Coronavirus: corporate debt ceasefire

The coronavirus crisis has led to falling revenues for many companies, but their expenditure continues. To limit the impact of the crisis, the government has adopted a ceasefire on corporate debts. 

Conditions

This moratorium should give companies breathing space from 24 April to 17 May 2020. All companies affected by the consequences of the COVID-19 pandemic can benefit from this measure. This is not the case for companies that were already in a state of suspension of payment on 18 March. Their difficulties are considered to predate the COVID-19 crisis.

Creditors may summon the debtor to appear before the President of the corporate court, who may lift the suspension on the basis of all the circumstances of the case. He may, for example, lift the moratorium if the company has not been affected by the coronavirus crisis or if there was an abuse of the law.

The impact of the crisis on the company will be assessed among others on the basis of the following criteria:

• a decline in turnover or in activity;
• temporary or full unemployment is invoked;
• the closure of the company by the authorities.

Suspension of debt repayment

Forced recovery and execution of debts are suspended. However, protective attachment of immovable property is still possible. This suspension concerns both old debts incurred before 24 April and new debts incurred from that date onwards. It also applies to interest.

Protection against bankruptcy

From 24 April to 17 May, companies cannot be forced into bankruptcy. The duty to report bankruptcy, which is subject to a criminal penalty, is also suspended. On the other hand, it is still possible to voluntarily file for bankruptcy.

This regime does not apply to companies that have already been declared bankrupt on 24 April. However, a company whose claim for bankruptcy is pending at that date may benefit from the suspension. Any company that was already in a state of suspension of payment on 18 March 2020 may be declared bankrupt. 

Judicial reorganisation plan

Payment deadlines under an already approved judicial reorganisation plan are extended by a duration equal to that of the suspension.

Continuity of contracts

In order to ensure the continuity of contracts, it is not possible, during the period of validity of Royal Decree No. 15, to unilaterally or judicially dissolve an agreement in the event of non-payment of a debt due during suspension. This derogation does not apply to employment contracts.

During the period of suspension, contractual obligations remain and payments must continue on a voluntary basis. As a reminder, the moratorium only applies to companies affected by the pandemic. A creditor always has the possibility to bring the case before the President of the corporate court, who may take into account the situation of that creditor - and the possible domino effect - in his decision whether or not to lift the suspension.

What happens next?

These different, temporary measures, should allow companies to react once the suspension is lifted. Reaching agreements with creditors, obtaining new credits, judicial reorganisation, ... On expiry of the suspension, companies will have to fulfil their contractual obligations again and take stock of their situation.

Febelfin, the federation of the financial sector, has drawn up a charter setting out the conditions under which companies can apply for deferral of payment of the corporate credit for a maximum of six months.

Source: Royal Decree No 15 of 24 April 2020 on the temporary suspension in favour of companies of implementation measures and other measures during the COVID-19 crisis, Belgian Official Gazette of 24 April 2020.

Corporate credit deferral of payment charter (Febelfin).