Judicial reorganisation procedure: two draft bills pending under the benefit of urgency
Estimated time to read this article4 min
Date of publication11 December 2020
Author(s)Maxime Born, Fanny Laune
CategoriesCorporate M&A and Capital Markets, Dispute resolution
The legislator has tabled two draft bills, respectively on 10 June 2020 and 21 October 2020, to amend a.o. the provisions relating to the judicial reorganisation procedure (PRJ/WCO) governed by Book XX of the Code of Economic Law (CEL).
The review of these draft bills is being carried out under the emergency procedure notably because of the current economic crisis and its impact on the continuity of enterprises.
The first draft bill of 10 June 2020
It aims at adapting the PRJ/WCO to the needs of the economic crisis caused by the Covid-19 pandemic, notably by facilitating access to it, especially for SME’s.
There are three main proposals to this end:
1. The broadening of the possibility to appoint one or more judicial representatives for debtors in difficulty
- by allowing the debtor himself to ask the president of the competent Court of Enterprise to appoint a judicial representative
- when “exceptional circumstances or events […] endanger or are likely to endanger all or part of the proper functioning of the economic activities of the debtor” ;
2. The creation of a new provisional guarantee system
With this new system, the debtor could obtain, under the supervision of the court and, if necessary with the help of a company mediator, certain temporary payment facilities. Those facilities notably consist in a suspension period during which the obligation to pay remains intact, but is suspended without any sanction being imposed.
As far as the creditors are concerned:
- They keep their right of set-off, their right of retention and the possibility to invoke the defence of non-performance;
- They can also oppose these provisional measures throughout their duration before the president of the Court of Enterprise. In that case, it is up to the president of the Court to decide by assessing the interests of each party;
- The creditors cannot terminate a contract during the suspension period. In addition, the penalty clauses are deemed unwritten.
3. The relaxation of the formal admissibility requirements by abolishing the inadmissibility sanction of the application in case of failure to file a specific document/exhibit.
This being said, the debtor shall justify “in a detailed manner” the reason why he is unable to provide the requested document/exhibit. Such an impediment can only be temporary.
Certain documents (see art. XX.41, §2, 5° to 9° of the CEL) must be filed at least 48 hours before the hearing on the application for the PRJ/WCO. If it remains impossible for the debtor to provide these documents within the time limit indicated by the Court, the debtor may file an explanatory note in the register to justify this impossibility.
The second draft bill of 21 October 2020
It notably aims at incorporating the Plessers ruling of the Court of Justice of the European Union in Articles XX.84 and seq. of the CEL regarding the PRJ/WCO by transfer under judicial authority.
The legislator proposes to impose upon the assignee an obligation to motivate his choice not to take over certain employees of the transferred enterprise on technical, economic or organisational grounds that are independent of the transfer itself. The insolvency Court shall check this motivation when the authorisation of the transfer is granted.
Given the uncertain times we are living in now, the measures proposed by these two draft bills should be well received by enterprises.
The first one enables enterprises, particularly SMEs, to obtain the help of a judicial representative and some temporary payment facilities according to a procedure that is simpler, faster and more discreet than the PRJ/WCO. And if this procedure should prove insufficient, access to the PRJ/WCO would then be facilitated.
These measures are in line with the requirements of the European directive on frameworks for preventive restructuring, debt forgiveness and forfeiture, and measures to be taken to increase the efficiency of insolvency proceedings. Our legislator is apparently already anticipating the implementation of this Directive which should be transposed by 17 July 2021.
As for the measures proposed in the second draft, they clarify the rules on the maintenance of employees’ rights in the event of a PRJ/WCO by transfer under judicial authority to avoid such transfer operations under Belgian law to be questioned under the recent European case law.
We will of course monitor these next developments in the insolvency world closely, so stay tuned.
Should you have any question, do not hesitate to contact Fanny Laune: