Belgian moratorium on insolvency proceedings

1. Introduction

Given the direct and indirect economic impact of the COVID-19 crisis on the Belgian market and to temper the financial consequences on Belgian undertakings, the government decided to introduce a moratorium on certain insolvency proceedings and related acts ordered against Belgian entities (the Moratorium).

The Moratorium has been formalized in a Royal Decree of 24 April 2020 relating to the temporary suspension of enforcement and other measures in favour of undertakings for the duration of the COVID-19 crisis (the Royal Decree).

2. Scope of the Moratorium

The scope of the Moratorium is limited by the entities to which it applies (Who?), the proceedings and related acts that are suspended (What?) and the duration of this suspension period (When?).

Who?

The Moratorium applies to all undertaking falling within the scope of Book XX of the Belgian Code of Economic Law (the Protected Undertakings) provided that:

• they were not in a state of cessation of payments on 18 March 2020;
  and
• the continuity of their business activities is threatened because of
  the COVID-19 crisis and its consequences.

What?

Seizures

Conservatory or enforcement seizures on all moveable goods of Protected Undertakings for their existing debts are forbidden. Attachments on real estates and ships remain however possible.

Insolvency proceedings

Bankruptcy, judicial dissolution or forced transfers cannot be decided against Protected Undertakings, except where these are ordered by the public prosecutor, the duly appointed trustee or with the agreement of the relevant undertaking.

In the same perspective, the obligation for undertakings to file for bankruptcy when certain conditions are met is suspended, it being understood that such filing can still be made on a voluntary basis.

Termination of agreements

Agreements entered into before 24 April 2020 may not be terminated unilaterally or by judicial means based on a payment default under such agreement. This provision does however not apply to employment contracts.

Reorganisation

Payment terms set out in reorganisation plans of Protected Undertakings duly approved by courts are extended by the same duration as the suspension period under the Moratorium.

When?

The Moratorium initially applied from 24 April 2020 until 17 May 2020 (included) and has been extended until 17 June 2020 (included) (the Suspension Period). The Suspension Period may be further extended by royal decree.

3. Exemption

Despite the above, the Moratorium does not dispense Protected Undertakings from complying with all their contractual obligations including obligations to pay their debts when due, nor does it affect the possibility for counterparties to apply contractual sanctions or seek remedies under ordinary law such as, inter alia, the exception of non-performance, set-off rights or retention rights.

In addition, the Moratorium does not prevent the application of the Law of 15 December 2004 on financial securities nor various tax provisions relating to security agreements and loans relating to financial instruments.

Finally, under the Royal Decree, and in order to avoid abuses, interested parties may, by writs of summons, request the President of the competent Enterprise Court to exclude an undertaking from the scope of the Moratorium or to totally or partially lift the applicable suspensions.

4. Claw-back rules

To ensure the financing of Protected Undertakings during the Suspension Period, the Royal Decree provides that claw-back rules applicable to Belgian bankruptcy proceedings will not apply to new credits granted during the Suspension Period or underlying securities.

Moreover, lenders may not be pursued based solely on the fact that such new credits did not effectively enable borrowers to preserve all or part of their assets or business activities.

See our Coronavirus (COVID-19) feature for more information generally on the possible legal implications of COVID-19.