Last modified:Thursday 31 October 2019
The law on the continuity of enterprises (LCE) replaced the law on judicial agreement on 01/01/2009. It gives entrepreneurs in financial difficulty a range of options and instruments allowing them to save their company and avoid bankruptcy.
The LCE is based on two possible procedures:
1. Out-of-court proceedings
The law offers the possibility of concluding an informal agreement with creditors. The debtor chooses who he wants to conclude an agreement with (min. 2 creditors) and the nature of his provisions. In addition, as an entrepreneur, you can request assistance from a company mediator when negotiating the out-of-court agreement. The debtor defines the scope and duration of its task in agreement with the court. This is an informal measure which is not subject to publication. This agreement can be filed with the commercial court, and this represents an interest in any bankruptcy proceedings after the judicial reorganisation.
2. Legal proceedings
The legal proceedings, also called "judicial reorganisation", comprises three options:
a) Concluding an "out-of-court agreement" with creditors
The entrepreneur can opt to conclude an out-of-court agreement with at least two creditors under the supervision of the delegated judge. The agreement is kept in the file at the court.
b) Concluding a "collective agreement" or a "reorganisation plan"
The entrepreneur can opt to conclude an agreement with all creditors under the supervision of the delegated judge. A grace period of 3 months is usually granted to protect you from creditors (seizures not allowed). During this period, as an entrepreneur, you should prepare a (reorganisation) plan so that you can pay your debts partially or fully within a period of five years. This plan is subject to a vote and if said plan is approved and implemented, the company can continue to exist and you are also exempt from paying any debts outstanding at the end of the plan.
c) Total or partial sale, under judicial authority, of the company or its activities to a third party.
The entrepreneur may opt to conclude an agreement for the sale (total or partial) of the company in difficulty, or its activities under the supervision of the delegated judge. Thus, the company's viable activities may be saved. In the context of the judicial reorganisation, a court officer is appointed to ensure the reorganisation and the purchase of the company by a third party.
This procedure constitutes the platform where different options are made available to the entrepreneur for the purposes of a reorganisation. Therefore, it is possible to choose the purchase option for one of the company's activities and a reorganisation plan for another.
Who can invoke this law?
The law is open to individuals and companies. However, there are various exceptions. For individuals, the law only applies to traders. For legal entities, the law is open to commercial companies, civil law companies having a commercial form and agricultural companies. Only self-employed professions exercised in the form of a civil law company (such as a doctor, pharmacist, lawyer, etc. exercising their activities under an SPRL) can still not be considered (but changes are being analysed).
The judicial reorganisation application guarantees protection for a maximum of six months (extendible to 18 months) from your creditors. Thanks to the payment grace period, creditors no longer need to be paid (although you may do so voluntarily) and the latter cannot proceed to recover their receivables (by seizure, etc). You are therefore temporarily protected from creditors.
How is a judicial reorganisation requested?
Go to the commercial court to apply for a judicial reorganisation. When filing the judicial reorganisation application, you must attach all relevant documents allowing the court to understand your financial situation.
The judge will make a decision within 10 days of the application. To do this, the entrepreneur will be summoned and heard. A decision will then be made within eight days. During this maximum 10-day period, you are, as an entrepreneur, protected against bankruptcy, seizure and against your creditors in general.
The court will only agree to the reorganisation if:
- the company's continuity is compromised (at present) or is at threat of being so (over time).
- a solution is possible for (partially) maintaining the economic activity (expectation).
The court will appoint a delegated judge immediately after the judicial reorganisation application is filed. The latter will analyse the application, the documents filed and will prepare a report assessing the admissibility and the basis of the application. He will also supervise the proceedings and the situation of the struggling company.
How much does this cost?
The cost of legal proceedings for the continuity of companies has been intentionally set at a very low level. However, don't wait until all your financial resources are depleted before acting, and consider the following costs:
- Consultancy fees. For all entrepreneurs, the opinion of an expert on the matter (accountant, tax advisor, lawyer, etc.) is highly recommended for preparing the file for the court. Depending on the case and the company's size, fees may reach 5,000 Euros.
Legal fees (court fee due when filing the application of 1,000 Euros (usually in cash, as there are no electronic payment options at the courts).
Administrative fees The law imposes certain practical obligations on the company such as sending a registered letter to all creditors when the judicial protection is acquired.
(file copying and reconstitution costs, costs of sending registered letters to creditors: 60 letters * 6 Euros = 360 Euros in postage costs).
You can consult the law with the Moniteur belge (FR).