Reform of the insolvency law from September 1, 2023 (Part 2)
Our precedent contribution contained introductory remarks on the reform of insolvency law, which came into force on 1 September 2023. As indicated, this contribution focuses on a key element of this reform.
The revision of the insolvency landscape has not spared the concept of the transfer of business, which is one of its pillars.
The transfer of a business can take place at two stages: as part of a public judicial reorganisation proceeding, but also as part of a silent preparation prior to bankruptcy.
In this first part, we look at the transfer of a business under judicial authority as part of a (public) judicial reorganisation proceeding. Transfers in the context of bankruptcy will be dealt with in a later contribution.
1. What and when?
When a business encounters financial difficulties and the continuity of its activities is threatened but it wishes to preserve them, the law offers several solutions. In particular, it can apply to the Court for a grace period lasting several months, to enable it to transfer all or part of its assets or activities to one or more third parties.
What was known until 31 August 2023 as "judicial reorganisation by transfer of business under judicial authority" is now called "transfer under judicial authority". The aim is to enable a company to be transferred in going concern, and if necessary to wind up the residual entity (the empty shell of the company after all its assets have been transferred).
2. How does the procedure work?
The transfer may be ordered by the Court in order to ensure the efficient liquidation of the legal entity (transfer of the business) or of the assets of the business (transfer of assets).
The transfer may be ordered either at the request of the company or by summons from the Public Prosecutor.
The company directly applies for the transfer in its initial application for judicial reorganisation, and may also do so at any time during the proceedings by changing the objective of the reorganisation.
The Court grants the transfer and appoint a "liquidation practitioner / vereffeningsdeskundige / practicien de la liquidation" - a "judicial representative / gerechtsmandataris / mandataire de justice" - who is responsible for organising and carrying out the transfer in the name and on behalf of the company.
In its decision, the Court determines whether the transfer relates to all the company's assets and activities, or only some of them. In the case of a partial transfer, the Court will specify the purpose of the transfer or leave it to the discretion of the liquidation practitioner.
For such transfers, the Court may now grant a grace period of 4 months, instead of 6 months before the reform.
The task of the liquidation practitioner will be to carry out the transfer as ordered by the Court. He will therefore search for and solicit offers (invitation to tender), giving priority to maintaining the company's activity and, above all, safeguarding jobs. He receives bids from potential buyers and selects the best offer (for an offer to be taken into consideration, the price offered for all the assets must be equal to or higher than the estimated forced realisation value in the event of bankruptcy or liquidation).
Depending on the circumstances, the transfer may also be ordered by summons from the Public Prosecutor, a creditor or any person with an interest in acquiring the business.
3. An innovation in 2023!
The major innovation brought about by the reform with regard to transfers is the fate of the company in the event of a total transfer of its assets and/or activities, which is now legally regulated and organised either towards bankruptcy or liquidation.
At the end of the procedure, once the liquidation practitioner has done what he was appointed to do and asked to be discharged, a hearing will be held before the Court to decide the future of the company: the Court will either declare bankruptcy if it finds out that the conditions are met, or liquidate the company if the debtor requests it or if the public interest requires so.