If a company is temporarily unable to pay its debts or if the business continuity is at risk, a judicial restructuring (under the former Continuity of Enterprises Act) may be a solution. The goal is to overcome financial difficulties to avoid bankruptcy.
An application for judicial restructuring provides protection from creditors for up to four months, in principle. The suspension of payments means that the company no longer has to pay the old creditors, and the creditors cannot proceed to claim their debts. Depending on the situation, the company can opt for a public or private procedure.
The objective of judicial restructuring can be threefold:
A company in dire straits may opt to enter into an amicable agreement with one or more key creditors under the supervision of a court-appointed delegated judge or with the assistance of a restructuring expert. The company can choose which creditors to negotiate with without having to include all creditors in the amicable agreement.
If the company opts for a collective agreement, it will have to submit a restructuring plan to its creditors, aiming to repay all or part of the existing debts within a maximum of five years. The court will set a date to vote on the restructuring plan.
The plan will be approved if agreed to by the majority of the creditors present, whose combined claims represent at least half of all amounts due. After the creditors' approval, the court will homologate the restructuring plan. Following homologation, the plan will be binding for all creditors, including those who did not participate in the vote or voted against it.
To offer companies in a desperate financial situation the option to salvage profitable parts or activities of the company, a judicial restructuring plan may also include the transfer or partial transfer of the company. A crucial factor here is the debtor's ability to sell the business' profitable activities, whereby the priority is the partial rescue of the business. The recipient, on the other hand, is indemnified from all risks associated with the transferring party.
Since 2023, a distinction must also be made between public judicial restructuring procedures for small and medium enterprises and those for large enterprises. For large companies, the criteria are: they must have at least 250 employees for two consecutive fiscal years, reach an annual turnover of 40 million euros or a balance sheet total of 20 million euros. Small businesses can also voluntarily opt into this system.
An important variant of this process is private judicial restructuring, under which the proceedings are kept strictly confidential to protect the company's reputation. No public announcements will be made in these proceedings. The company can reach an agreement without public disclosure, under the guidance of a restructuring expert and in consultation with creditors or capital holders.
If a company believes that it is bankrupt, it can ask the courts to prepare a transfer of assets and operations prior to the declaration of bankruptcy. This process is completely confidential and provides an opportunity to save the healthy parts of the company. The court will appoint a proposed trustee and a proposed bankruptcy judge to oversee the process. This helps preserve the company's valuable assets and ensures the highest possible payout to creditors while preserving jobs.
In a voluntary dissolution and liquidation of a company, the governing body indicates its desire to cease the company's activities. There may be various reasons for this, including poor economic prospects, restructuring or disagreements between shareholders or partners. A liquidator can lead the voluntary liquidation of a company.
A liquidation involves a series of operations aimed at liquidating all the company's assets and using them to pay off outstanding debts. The preparation of the plan for the distribution of assets among creditors must be submitted to the commercial court for approval before the assets can be distributed among the shareholders or partners.
Caluwaerts Uytterhoeven's insolvency team offers assistance and advice in areas such as:
In addition to insolvency law, we specialise in a wide range of other areas of expertise, including company law, M&A and commercial & distribution law. Other areas of expertise include labour law and mediation & arbitration.
Caluwaerts Uytterhoeven has offices in Antwerp and Turnhout, where we provide our clients with personal and professional legal counsel.
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