Bridging the Covid-19 economic turmoil: Belgian legislator steps in with emergency insolvency legislation to protect undertakings in financial distress due to the Covid-19 crisis

The confinement measures adopted by various governments to fight the Covid-19 outbreak have severely impacted the financial position, and particularly cashflow, of many undertakings. Revenues have completely or partially dried up, whilst overhead and recurring costs continue to be incurred.

To prevent undertakings being forced into insolvency because of the confinement and the resulting liquidity crisis, the Belgian legislator has adopted a Royal Decree that provides for several protection measures from 24 April 2020 until 17 May 2020. The Royal Decree establishes a moratorium and several related protections, which can, if and when necessary, be extended beyond 17 May 2020 through a new decree.

The key features of the moratorium are:

  • A stay on enforcement and the effects of certain insolvency proceedings: during the moratorium period, certain creditor enforcement measures and the effects of certain insolvency proceedings are automatically suspended;
  • A suspension of the director's duty to file for bankruptcy: the statutory duty for a director to timely file for bankruptcy is suspended; and
  • Protection of new funding: to incentivise the extension of financing to undertakings in financial difficulty, the Royal Decree contains a specific exemption of liability for lenders providing new financing during the moratorium and safeguards the rights of such lenders to collect their outstanding claims in case of a subsequent bankruptcy.
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UPDATE: Belgian enforcement moratorium extended to 17 June

The protection measures to prevent undertakings being forced into insolvency have been extended to 17 June 2020. The change is made by Royal Decree of 13 March 2020 amending the original Royal Decree (nr. 15) dated 24 April 2020 which introduced a stay on enforcement and the effects of certain insolvency proceedings, a suspension of the director's duty to file for bankruptcy and the protection of new funding.
 
For more information, please refer to our alert “Bridging the Covid-19 economic turmoil: Belgian legislator steps in with emergency insolvency legislation to protect undertakings in financial distress due to the Covid-19 crisis” of 28 April 2020 or reach out to the key contacts listed at the right.