The electronic signature: which validity?

With the COVID-19 crisis and the rise of teleworking, certain practices have evolved as the use of electronic signatures, which may soon become the rule rather than the exception. In practice, it is not always clear which documents can be signed electronically, which type of electronic signature should be used and what is its legal value. This news addresses the legal and practical aspects of the e-signature.

Legal provisions applicable

Article 1322, subpara. 2, of the Civil Code, provides that “a signature may be required for the application of this article for a set of electronic data that can be attributed to a specific person and that establishes the maintenance of the integrity of the content of the act”.

Regulation (EU) No 910/2014 on electronic identification and trust services for electronic transactions in the internal market (eIDAS Regulation) provides that:
1. An electronic signature shall not be denied legal effect and admissibility as evidence in legal proceedings solely on the grounds that it is in an electronic form or that it does not meet the requirements for qualified electronic signatures.
2. A qualified electronic signature shall have the equivalent legal effect of a handwritten signature.
3. A qualified electronic signature based on a qualified certificate issued in one Member State shall be recognised as a qualified electronic signature in all other Member States.” (art. 25 of the eIDAS Regulation).

Different types of electronic signatures

There are three types of electronic signatures, classified according to their level of security.

The basic electronic signature

This signature consists of “data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign” (art. 3.10 of the eIDAS Regulation). In practice, it can be a scan of a signature integrated into an electronic document, a ticked box on a website, a signature on a delivery man’s terminal, etc.

The signatory will have to establish, if the validity of his/her signature is disputed, that (i) it is attributable to him/her and (ii) the integrity of the content of the signed document is guaranteed (art. 1322, subpara. 2 Civil Code). This second condition, which is controversial, is doomed to disappear with the new Book 8 of the Civil Code, which will come into force on 1 November 2020.

The advanced electronic signature

An advanced electronic signature meets the following requirements:
(a) it is uniquely linked to the signatory;
(b) it is capable of identifying the signatory;
(c) it is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control; and
(d) it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable.” (article 3.12 and article 26 of the eIDAS Regulation).

How – by means of which technological solution – the four requirements are complied with, is irrelevant for the legislator. As a result, service providers such as DocuSign, GlobalSign, Yousign, etc. have developed various processes to verify the signatory’s identity and the integrity of the signature to offer advanced electronic signatures.

Even if advanced electronic signatures are not assimilated to handwritten signatures by article 25.2 of the eIDAS Regulation, they rely on more elaborate verification processes which in principle meet the requirements of article 1322, subpara. 2 of the Civil Code. Therefore, they will be used for documents with high financial and legal stakes, and each time the law so requires.

The qualified electronic signature

A qualified electronic signature is an advanced electronic signature that (i) is created by a qualified electronic signature creation device (see requirements of Annex II of the eIDAS Regulation) and (ii) is based on a qualified electronic signature certificate that links the signature to the signatory’s identity (see requirements of Annex I of the eIDAS Regulation) (article 3.11 of the eIDAS Regulation).

A qualified signature is assimilated to a handwritten signature (art. 25.2 of the eIDAS Regulation) and has the same legal value. A qualified signature recognised as such in an EU Member State shall be recognised with the same legal value in all EU Member States.

In Belgium, a signature created with an identity card will be considered as a qualified electronic signature (to find out how to sign a document using your electronic identity card, see here). An EU Trusted List also gathers all trust service providers able to provide qualified signatures in Belgium (see the list here).

Itsme and GlobalSign have been accredited as such qualified trust service providers.

Requirement of multiple originals

Article 1325 of the Civil Code, which does not apply to B2B contracts, states that: “private deeds containing synallagmatic agreements are valid only to the extent that they have been made in as many originals as there are parties with a distinct interest”. Given the obvious difficulty of satisfying this condition with digital contracts, article XII.15 of the Code of Economic Law provides that “any legal or regulatory requirement of form relating to the contractual process shall be deemed to be satisfied in respect of a contract by electronic means where the functional qualities of that requirement are preserved”.

Therefore, the formality of “multiple originals” is met when a document is digitally signed by all the parties, for which any modification of the content of the act requires the joint action of each of them.
Since it is not a matter of public order, the parties can also contractually exclude the application of article 1325 of the Civil Code.

In practice

Acts under private signature

Private agreements can be validly concluded by means of an electronic signature.

All types of signature are valid, provided that the conditions of article 1322, subpara. 2 of the Civil Code are met for unqualified signatures. In practice, disputes as to the probative value of an unqualified electronic signature are rare. The type of signature will, therefore, certainly depend on the importance of the document to sign.

