Private Reorganisation Proceedings: Avoiding negative Publicity

From 1 September 2023, judicial reorganisation proceedings by way of an amicable agreement as well as those with a view to a collective plan will both have a private variant. This will help avoid negative publicity and allowing the debtor to prepare its restructuring in all quietness.

As a reminder, a company confronted with financial difficulties threatening its continuity may file for judicial reorganisation proceedings to get protection against enforcement actions and bankruptcy filings by its creditors.

This moratorium aims to give the debtor, who retains control over the business (debtor-in-possession), breathing space to prepare its restructuring in the form of either (which may nonetheless be changed during the process):

• a settlement with one1 or more of its creditors, for instance a payment plan (amicable agreement);
• a restructuring plan that will be put to vote to its general body of creditors and will be binding on all creditors if a majority votes in favour and the court subsequently confirms it (collective plan); or
• a transfer of its assets or activities either in whole or in part by a court-appointed practitioner, which is by far the most drastic option (transfer of activities under judicial authority). See The judicial transfer of activities: Rising from the ashes?

Once the judicial reorganisation procedure has been opened by the court, it will be published in the Belgian Official Gazette (Moniteur belge/Belgisch Staatsblad) and in the Business Register (Banque-Carrefour des Entreprises/Kruispuntbank van Ondernemingen). As a result, the debtor's financial problems are made public, often creating unrest among employees, suppliers and investors. They will adapt their behaviour accordingly and, for instance, demand pre-payment, stop providing credit or insist on additional security.

What’s new?

Conscious of the adverse effects of the negative publicity that goes along with these reorganisation proceedings, the Belgian legislator had introduced a private preparatory procedure as temporary measure during the COVID-19 pandemic to avoid a bankruptcy wave (Act of 21 March 2021). Largely based on this temporary procedure, the Belgian Act of 7 June 2023 transposing EU Directive 2019/1023 has adopted a permanent private variant of the amicable agreement and collective plan proceedings. The key feature is that the proceedings will not be publicly disclosed.

The debtor can choose which creditors to involve in the process, which is particularly interesting for the preparation of collective plan, as its public counterpart requires all creditors to be involved in the procedure. Only the creditors that the debtor deliberately involves in the process will be informed of the proceedings and will have access to information via the Insolvency Register (RegSol).

The court will appoint a restructuring expert to oversee the process and help the debtor negotiate an amicable agreement or prepare a collective plan. Notably, also creditors can initiate this procedure by requesting the appointment of a restructuring expert (see The restructuring expert: The new kid on the block).

As opposed to traditional public reorganisation proceedings, the debtor will not automatically enjoy protection against its creditors. The restructuring expert may, however, ask the court to grant an ad hoc moratorium to the debtor against specific creditors (max. four months).

How can we help?

In a field that is becoming increasingly complex, our Belgian Restructuring Team (Legal 500, Tier 1 Insolvency) can help you navigate these legislative changes. We can help you in both public and private reorganization proceedings.

Do not hesitate to reach out to our team.