Up Again Belgium: Governance


1. What are the key topics that boards should focus on to ensure proper discharge of their duties as directors, as their businesses return to work following a lockdown?

Continuity of the company and overall financial situation

Management is under a continuing obligation to monitor the company's financial situation, or at least ensure that the necessary mechanisms are in place to do so.

Management must take into account the financial impact of COVID-19 when reporting annually on the main risks and uncertainties that have occurred after year-end (e.g. consequences of impairment, value decreases, and consequences on the continuity principle).

Listed companies also specifically need to consider their obligations to disclose information in a timely manner to their shareholders and the market. The FSMA has published guidelines in that regard.

Liquidity of the company

Where important and concordant facts are likely to affect the continuity of the company, the management body must consider measures to safeguard the continuity of the economic activity for a minimum period of 12 months or propose the dissolution of the company.

In an NV/SA this procedure is triggered if the net assets fall below a certain threshold (less than half of the share capital. The above procedure must be followed in a BV/SRL if:

  • the net assets risk to become negative or have become negative; or
  • it is uncertain whether the company, according to reasonable developments, will be able, during the following 12 months, to pay its debts as they become due.

Communication with employees

As employees return to work, management should prioritise their health and safety. This could necessitate changes to working locations, times, practices and environments and plans (e.g. the need to ensure employees and visitors can physically distance, alterations to access arrangements to premises, additional cleaning of premises, and whether face‑to‑face meetings are required).

It is crucial these changes are clearly communicated to employees before their return to work and updated, as required, after their return.

Communication with shareholders and stakeholders

Management should maintain open, factual and timely communication with all shareholders and stakeholders to proactively keep everyone updated on the status of the company.

Overall strategic and risk oversight

Directors have responsibility for strategic and risk oversight. Management should understand and assess the impact of, and, if necessary, revisit, decisions taken in response to the COVID‑19 crisis on a regular basis as existing Belgian government restrictions are lifted, new requirements imposed, and support measures withdrawn.

This strategic review should also include an impact analysis of the crisis on key customers/markets and supply chains, and consider if the business could optimise its operations through corporate reorganisation.

To avoid unnecessary physical meetings, meetings of the board of directors may be held in writing or by telegram, telex, fax or email on unanimous consent. This applies as a result of the Belgian government measures until 30 June 2020, even if the articles of association provide otherwise.

2. Should boards adopt particular governance practices in this context?

As above, management can be held responsible for compliance with the COVID-19 regulations and guidelines issued by the Belgian government, so it should develop a solid strategy for returning to the office (if not already done) and implement monitoring procedures.

It is prudent to hold regular, well-documented board meetings. Boards could consider setting up a dedicated subcommittee or engage third-party experts.

In listed companies, management should be mindful of the impact of COVID-19 on the business of the company and assess on a continuing basis whether market updates are appropriate.

3. To what extent are boards being encouraged to take into account corporate purpose and values in the context of COVID-19 and a return to work?

Nonessential businesses were allowed to resume operations as of 4 May 2020. The Belgian government, however, has indicated that working from home (telework) should remain the preferred working method and should be encouraged as much as possible.

Therefore, based on the government recommendations (and taking into account the general duty of care an employer has to ensure the health and safety of its staff), boards (most often those of mid-sized to larger companies) should pay attention to their return to work policy, and ensure that hygiene standards are as high as possible when returning to the office.


4. Your company is facing liquidity issues as a result of the COVID-19 crisis:

a. What are the repercussions for continuing to operate your company?

The main and most far-reaching implications relate to the inability to pay suppliers or employees, as a result of which the company will no longer be able to operate its business activities and generate income, and will end up in a downward spiral of illiquidity.

However, Royal Decree No. 15 has to some extent accommodated companies suffering from a lack of liquidity as a result of the COVID-19 crisis and has declared a statutory moratorium for companies not yet in a state of cessation of payment on 18 March 2020 (the date of the federal COVID-19 measures).

As a result, companies are protected against termination of ongoing contracts for reasons of non-payment, enforcement actions on company assets, and insolvency filings by creditors until at least 17 June 2020.

However, this Royal Decree does not affect creditors’ rights under general contract law such as a set-off, non-execution exception and retention rights.

b. Do you have to file for insolvency if your company cannot pay all its debts as they fall due?

As a result of the statutory moratorium imposed by Royal Decree no. 15, companies are temporarily released from their obligation to file a declaration of bankruptcy within one month after they are no longer able to pay their due debts on a permanent basis (art. XX.102 Code Economic Law), provided the company was not yet in a state of cessation of payment on 18 March 2020.

c. Are there any steps that should be taken to minimise the risk of your actions as director being challenged?

Directors of companies at risk of bankruptcy must continue to take particular care and take reasonable steps to minimise losses as much as possible.

Royal Decree no. 15 does not release directors from their duty of care and is without prejudice to the wrongful trading provision referred to in art. XX.227 Code Economic Law.

Regardless of the fact that companies automatically benefit from the statutory moratorium of Royal Decree no. 15, any interested party can request the President of the competent Enterprise Court to lift the moratorium in respect of a debtor.

In such a case, the President will examine factors including whether the decrease in turnover or activities of the debtor is due to the COVID-19 pandemic, whether economic unemployment was invoked, whether the government ordered the closure of the company, and the interest of the applicant, and then decide on the lifting of the moratorium on a discretionary basis.

d. Will your company be wound up if you fail to make payments when due?

No. In principle, companies will be protected by the moratorium established by Royal Decree no. 15. However, as set out above, any interested party may request the President of the Enterprise Court to lift the moratorium in respect of a debtor.

Companies are also only protected against summons in bankruptcy and in dissolution brought by their creditors. Insolvency filings by the Public Prosecutor’s Office are not halted by the moratorium and so are still a threat for virtually bankrupt companies.

Of course, the above does not preclude financially distressed companies from applying for bankruptcy or formal reorganisation proceedings themselves, the latter consisting primarily of three different options:

  • amicable settlement with two or more creditors
  • collective plan
  • transfer of undertaking under judicial authority.

The application for such proceedings initiates a similar protection regime (the temporary moratorium of Royal Decree no. 15 is based on this) during which the debtor-applicant is protected against enforcement actions on its assets and insolvency filings by creditors. This is to allow it to conclude a debt restructuring agreement with some or all of its creditors (e.g. haircut, payment plan, debt-for-equity swap) or transfer the viable business activities to a third-party bidder under the supervision of the Enterprise Court.


5. What are your potential antitrust risks?

Statistics prove that in times of a severe crisis, competitors tend to cooperate more to create a momentum of solidarity to mitigate the inflicted harm.

Under antitrust rules, any artificial tempering with free competition is likely to infringe the competition rules and can lead to heavy fines on the company.

Where company directors were actively involved in such activities or negligently failed to prevent the infringement, the company may be required to seek indemnification from that director.

Companies (including competitors) are allowed, under defined conditions, to collaborate for legitimate purposes, such as to carry out joint R&D, or to jointly produce products that they subsequently sell, typically in competition with each other.

However, a crisis does not entitle companies to agree on prices, output or other parameters of competition simply to mitigate the financial impact of a crisis.

Antitrust regulators allow for narrowly defined exceptions from the above strict rules for the duration of the COVID-19 crisis, but only where this is objectively necessary to ensure the supply of “essential goods,” which is an evolving concept.

Where companies rely on this exception, they are required to document all communications

With countries moving out of lockdown, antitrust regulators will resume their practice of carrying out surprise inspections where they have reason to suspect a company has infringed the competition rules.