Notarial deeds

Article 1317 of the Civil Code states that notarial deeds can be received in dematerialised form, in which case a qualified electronic signature will be admitted.

In practice, the electronic signature of these deeds implies the establishment of a database of notarial deeds (NABAN), which has not yet been implemented.

Corporate documents

Documents drawn up for the management of legal entities (such as minutes) may be signed electronically by ordinary, advanced or qualified signatures.

The Companies and Associations Code expressly provides for the use of the ordinary or qualified electronic signatures for remote and proxy voting (art. 7:143 and 7:146).

The choice of the type of signature will depend on the importance and the nature of the decision taken by the corporate body.

Conclusion

According to the principle of non-discrimination in article 25.1 of the eIDAS Regulation, an electronic signature cannot be disregarded solely on the ground that it is an electronic signature. The author of a qualified signature will be assimilated to the author of a handwritten signature, whereas the author of an ordinary or advanced signature will have to convince the judge of the meeting of the conditions of article 1322, subparagraph 2 of the Civil Code.

In practice, all documents can be signed electronically but the type of e-signature must be adapted to the issues involved.

***

For any question on this subject, please contact Sandrine Hirsch or Axel Maeterlinck
sandrine.hirsch@simontbraun.eu | +32 (0)2 533 17 64
axel.maeterlinck@simontbraun.eu | +32 (0)2 533 17 64

Covid-19 – Temporary protective measures for enterprises in difficulty – Extended until 17 June

Update 13 May  |  The Federal Government has adopted new protective measures for enterprises affected by the COVID-19 crisis in the Royal Decree n°15 of 24 April 2020 (the “Royal Decree”).

Which enterprises are eligible to benefit from these measures?

  • Enterprises within the meaning of Book XX of the Belgian Code of Economic Law;
  • whose continuity is threatened by the COVID-19 pandemic and its consequences; and
  • which were not in a state of cessation of payments on 18 March 2020.

For how long may enterprises benefit from these measures?

The measures shall apply from 24 April 2020 to 17 June 2020 (the “Moratorium”). They have been extended beyond the first Moratorium running until 17 May, by a Royal Decree of 13 May 2020 extending the measures initially provided by the Royal Decree n° 15.

What are the measures to protect enterprises affected by the crisis?

No preventive or enforceable seizure may be granted, and no enforcement action may be pursued or carried out on an enterprise’s assets.

Seizures on real estate assets remain permitted.

An enterprise may not, at the request of its creditors, be declared bankrupt or dissolved (in the case of a legal person) except:

(i) on the initiative of the Public Prosecutor’s Department, or

(ii) on the initiative of the temporary director (voorlopig bewindvoerder/administrateur provisioire) appointed by the President of the Enterprise Court, or

(iii) with the agreement of the enterprise itself.

Eligible enterprises are relieved from the obligation to make an admission of bankruptcy throughout the Moratorium.

However, company’s directors should ring the warning bell (alarmbelprocedure/procedure de la sonnette d’alarme) and call the general meeting if the financial situation of the company justifies it (see our previous news here).

Payment terms provided in a judicial reorganisation plan approved before or during the Moratorium are extended for a period equal to the duration of the Moratorium provided that the execution of the plan does not exceed five years.

Contracts entered into before 24 April 2020 may not be terminated unilaterally or by a court decision due to a failure to pay a debt due under the contract during the Moratorium. Therefore, an express resolutory clause (uitdrukkelijke ontbindende beding/clause résolutoire expresse) cannot take effect during this period.

Similarly, other contractual mechanisms relating to non-payment may not take effect (such as penalty clauses for late payment).

However, the Royal Decree does not provide for a derogation  for:

(i) the debtor’s obligations to pay its debts due,  nor

(ii) the implementation of contractual sanctions under ordinary law such as, inter alia, the defence of non-performance, the set-off and the right of retention,

(iii) the application of the Law of 15 December 2004 on financial securities and various tax provisions relating to security agreements and loans relating to financial instruments,

(iv)  the obligations of employers.

What protection for creditors?

A creditor may proceed before the President of the competent Enterprise Court (“as in summary proceedings” (zoals in kort geding/comme en référé)) to lift the measures mentioned above (in whole or in part).

