Is the judicial reorganisation procedure useful to protect against bankruptcy in Belgium?

Raphaël Gevers

Is the judicial reorganisation procedure useful to protect against bankruptcy in Belgium?

Raphaël Gevers is a Partner at DALDEWOLF and specialises in bankruptcy and reorganisation, company restructuring and composition procedures. He is also a visiting lecturer at UCL-Mons (Université Catholique de Louvain - Mons). Raphaël provides relevant services in terms of reorganisation (equivalent to the US chapter 11) or formal insolvency procedures. Contact Raphaël.

Entrepreneurs have been granted a moratorium by the authorities to deal with difficulties caused by the pandemic. Institutional creditors have recently started to file for bankruptcy again. Not inevitableHowever, bankruptcy is not inevitable. There is a general protection mechanism to protect a company that is experiencing serious payment difficulties and to help it recover. This is the judicial reorganisation procedure (JRP).It can be a lifesaver for companies when traditional suppliers, landlords, tax authorities, etc., become impatient and aggressive because of non-payment.A protective bubbleIn concrete terms, when a company applies for and obtains the benefit of the JRP, it is placed in a protective bubble for a period of up to 6 months, during which its creditors cannot demand payment of past invoices or carry out seizures.This is an important advantage that the company benefits from immediately. Moreover, as long as the JRP lasts, the company cannot be declared bankrupt.Remaining the bossIn the event of a JRP, the managing director remains the “boss” of their company. All decisions continue to be taken by them alone. In order to obtain a JRP, the administrator must file a request, accompanied by ten legal and accounting schedules. It is therefore necessary to ensure that the accounts are up to date.JRP by collective agreementThere are three types of JRP but the most commonly used is JRP by collective agreement, which involves negotiating a payment plan with all creditors.The proposals included in this plan may consist of:

payment periods – the company can propose that its creditors be paid over a period of 5 years maximum (or 2 years maximum depending on the category of creditors), and/or

reduction of claims – the company can offer its creditors to waive part of their claim (the law stipulates that creditors must receive at least 20% of their claim).

These payment proposals are then presented to the vote of the creditors.Thinking about tomorrow, and recoveryThe JRP by collective agreement is a tool provided for by the law. Its usefulness is undeniable but its effectiveness will only be actual if it is requested in time. The success of a JRP largely depends on it not being requested too late.It is therefore important to know the mechanisms before it is too late, and to integrate the deadlines into one's calendar.For the sake of completeness, it should be remembered that the act of 21 March 2021 also introduced the possibility of drawing up a pre-pack agreement (of a confidential nature) which can then be finalised by an accelerated JRP procedure.

It would be a pity to miss the opportunities of post-pandemic recovery by not being prepared for the impatience of ruthless creditors.

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