Flexible insolvency rules will continue to apply until 31 March 2023

During the corona crisis, insolvency rules were considerably eased and a so-called pre-packaged bankruptcy procedure was also provided for. In principle, this easing was supposed to stop in mid-2022, but it has been extended in the meantime. And immediately until 31 March 2023.

Just a recap

The easing of the insolvency rules actually consists of three parts.
A first easing concerns the legal requirement to immediately add all documents when submitting a petition to open a legal agreement; and this 'under penalty of nullity'. At the moment this is not necessary: companies are allowed to deposit the necessary documents up to 2 days before the session.

The second easing has to do with the duration of the commercial inquiry: it was extended – for the benefit of companies in difficulty in the corona era.
If a judge-reporter has been appointed, the term currently is 8 months (instead of the usual 4 months) and can be extended to 10 months.
If the investigation is conducted by the Chamber for companies in difficulty itself, the term currently is 18 months (instead of 8 months).

The third measure consists of the pre-packaged bankruptcy procedure. This procedure allows companies in difficulty to conclude a preliminary agreement with one or more creditors. This offers the advantage that the court can decide more quickly to continue the company under the conditions that the parties have already agreed upon.

Why?

But why this additional delay? The reason for this is not so much to be found in (the aftermath of) the Covid-19 crisis, but in a European directive. More specifically, this concerns the European Restructuring Directive of 2019, which should have been transposed into Belgian law by 17 July 2021. With this directive, the European Union aims to harmonize insolvency law in the different Member States, with an emphasis on effective preventive restructuring frameworks. Furthermore, Europe wants honest entrepreneurs who are insolvent or over-indebted to allow full debt waiver after a reasonable period of time. Finally, the directive also contains rules for more efficient insolvency procedures.

Our country started preparations in 2021 to adapt Belgian insolvency law to the Restructuring Directive, but did not meet the deadline.

Delay in Belgium

The measures taken against the corona crisis turned out to be a step in the right direction, but were as such not sufficient. More legislative work is needed to fully transpose the directive into Belgian law. Fortunately, Member States were able to get a 1-year extension if they encountered particular difficulties in transposing the Directive. That is why the corona easing originally ran until 17 July 2022. However, even that date turned out to be unfeasible.

Instead of reverting the solvency rules after corona to the classic rules and then adapting them again to European solvency law, the government now decided to keep the current corona regime until 31 March 2023, in the hope that the European directive against that date can be integrated into our Belgian law.