In Belgium there are three types of judicial reorganisation:
Reached with two or more creditors.
Whereby the debtor presents a collective agreement with a proposition of measures to safeguard the continuity of the company (e.g. reduction of debts by up to 80%, repayment plan etc.), which needs to be approved by the majority of the creditors representing more than 50% of the total debt of the company.
Transfer under judicial authority
Whereby the Court appoints a court representative who is responsible for organising and realising the (partial or full) sale of the business. This is often used to sell the healthy parts of a business and to leave behind the unhealthy parts, after which the company with the remaining assets is often liquidated. The management of the company remains in charge of the day-to-day business, but the court representative has exclusive power in respect of the sale process.
Aside from judicial reorganisation, a company in difficulty can also opt for out-of-court amicable settlement with two or more creditors.
As from the time of deposit of the request for the opening of a judicial reorganisation, the company is granted the benefit of suspension of payment of debts originating from before the opening of the procedure. The initial suspension period is a maximum of 6 months, but it is possible to ask the Court to extend this up to 18 months. The payment of new debts originating from after the opening of the procedure is not suspended. If the company fails to pay its new debts, the Court can decide to terminate the judicial reorganisation.
The company cannot be declared bankrupt as long as it is involved in a judicial reorganisation, and the directors also cannot be held liable for late filing for bankruptcy during this period (unless the judicial reorganisation was opened for the sole purpose of avoiding having to file for bankruptcy).
During the judicial reorganisation proceedings, the directors remain in charge of managing the company and will continue to carry out its day-to-day activities.
The purpose of bankruptcy proceedings is to place the debtor’s assets under the authority of a trustee who is charged with managing and liquidating the assets of the company and distributing the proceeds among the creditors. Once bankruptcy proceedings are initiated the directors will no longer have any powers.