The President will lift these measures at his discretion, taking into account all relevant circumstances to assess the impact of the Corona crisis on the enterprise, such as:

  • whether, as a result of the Corona crisis, the debtor’s turnover or activity has fallen sharply;
  • whether there has been total or partial recourse to temporary or total unemployment;
  • whether the authorities have ordered the closure of the debtor’s enterprise;
  • whether the debtor and the creditor tried to reach an agreement,
  • whether there were attempts to obtain new credits;
  • the consequences of the suspension on the applicant’s interests (e.g. the creditor) (domino effect);
  • the overall burden of the debt and the debtor’s chances of recovery;
  • the fact that the debt arose from contracts concluded after the outbreak of the COVID-19 pandemic, insofar as the debtor could have foreseen the consequences;
  • whether the company is not affected by the pandemic or is perfectly capable of paying its debts (i.e. fraud).

Finally, and as set out above, creditors can still apply certain traditional contractual sanctions.

***

Axel MaeterlinckFanny Laune and Maxime Born

Should you have any question, do not hesitate to contact:
Axel Maeterlinck: axel.maeterlinck@simontbraun.eu
Fanny Laune: fanny.laune@simontbraun.eu

LegalTech at Simont Braun – Adoption of machine learning platform Luminance

Leading Belgian law firm Simont Braun takes a step forward into LegalTech with Luminance. This ground-breaking AI application enables legal counsels to review large volumes of documentation with an instant insight into their content, improving and accelerating processes such as due diligence and regulatory compliance reviews.

Simont Braun decided to engage Luminance after a successful two-week pilot trial with the platform. Luminance’s core technology, ‘LITE’ (Legal Inference Transformation Engine), uses a unique combination of supervised and unsupervised machine learning, which enables the user to detect critical information in a massive volume of contracts very efficiently. Luminance is also language and jurisdiction-agnostic, allowing the lawyers to work seamlessly across French, Dutch and English documentation.

Axel Maeterlinck, Corporate / M&A Partner at Simont Braun, comments: “Luminance goes above and beyond other platforms on the market. We can now review an entire set of documents at a glance and, hence, ensure a quicker and more efficient analysis while being sure that nothing has been missed. This is a significant added-value for our clients.”

Emily Foges, Luminance’s CEO, is delighted to have such a forward-thinking firm on board: “Firms are under a lot of pressure to constantly adapt and adhere to their clients’ demands. With Luminance, law firms like Simont Braun can stay ahead of the game by providing the best possible legal representation to their clients.”

In just over three years, Luminance has established itself as the world-leading artificial intelligence platform for the legal profession. Now in use in over 80 languages, Luminance’s flexible machine learning is integral for firms like Simont Braun seeking to innovate their legal services.


About Simont Braun

Simont Braun is an independent business law firm which provides a broad spectrum of legal services, including Corporate / M&A, Banking and (Digital) Finance, Real Estate, Intellectual Property, Dispute Resolution, Tax and Employment Law. Based in Brussels, Simont Braun currently houses 45 lawyers. Simont Braun is recommended by Chambers and Partners and The Legal 500.


About Luminance

Luminance is the leading artificial intelligence platform for the legal profession. Founded by mathematicians from the University of Cambridge, Luminance has developed the Legal Inference Transformation Engine (LITE), the first true application of machine learning to the legal industry, combining pattern-recognition technology with supervised and unsupervised machine learning to read and understand human language. Luminance is used by law firms and in-house teams in over 48countries around the world to improve processes such as due diligence, contract negotiation, regulatory compliance reviews, property portfolio analysis and eDiscovery. The company has offices in London, Cambridge, New York and Singapore.

 

Update 29 April – Exceptional measures facilitating the functioning of corporate bodies in Belgium

Update 29 April

Regulatory framework

1. Following the outbreak of the COVID-19 pandemic, a number of corporate entities are facing difficulty to organise their ordinary shareholders meetings and the meetings of their management bodies.

Many companies have also decided to hold extraordinary shareholders meeting to adapt their articles of association to the provisions of the new Companies and Associations Code (hereinafter, the “CAC”) this year at the same time as their ordinary shareholders meeting.

2. In response thereto, the Belgian Government has adopted a special Royal Decree[1] (hereinafter, the “Royal Decree”), providing flexible short-term solutions, which are optional, for the organisation of their corporate meetings derogating to different provisions of the CAC.

Entities concerned

3. All forms of companies, non-profit organisations, contractual collective investment undertakings and legal entities governed by public law may use the possibilities introduced by the Royal Decree, as summarized below.

4. This news will focus on the application thereof to companies and will not address the specificities applicable to the other entities concerned by the Royal Decree..

