Belgium: Covid-19 - Facilitations for companies15 May 2020
Because of the economic impact that the current pandemic and the government measures relating to it are having on many Belgian companies, the government decided to introduce a number of temporary measures to safeguard the livelihoods of such companies and to support (temporary) liquidity problems resulting from the government measures. These measures were taken in Royal Decree No 15 on the temporary suspension of implementing measures and other measures in favour of companies during the COVID-19 crisis of 24 April 2020 (hereinafter ‘the Royal Decree’).
Who does the Royal Decree apply to?
The Royal Decree applies to all companies described in Book XX of the Economic Law Code1 (hereinafter: ECL) whose continuity is threatened by the Covid-19 pandemic or its consequences and who were not in a state of cessation of payments on 18 March 2020, the date on which the 'lockdown light' was initiated in Belgium. These last two conditions are cumulative.
Thus, organisations without legal personality which have no distribution purpose and do not in fact provide pay out, as well as legal persons governed by public law and public bodies, cannot benefit from the more favourable measures.
During what period do the measures apply?
The measures shall apply during the initial period from 24 April 2020 to 17 May. However, this period may be extended pursuant to Article 1(4) of the Royal Decree.
Nevertheless, the Royal Decree entered into force without retroactive effect.
Which measures were taken?
Six measures were taken to support firms in difficulty during the abovementioned period.
1. Suspension of precautionary and executory attachments and suspension of the use or continuation of means of enforcement
During the aforementioned period, it is impossible for creditors to levy a precautionary or executory attachment on movable property. Please note that a precautionary or executory attachment of immovable property falls outside the scope of this measure: this remains possible. This is due to the fact that a precautionary attachment does not prevent the use of the immovable property and can thus guarantee the continuity of the company and due to the fact that the procedure to obtain an executory attachment for immovable property still takes a long time. Precautionary attachments on seagoing and inland vessels are also excluded from the measure, but this is a less common phenomenon.
This arrangement applies to all debts of the defaulting company, including interest, as well as debts included in the reorganisation plan of the company in application of Article XX.82 ECL and which have been homologated.
2. No declaration of bankruptcy and judicial winding up of enterprises and no forced transfer under judicial authority
During the period covered by the Royal Decree, a company cannot be declared bankrupt, nor can it be dissolved by the court on the basis of a writ of summons from a creditor or interested party. There are, however, a number of exceptions to this. For example, the aforementioned is possible if this is done at the request of the Public Prosecution Service or at the request of the provisional administrator appointed pursuant to Article XX.32 of the ECL. This is also possible on the company's own declaration.
An order for transfer under judicial authority in application of Article XX.84, §2, 1° ECL is also impossible. This regulation was added to the Royal Decree in order to comply with the principle of non-discrimination.
Important note: this regulation also applies to pending procedures, provided that the general scope of the Royal Decree (see above) is met.
From a practical point of view, this arrangement would have consequences with regard to the suspicious period if the suspension period were to be extended in application of Article 1(4) of the Royal Decree to a period of more than 6 months. If necessary, the curator would have to deal with this problem by means of a Paulian action in bankruptcy.
3. Term of the obligation to report bankruptcy (art. XX.102 ECL)
Closely related to the previous measure is the suspension of the obligation to report one’s own bankruptcy if the bankruptcy conditions are met. This obligation is suspended during the period of suspension, but only if there is a causal link between the fulfilment of the bankruptcy conditions and the current pandemic. The criminal sanction for those who fail to comply with this obligation, i.e. imprisonment of between one month and two years and a fine of between 100,00 EUR and 500.000,00 EUR (to be increased with surcharges) or only one of these penalties pursuant to Article 489bis of the Penal Code, will thus lapse during this period.
Please note that it is always allowed to report one’s own bankruptcy, only the obligation to do so will be waived for the time being.
4. Suspension of payment deadlines in a reorganisation plan
The payment periods included in a reorganisation plan in application of Article XX.82 ECL that have been homologated are extended by a period equal to that of the period to which the Royal Decree relates. As this period can still be extended, these payment periods can be further extended. This extension may cause the maximum periods referred to in Articles XX.74 and XX.76 ECL to be exceeded.
5. No judicial or unilateral termination of contracts
Contracts with companies that comply with the scope of the Royal Decree cannot be dissolved during the period of suspension for non-payment or conventional mechanisms linked to non-payment (e.g. non-payment of an indemnity clause), either judicial or unilateral. This arrangement only applies to agreements concluded before 24 April 2020. In addition, employment contracts are excluded from this scheme.
6. New credits entered into during the period of suspension
Article 1328 of the Belgian Civil Code and Article XX.112 of the ECL, being respectively the fixed date of private deeds and the non-opposability of acts for consideration entered into during the period of suspicion, are not applicable to new credits entered into during the period of suspension or to securities or other implementing acts taken in the execution of these new credits.
In addition, lenders of these new credits cannot be held liable solely on the grounds that the granting of these credits did not actually enable all or part of the business to continue as a going concern.
Furthermore, the Royal Decree also clarifies that a number of matters and obligations are retained for companies to which the Royal Decree applies, namely the obligation to pay due debts and the fact that contractual sanctions under ordinary law are retained (e.g. damages clauses, the so-called ENAC, set-off and the right of retention). Also, the Financial Securities Act remains unaffected and the Royal Decree does not affect employers' obligations.
If one is of the opinion that a company has wrongfully called upon the measures of the Royal Decree, a procedure as in interim relief can be initiated before the chairman of the competent Enterprise Court. This procedure can be initiated by any interested party by summons. The dissolution of the measures called upon by the company can be pronounced in whole or in part.
In reaching his decision, the chairman should take into account, inter alia, whether, as a result of the Covid-19 pandemic, the turnover or activity of the undertaking summoned has fallen sharply, whether economic unemployment has been called upon, either in full or partly, and whether the government has ordered the closure of the undertaking in question, as well as the interests of the applicant.
For further information, contact:
Sebastiaan Meeuwens, Advocaat
Legalis advocaten, Tessenderlo
t: +32 13 671201
1 In Belgium referred to as ‘Wetboek Economisch Recht’.
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