction of the Belgian courts

Article 118 of the Belgian Code of Private International Law of the Belgian Code of Private International Law determines the cases in which the Belgian courts will have jurisdiction other than those cases where such jurisdiction derives from the EU Insolvency Regulation. In such cases, the opening of the insolvency proceeding, its progress and its closing will be governed by Belgian law.

This provision draws a distinction between main insolvency proceedings and territorial insolvency proceedings.

The main insolvency proceeding is defined by Article 117, 2° of the Code of Private International Law as the insolvency proceeding whose effects extend to the assets of the debtor as a whole. Belgian courts have jurisdiction to order the opening of a main insolvency proceeding when the main establishment or the registered office of the debtor is located in Belgium.

The territorial proceeding is defined by Article 117, 3° of the Code of Private International Law as the insolvency proceedings whose effects are limited to the assets of debtors that are located on the territory of the state in which the said proceeding is opened. Belgian courts have jurisdiction to order the opening of territorial insolvency proceedings when the debtor has an establishment in Belgium.

Duty of information and cooperation

Article 120 of the Belgian Code of Private International Law imposes on the liquidator of a main proceeding or of a territorial proceeding opened pursuant to Article 118 of the Code a duty to cooperate and exchange information concerning the management of foreign insolvency proceedings.

This duty is, however, subject to a condition of reciprocity, meaning that such duty will only apply where the foreign state provides for the duty in its own laws. Moreover, the liquidator will not be bound by this duty if the inscription, publication and cooperation costs are unreasonable compared with the assets of the debtor.

This cooperation duty also implies that if the liquidation of the assets of a territorial proceeding is sufficient to pay all the admitted claims of the creditors, the liquidator designated in this proceeding will have to transfer without delay the excess of assets to the administrator of the main proceeding on the condition that there exists reciprocal cooperation and exchange of information in said proceeding.

Efficacy of foreign judgments

Article 121 of the Code of Private International Law deals with the issue of the recognition of foreign insolvency decisions when the EU Insolvency Regulation or a bilateral or multilateral convention do not apply.

Pursuant to Article 121 of the Code of Private International Law, a foreign decision relating to the opening, progress or closing of an insolvency proceeding that was not delivered on the basis of the EU Insolvency Regulation is recognised or declared enforceable in Belgium, provided that:

  • a as a decision of a main proceeding, the decision was rendered by a court of the state in which the main establishment of the debtor was located at the time of the introduction of the proceeding;
  • b as a decision of a territorial proceeding, the decision was rendered by a court of a state in which the debtor has an establishment other than its main establishment; and
  • c the effect of the foreign decision is not contrary to the rights of the third parties provided for in Article 119, Sections 2 to 4.
Powers of the foreign liquidator

In cases of recognition, the liquidator may exercise the powers granted to him or her by the foreign decision, such as requesting the opening of a territorial proceeding in Belgium, or any provisional and conservatory measures in his or her capacity as liquidator in the foreign main proceeding.

The foreign insolvency decision must not be formally recognised for the foreign liquidator to exercise his or her powers. It is only in cases where the insolvency decision is challenged that the foreign liquidator might have to request the formal recognition of said decision and his or her mandate.

Vi FUTURE DEVELOPMENTS

The current insolvency legislation in Belgium is quite recent, with laws dating from 1997 for bankruptcy proceedings (the Bankruptcy Law) and 2009 and 2013 for reorganisation proceedings (the Law on the Continuity of Enterprises). A reform of the Bankruptcy Law may be expected in the future. It might be hoped that the expected future reforms of the Bankruptcy Law will include making a better fit with the Law on the Continuity of Enterprises. Indeed, unsuccessful reorganisations often end in bankruptcy, and successful reorganisations on the basis of a transfer of undertakings also end up in the bankruptcy or voluntary liquidation of the remaining (almost empty) shell. Ideally, the Belgian legislator would adopt a completely new law including both provisions on the bankruptcy and the reorganisation of companies in distress.

Footnotes

1 Bart De Moor is a partner and Marie Keup and Charlotte Stragier are associates at Strelia.

2 1346/2000.

3 Provided for in Article 8 of the Bankruptcy Law of 8 August 1997 (the Bankruptcy Law).