The judicial reorganization offers companies protection against creditors. It is intended for companies facing temporary difficulties. The company actually still has enough assignments and can continue to work. She could get out of debt but needs to get a viable repayment plan for that. So a plan where the amount to be repaid is realistic for the company.
The judicial reorganization procedure gives a period of suspension of payment , which gives the debtor a respite to solve his financial problems. During that period, the company cannot be declared bankrupt and executive bailiffs can no longer be seized.
The judicial reorganization procedure offers many legal options for the company to get out of debt. You can get period payment plans up to a maximum of 5 years. The longer the period in which you can pay off, the smaller the amount you have to pay off monthly. You can also ask your creditors to repay only part of the debt and not the entire amount.
It is a legal procedure, which means that you have to submit a petition to the court in order to use it. Filing of the petition is done via the website www.regsol.be.
You must enclose certain documents with that petition. Those pieces have to be made by experts and they are not free. A fee must be paid when depositing in regsol.
The judicial agreement procedure had a different name before 1 May 2018: the Business Continuity Act. Better known as the WCO. The procedure described below applies to all procedures opened after May 1, 2018. For ongoing procedures, opened before May 1, 2018, the WCO will continue to apply.
The aim of the Judicial reorganization (formerly WCO - Business Continuity Act) is to overcome financial problems and avoid bankruptcy . The procedure protects a company against its creditors, for a period determined by the court (maximum 6 months, renewable by maximum 18 months). This can be done in three ways:
1. Friendly agreement : you consult with a number of creditors to reach an agreement. You should not make an agreement with all your creditors. With at least 2 creditors. You choose with which creditors. Of course you need the agreement of the creditor with whom you want to make an appointment.
2. Collective agreement : you propose a reorganization plan to all creditors. If the majority of your creditors agree, then the plan is binding on everyone included, that is, those who disagreed must follow the plan anyway. After approval of the plan by the creditor, the plan must also be homologated by the court.
3. Transfer under judicial authority : you want to sell your business or part of it. A prosecutor appointed by the court will take on this task. The proceeds of the sale are distributed among the creditors.
The debtor must request the start of this procedure from the Enterprise Court by means of a petition. This petition must comply with many legally determined rules. The debtor must choose one of the above three goals. However, he can ask the court to change this aim at any stage of the procedure.
If the company in difficulty opts for an amicable agreement, it will conclude this with one or more creditors. It is free to choose which creditors to negotiate with and is not obliged to involve all creditors in the amicable settlement.
If the company opts for a collective agreement, and therefore a reorganization or payment plan, it will have to submit this plan to the creditors. The aim is to pay off all or part of the debts over a maximum period of five years. This plan will be voted on. It will be approved when the majority of creditors present with their claims represent at least half of the total debt. The court will approve the plan, ie include it in a judgment so that it acquires legal force and is therefore binding on all creditors, including those who did not participate in the vote or who did not agree.
In order to ensure that companies in a hopeless financial situation can still be partially saved, it is possible to sell the profitable parts / activities of the company in the context of the judicial reorganization. In that case, the transferee is exempt from all risks associated with the business transferor in a bad financial situation.
During the judicial reorganization procedure, the enterprise debtor obtains a “suspension of payment” for (in principle) a maximum of 6 months. The debtor will not have to pay his existing creditors during this period (note: debts incurred after the start of the procedure must be paid!). He can still choose to pay them voluntarily. In the period of suspension, therefore, the creditors themselves cannot execute their claim, for example through attachment or forced sale. In addition, the company-debtor cannot be declared bankrupt / dissolved in court during that period, unless he applies for this himself.
However, with the amendment of the law of 1 May 2018, the procedure has become stricter. For example, it is still possible, during the procedure, to proceed with a public sale due to a seizure if the day of sale had already been determined and would take place within two months of the application being lodged.
This change has been made to limit abuse. After all, it used to be possible to submit a request for a judicial reorganization in order to counter an imminent public sale, but this will no longer be possible with the new regulation.
The company court opens the procedure for judicial reorganization if the continuity of the company is threatened immediately or in the longer term. In the case of a company, there is in any case a threat by law when the turned losses have caused the net assets to fall to less than half of the share capital.
Therefore, being in a state of bankruptcy (but not yet declared bankrupt) does not prevent the opening of the proceedings.
The court will also appoint a delegated judge to supervise the conduct of the proceedings and the debtor.
The procedure can be terminated (early) at the debtor's request. The court will hear the debtor and the delegated judge and may then decide to terminate the proceedings in whole or in part. The debtor may request that all agreements concluded with creditors during the proceedings be recorded in the judgment.
The court can also autonomously decide to terminate the procedure prematurely. In the same judgment, the court can choose to pronounce the bankruptcy of the debtor or judicial liquidation of the debtor company.