New Legislative Framework for Judicial Liquidation of Companies

On 4 May 2017, the federal Parliament adopted a new law (Wet tot wijziging van diverse wetten met het oog op de aanvulling van de gerechtelijke ontbindingsprocedure van vennootschappen / Loi modifiant diverses lois en vue de compléter la procédure de dissolution judiciaire des sociétés, the “Law”) which introduces extensive changes to the procedure of judicial liquidation of companies. The Law steps up efforts to combat dormant companies and enhances the role of the Chambers for Commercial Investigations (Kamers voor Handelsonderzoek / Chambres des Enquêtes Commerciales) within the commercial courts.

First, the Law expands the grounds on which a procedure for judicial liquidation can be initiated. This procedure allows the commercial court to order the liquidation of a company that is considered to be dormant. Under current rules, a company can only be judicially liquidated if it has not published its annual accounts for three consecutive years. By contrast, the Law allows the commercial court to order such a liquidation if the company has not published its annual accounts within seven months after the end of its accounting year. The commercial court may nevertheless allow the company a grace period to rectify the publication and is, in some cases, even obliged to do so.

Second, the commercial court can, after having been notified by a Chamber for Commercial Investigations, order the judicial liquidation of: (i) companies that have been deregistered from the Crossroads Bank for Enterprises (Kruispuntbank Ondernemingen / Banque-Carrefour des Entreprises) because they are considered to be inactive; (ii) companies that have repeatedly failed to comply with a hearing request from a Chamber for Commercial Investigations; and (iii) companies whose directors cannot prove their basic management skills or the legally required professional skills.

Third, the Law introduces several novelties in relation to the liquidation procedure itself. For example, the commercial court may decide to refrain from appointing a liquidator in case no interested party requests such an appointment. Failing a request to appoint a liquidator within one year after the publication of the judicial liquidation, all claims against the liquidated company will no longer be deemed to be payable and the assets of the liquidated company will automatically transfer to the Belgian State. The same applies to any assets of the liquidated company that would be discovered more than five years after publication of the commercial court’s decision.

The Law also requires the former directors of the liquidated company to provide the liquidators with any information and, to a certain extent, assistance they would request. Any lack of cooperation by the directors may result in the prohibition to become or remain director or officer of a company for up to three years.

Fourth, the Law also confers on the public prosecutor the power to request the judicial liquidation of specific types of companies in case their net assets fell below the statutory minimum. Currently, only interested third parties are entitled to submit such a request.

At a broader level, the Law heralds the start of a wider overhaul of Belgian corporate and insolvency legislation, which had already been announced in the 2014 agreement that forms the basis for the current federal government. In particular, extensive changes to the Law on Continuity of Enterprises (Wet Continuïteit Onderneming / Loi sur la Continuité des Entreprises) and the Bankruptcy Law (Faillissementswet / Loi sur les faillites) are currently being discussed in Parliament.

That bill envisages introducing a so-called “silent bankruptcy” which aims at maximising employment and value within the bankrupt company, and improving the possibility of bankrupt entrepreneurs to obtain a second chance whilst also amending the rules on directors’ liability. Both laws will also become part of the Code of Economic Law (Wetboek van Economisch Recht / Code de droit économique).

Fifth and finally, it is expected that a bill proposing drastic changes to the Belgian Company Code will be introduced in Federal Parliament in the fall of 2017. The details of this bill are not yet publicly known.