Board of directors: written proceedings and telecommunication

5. The board of directors may, in all circumstances, decide unanimously in writing, notwithstanding any restrictions in the articles of association.

In addition, any meeting of the board of directors may be held by means of telecommunication techniques allowing joint deliberation, such as telephone or video conferences.

Shareholders meetings: remote meeting or postponement


1.     Remote meeting

6. Companies may require shareholders to exercise their voting rights exclusively :

  • by voting remotely using a form made available by the board of directors or via a website, in accordance with the provisions of the CAC; and
  • by giving a proxy to another person prior to the shareholders meeting. The board of directors may appoint one person that may act as proxy. This person can validly represent a shareholder upon receipt of specific voting instructions for each item on the agenda.

7. The voting form and/or proxy may be forwarded to the company by any means, including e-mails and scans.

8. For listed companies, these documents should reach the company at the latest on the fourth day prior to the date of the shareholders meeting. Other companies may impose the same time limit.

9. The company may limit the number of participants to the bureau of the meeting (if any), the members of the board of directors, the auditor and the proxyholder. The meeting may be held by conference call or video conference. It is not required in such case that the Company extend such solution to the participation to shareholders or other persons having the right to participate to the shareholders meeting, if the Company cannot guarantee compliance with the COVID-19 measures applicable at the time of the meeting.

10. Companies may require the shareholders to submit their questions in writing, and request them to do so at the latest the fourth day prior to the meeting. In such a case the board must answer to the questions submitted by the shareholders either in writing at the latest on the day of the shareholders meeting (before the vote) or during the shareholders meeting if its shareholders are allowed to follow the meeting live or in recorded form (webcam, conference call, etc.). Listed companies that opt for answers in writing should publish these on their website. Other companies may inform their shareholders by any other means, ensuring that their shareholders are reasonably able to take note of the answers.

11. For the rest, the modalities for convening remain generally applicable.

12. Companies that would have already convened their shareholders meeting may amend the convening notice without having to fulfil all formalities required by the CAC:

  • For listed companies: by means of a press release and on the company’s website no later than the sixth day prior to the date of the meeting already convened.
  • For other legal entities: by the most appropriate means.


2.     Postponement of shareholders meeting

13. The board of directors may decide to postpone the annual shareholders meeting and any other shareholders meeting, even if they have already been convened. This is not allowed for meetings convened in application of the warning bell procedure (“sonnette d’alarme/ alarmbel”), meetings convened at the request of the statutory auditor or meetings convened at the request of shareholders.

14. The postponement must be announced:

  • For listed companies: by means of a press release and on the company’s website no later than the fourth day prior to the date of the scheduled meeting. .
  • For other legal entities: by the most appropriate means.

15. In the event the board decides to postpone the shareholders meeting, all formalities must be complied with for convening the new shareholders meeting.

16. The dates for the approval, the submission of the annual accounts or where applicable, publication of the financial report have been extended with 10 weeks following the deadlines provided by the CAC or by the Royal Decree of the 14 November 2007.

Companies whose financial year ends on 31 December 2019 could therefore approve the annual accounts until 8 September and have until 8 October to file the annual accounts with the National Bank of Belgium.


3.     Video- and teleconference

17. Companies can also decide to hold a general meeting by video or teleconference in accordance with the CAC, even if this is not provided by the articles of association.. In such case, the general principles for general meetings remain applicable and procedures for deliberation, questions and voting should be put in place.


4. Written proceedings

18. It should be reminded that decisions of the shareholders meeting may be taken unanimously in writing in accordance with the CAC, except if such possibility is excluded by the articles of association. This may be done for companies with a small number of shareholders.

Notarial deed

19. For resolutions which require a notarial deed, the Royal Decree provides that only one director or any other person appointed by the board of directors should appear before the notary in person.

Entry into force – duration

20. The measures enter into force retroactively as from March 1, 2020 and will be applicable until June 30, 2020. 

21. The measures may also be applied for meetings that are convened before June 30 but which are to be held after such date.


*     *     *

For any question, please contact the authors:

Sandrine Hirsch  |  sandrine.hirsch@simontbraun.eu
Tine Bauwens  |  tine.bauwens@simontbraun.eu
Nikita Tissot nikita.tissot@simontbraun.eu
Maxime Born  |  maxime.born@simontbraun.eu

 

[1]Arrêté royal n° 4 du 9 avril 2020 portant des dispositions diverses en matière de copropriété et de droit des sociétés et des associations dans le cadre de la lutte contre la pandémie Covid-19. Koninklijk besluit nr. 4 van 9 april 2020 houdende diverse bepalingen inzake mede-eigendom en het vennootschaps- en verenigingsrecht in het kader van de strijd tegen de Covid-19 pandemic. – The Royal Decree of 28 April 2020 has extended the measures provided in the Royal Decree of 9 April 2020 until 30 June 2020.

