With the lockdown measures and other restrictions imposed by the Belgian government to fight the COVID-19 pandemic, many companies are having to deal with revenue loss while having the same level of (fixed) costs. The Royal Decree n°15 that was published and entered into force on 24 April 2020 implements new temporary measures to protect businesses, which had not ceased payment prior to or on 18 March 2020 but became in difficulty afterwards due to the COVID-19 pandemic’s impact.
These measures will last until 17 May 2020, unless extended, and prohibit creditors from taking the following measures:
- initiating or continuing conservatory or executory attachments on any goods, except immovable goods;
- initiating bankruptcy or liquidation proceedings;
- terminating contracts entered into prior to 24 April 2020 in case of non-payment (except regarding employment contracts).
Upon the unilateral request of an interested party, the President of the relevant Business court may decide that a company does not fall within the scope of the Royal Decree n°15 or decide to mitigate the effects of the measures.
To rule on those cases, the President shall take into account the interests of the applicant and the impact of the COVID-19 crisis on the debtor’s business, such as the significant decline of the debtor’s turnover or activity, the full or partial use of economic unemployment, the closure of the debtor’s business pursuant to the public authority’s order, etc.
The obligation upon the directors of defaulting companies to petition for bankruptcy will also be suspended until 17 May 2020 provided that the (conditions of) bankruptcy results from the outbreak of the COVID-19 crisis.
The payment periods included in a reorganization plan approved prior to or on 17 May 2020 will also be extended for the duration of these temporary measures.
The above measures do not apply to companies that were already in an insolvency situation prior to the COVID-19 crisis, i.e. prior to/ on 18 March 2020. It seems to us that such a distinction will be difficult to make or prove in practice.
These temporary measures do not release businesses from any of their obligations towards business partners, employees etc., and does not affect the application of the Belgian Financial Collateral Act.
As the principle remains that due debts need to be paid, the other contractual remedies, such as the exception of non-performance, the exception of set-off and the retention rights, remain available.
It goes without saying that the above measures will have an important impact on creditors. Such creditors should evaluate (e.g.) if they can execute their securities or claim payment from third parties (e.g. on the basis of a guarantee).
Finally, the government has also announced that similar measures will be adopted for claims/proceedings against consumers.
The above information is merely intended as comment on relevant issues of Belgian law and is not intended as legal advice. Before taking action or relying on the comments and the information given, please seek specific advice on the matters that are of concern to you.