My debtor is in judicial reorganization, now what?

Formerly known as the Continuity of Enterprises Act

If you want to collect unpaid invoices via the IOS procedure, for example via Unpaid, it is possible that this will not work because your debtor is bankrupt or has invoked the law on the possibility of judicial reorganisation (now insolvency law, formerly known as the law on the continuity of the company or WCO). We would like to explain to you exactly what this means.

What is the judicial reorganisation (also known as the law on the continuity of the company)?

If a company invokes (and is granted) the possibilities of judicial reorganisation, it still protects itself against its creditors. The creditor can therefore choose whether or not to participate in a reorganisation plan. If the creditor believes that there is still a future for the debtor, they often participate in a reorganisation. Ultimately, the decision on the reorganisation plan lies with the majority of the creditors. If the majority approve the plan, the rest must follow. If the majority of the creditors refuse to go along with the plan, there is a good chance that the WCO will go bankrupt.


 

Different types of judicial reorganisations: My debtor is in judicial reorganization

  1. A reorganisation by amicable agreement with the creditors (spreading the payment, cancelling part of the debts, etc.).

  2. A reorganisation by means of a collective agreement with the creditors. This involves drawing up a continuation plan for the company and usually cancelling part of the debts.
     
  3. A reorganisation by means of a transfer of part or all of the undertaking to one or more third parties. Here the business or part of the business is sold.

When can a company invoke a judicial reorganisation?

If a company is in financial difficulties, it can give itself another chance to continue its activities via the judicial reorganisation procedure. In the first instance, they want to save time and, with the help of a recovery plan, restore the company to financial health.

The consequence of the start of the judicial reorganisation procedure is that the debts of the company are no longer due and therefore cannot be recovered via the IOS procedure or via the court. The company also benefits from the advantage of an obligation to deliver, even if the old invoices remain unpaid.

Who can use the judicial reorganisation procedure?

The term 'trader' used to be important, but it is no longer important today. Now the law applies to every 'company'. A company is:

  • A legal person (except public law): a company (regardless of the operation), non-profit organizations (VZW's) and foundations.
  • A natural person who pursues a professional activity on an independent basis. The directors of a company and a manager are also entrepreneurs.
  • Liberal professions: pharmacists, dentists, doctors, lawyers, etc.

What if your debtor enjoys the protection of a judicial reorganisation?

The judicial reorganisation of your client predicts little good for your outstanding invoices but is not yet a reason to bury your head in the sand.

What to do if your client requests a judicial reorganisation

As a company you have to use RegSol. This is the government's user-friendly digital platform for handling these files electronically. It ensures that you are kept up to date with the entire procedure, and it increases the chance of recovering unpaid invoices from a debtor in a judicial reorganisation.

We are happy to give you the following tips if your unpaid invoices remain on ice for a while:

  1. Check the list of amounts and creditors

    The debtor is given 8 days to inform the creditors. As soon as you receive the news, it is best to check whether you are on that list and whether the amounts are correct. In addition, you should check whether the status of the claim is correct. If you have seen a mistake, you can appeal. Note: you must respond in advance of one month before the date of the hearing.
     
  2. Inform yourself

    It is advisable to get to know your client's accounting situation. During the procedure, you have the right to consult the judicial reorganisation file.
     
  3. Attendance at the vote

     

    The purpose of this hearing is to approve your debtor's reorganization plan. If you attend, you will have the opportunity to give your approval and assert your rights. In some cases this can be interesting. Oftentimes it can be a waste of time for a small creditor.

  4. Comply with your obligations
     

    This suspension period does not suspend ongoing contracts. The new claims will not be frozen and you can demand stricter payment conditions. But this may involve a risk. The greater the debt of your debtor, the smaller the chance that you can still recover your unpaid invoices.

    Once the procedure is over, by collective agreement, there are two options for your debtor: recovery or bankruptcy. If recovery is decided , you can continue to work with your client. Your debtor will most likely do his best to make sure that this will not happen again. It goes without saying that you should remain cautious so that your own business is not compromised.

 

Do you have any questions and/or remarks about this article? Don't hesitate to contact us, we will be happy to help you.