Entrepreneurs may be able to avoid bankruptcy by anticipating difficulties - if they keep a close eye on the financial situation of their business.
In Belgium, the most important insolvency procedures are:
- Judicial composition;
- Collective debt settlement.
The Belgian legal system makes a distinction between commercial and non-commercial parties. Only commercial parties can file for judicial composition and be declared bankrupt.
The bankruptcy process is governed by the law of 8 August 1997, as purely a liquidation mechanism. Bankruptcy has no time limit.
The law of 17 July 1997, for its part, defines judicial composition as a preliminary step in bankruptcy. During judicial composition, debtors are given relief from their creditors and are protected against involuntary bankruptcy.
For non-commercial parties, the collective debt settlement procedure is subject to the Judicial Code (article 1675/2, paragraph 1).
Entrepreneurs having experienced bankruptcy should not lose confidence in their ability to embark on a new business.
The bankruptcy process: a step-by-step guide
A company is required to submit a bankruptcy petition in the month following its suspension of payments. The Board of Directors or managing director is responsible for this filing.
A liquidator is then appointed by the Commercial Court to manage the trader's business with the purpose of liquidation. The liquidator sells the bankrupt company's assets and ensures that creditors are paid in the order provided under law.
Bankrupt companies lose control of their assets but retain the right to monitor how they are sold.
The debtor must furnish its company's accounting statements. If the liquidator must update the accounts, the commercial party will be charged for the service.
Following the liquidation of assets and, to the extent possible, the repayment of creditors, the process is complete.
In the case of a legal entity, it is dissolved and officers are not held liable unless there has been misconduct.
In the case of a natural person, there is an excusability procedure. By means of which, unless there has been misconduct, all debts may be erased and the bankrupt individual is able to make a fresh start in business.
Any transfer of assets, must occur within six months following the bankruptcy date. This deadline may be extended to nine months if the business is being run provisionally by the liquidator.
Workers are considered as rehired if they are employed by the purchaser, either before the transfer of assets (but after the bankruptcy), during the transfer, or within six months following the transfer.
There are many reasons to restructure a company (business losses, projected future threats to the company, an interest in diversification, etc.).
A liquidation sale is authorised if the following occurs:
- court ruling;
- death of the seller;
- transfer of the business;
- cessation of operations;
- closing or relocation;
- renovations (lasting longer than 20 days);
- damage to stock caused by a disaster;
- obstacles to operations;
- retirement of seller.
During liquidation, the seller must reduce its prices and may sell at a loss if so desired.