Covid-19 | Exceptional measures for listed companies

As you know, exceptional measures are now facilitating the functioning of corporate bodies in Belgium (see our previous news here).

But what about listed companies?

The FSMA has published a Q&A focusing on their specific obligations. The Q&A is available in French here and in Dutch here.

For any question, do not hesitate to contact our Corporate team.

Simont Braun achieves excellent results in The Legal 500 ed. 2020

This year again, Simont Braun has been highly recognised in The Legal 500, a reference guide ranking leading law firms around the world.

  • FinTech  |  Tier 1
    Simont Braun is THE specialist firm in fintech in Belgium
  • Intellectual Property  |  Tier 2
  • Real Estate  |  Tier 2
  • Corporate, M&A  |  Tier 3
  • Dispute Resolution  |  Tier 3

Manuela von Kuegelgen is individually recognised as a Leading Individual in Real Estate for the second year in a row.

Our young generation is also under the spotlight, with Rafaël Jafferali ranked as a New Generation Partner in Dispute Resolution and Laura Grauer as a Rising Star in Real Estate.

Nine of our lawyers are also recommended

Commercial, corporate and M&A
– Paul Alain Foriers
– Sandrine Hirsch
– Steven Callens

Dispute resolution
Paul Alain Foriers

Fintech
– Catherine Houssa
– Philippe De Prez
– Thomas Derval

Intellectual property
– Emmanuel Cornu
– Eric De Gryse
– Fernand de Visscher

We are very grateful to our clients and peers who keep recognising Simont Braun as a top law firm in the Belgian market. Thank you to our teams for their hard work!

All rankings and quotes are available here.

Covid-19: Duties and liabilities of directors in times of crisis

The health crisis we are experiencing and the restrictive measures adopted to limit its spread are and will be deeply affecting businesses. With all the economic and human consequences that this entails, this ordeal could be fatal for many of them. What are the decisive role and obligations that directors must now adopt to overcome this crisis? What liabilities do they incur?

Which actions should directors take?

Members of the board of directors, individually or collectively, must take all reasonable actions to ensure the continuity of the company.

Directors’ guidelines should remain the same: business decisions must be taken in the best interest of the company, i.e. the long term interest of shareholders taking into account the interests of all stakeholders – like employees, customers, creditors and suppliers.

Directors should carefully assess and proactively address the (possible) impacts of the current crisis as their passivity in a critical situation might be considered as a fault for which they might be held liable.

They should consider all measures approved by the federal and regional governments to help companies in difficulty following the spread of the coronavirus. These measures consist of:

If the company fulfils the required conditions to benefit from these relief measures, it should take timely action to benefit from them to the fullest extent possible.

Directors should make every effort to adapt the company’s business strategy to enable it to maintain a certain level of activity, taking into account the restrictions imposed by the Government. They should consider the need to put all or part of the employees on temporary unemployment for force majeure (on this topic, see our news here) and they should take all necessary precautions to protect the health and welfare of active employees, subcontractors and public at large.

Nevertheless, directors should be careful not to continue a loss-making activity that would appear unreasonable to normally diligent and prudent directors. They will certainly not pursue the activities of a company that would be in the conditions of bankruptcy (see below).

What must directors do when the financial situation of the company becomes critical?


1. The Warning Bell

Directors should not forget to ring the “warning bell” if financial difficulties increase.

Directors of SRL/BV and SC/CV will have to ring the bell (i) when the company’s net assets are negative or are likely to become negative, or (ii) when the company’s liquid assets are no longer sufficient to pay its debts due for the next twelve months.

Constantly and properly monitor the development of the company’s cash flow can prove very difficult. In case of doubt, directors should ring the bell to limit the risk of liability.

Directors of SA/NV will have to ring the bell when, as a result of a loss (i) the net assets are reduced to less than one-half of the share capital or (ii) the net assets are reduced to less than one-quarter of the share capital. Note that in the event of a reduction in the net assets below EUR 61,500, any interested party may request the winding-up of the company in court.

The activation of the warning bell requires the directors to convene the general shareholders meeting within two months of the statement that the abovementioned conditions are met. The directors must then draw up and submit to the general meeting a report in which they propose measures (i) to improve the situation in order to ensure continuity or, (ii) to wind-up the company. In such a case, directors can protect themselves against liability claims by convening a  general meeting to decide on the future of the company.

These measures involve the meeting of corporate bodies, which is problematic because of the containment measures. Fortunately, a Royal Decree has introduced exceptional temporary measures extending the possibilities of recourse to the unanimous written decision procedure and the use of telecommunication means for the management body. It also facilitates the use of remote voting and the use of proxies to vote at a general meeting, and allows the management body to postpone general meetings. On this subject, see our news here.


2. Possible measures of continuity: the reorganisation procedure

Directors may propose measures to pursue the company’s activities, notably by initiating a judicial reorganisation procedure.

As mentioned above, the directors should first propose all measures that are likely to reduce future losses, improve the company’s profitability, reduce its expenses or enhance the value of some of its assets.

At this stage, they may also assess the suitability of initiating a judicial reorganisation procedure.

Such a procedure aims at allowing enterprises in financial distress, but still having prospect for recovery, to continue all or part of their business as a going concern, by preventing – during maximum six months (the “Suspension period” – renewable once for six months):

  • any sale of the debtor’s movable/immovable assets resulting from creditors’ pending enforcement measures, except when the date of the auction has been scheduled within two months as from the date of the filing of the debtor’s application;
  • that the debtor is declared bankrupt or is judicially liquidated.

Because of the health crisis, several courts of enterprise (and notably the French Brussels court of enterprise) have decided to stay all of their hearings from 19 March up until 20 April 2020 (subject to re-evaluation at this date), except for urgent cases.

Nevertheless, if a company may benefit from a judicial reorganisation procedure, we recommend filing a petition via the electronic insolvency registry (REGSOL) even in the absence of hearing until 20 April (or later). Indeed, as long as the court has not ruled on the petition, the debtor is protected from almost all enforcement measures and from a declaration of bankruptcy (art. XX.44 of the Economic Code).


3. In case continuity of the enterprise is compromised: the dissolution of the company

If there is no prospect for recovery and if bankruptcy conditions are not met, the directors should in principle and under normal circumstances (see below) propose the winding-up of the company. To this end, the directors shall submit to the general meeting a special report justifying the winding-up of the company as well as a statement summarising the active and passive situation of the company, dated not more than three months ago. This statement must be subject to an audit report by the statutory auditor or, failing that, by an external auditor or chartered accountant. The winding-up must then be recorded in a notarial deed.

The Royal Federation of Belgian Notaries has instructed the Belgian notaries’ offices to receive only “urgent” deeds, but internal circulars confirm that transactions on corporate assets and warning bell procedures are of such an urgent nature. The notary should confirm this on a case-by-case basis.

Before considering this option, directors will be well advised to keep the company alive to the extent possible and at least until the end of the health crisis to make sure there is no prospect for recovery and, for example, envisage a judicial reorganisation procedure.


4. Final option: the admission of bankruptcy

In case the company cannot overcome its financial difficulties so that the conditions of bankruptcy are met at some point, directors must make an admission of bankruptcy via the electronic insolvency registry (REGSOL). The admission should be filed within the month of the fulfilment of these two conditions:

  • when it can no longer pay its debts as they fall due (permanent cessation of payment), and
  • when its creditors’ confidence is tainted (its credit is exhausted).

In case they fail to proceed with the admission of bankruptcy, directors might be held liable and might face criminal sanctions. Still, the Government is currently examining the possibility to put on hold the obligation for directors to make an admission of bankruptcy.

Also, governmental discussions are pending about the possibility to freeze bankruptcy proceedings initiated against companies that encounter financial difficulties because of the governmental health security measures. In other words, companies would be protected from being declared bankrupted upon request of a third party/ the Public prosecutor until the end of the crisis.

We are closely monitoring the Government’s decisions in this regard and we will keep you posted as soon as other measures enter into force.

In conclusion

It is not possible at this time to predict the outcome of this crisis. Nor is it possible to determine the extent to which courts and tribunals will show leniency to directors who have not fully complied with their obligations. Many parameters will no doubt be taken into consideration, but proactive directors who meet the basic requirements outlined above should be beyond reproach.

***

Axel Maeterlinck, Fanny Laune and Maxime Born

Should you have any question, do not hesitate to contact:
Axel Maeterlinck: axel.maeterlinck@simontbraun.eu
Fanny Laune: fanny.laune@simontbraun.eu