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03 November 2017
On August 11 2017, following proposed changes to the insolvency regime (for further details please see "Changes to insolvency regime proposed"), Parliament voted into law the federal government's proposal to introduce a new chapter on insolvency into the Code of Economic Law. Chapter XX will enter into force on May 1 2018.
This update examines Articles XX.225, XX.226 and XX.227, which concern the potential liability of former directors of a bankrupt company.
Some of the principles included in these articles already partially existed in Belgian law, but have been amended. A number of changes have been introduced and some concepts broadened so that they apply to a wider range of entities.
However, in general, the three articles discussed below do not apply if the bankrupt entity is a natural person conducting activities in his or her own name (Article XX.224).
Under Article XX.225, if the remaining funds in a bankruptcy outweigh the accumulated debts, the existing or former directors, administrators, central executive officers, members of the board of directors or any other person that has had an administrative capacity in the company can be held personally liable for the whole or part of the remaining debts if it is determined that any such person made a grave or serious error that contributed to the company's bankruptcy.
Fiscal fraud is a serious offence under Article XX.225. However, this mechanism does not apply if:
Non-profit organisations are excluded from this mechanism.
Both the bankruptcy receiver and each creditor harmed can initiate proceedings in this context. A creditor can initiate proceedings only if the receiver fails to do so within one month from being summoned by the creditor. In any case, the bankruptcy receiver can intervene and take over the proceedings from the initiating creditor.
The bankrupt estate must cover the creditor's costs and expenses if the bankruptcy receiver intervenes. If the bankruptcy receiver does not intervene, these costs must be reimbursed only if the claim resulted in a positive outcome for the estate.
The compensation awarded by the court is distributed among the creditors.
Under Article XX.226, the bankruptcy receiver and social security services can initiate proceedings against former administrators (ie, the same group of people under Article XX.225) to claim partial payment of any remaining social security debts (including interest) if:
No exception is made for:
In an April 7 2017 judgment, the Supreme Court considered that bankruptcies which are opened on the same day can be considered together to assess whether the administrator in question was involved in three different bankruptcies during the previous five years. This new interpretation could have consequences for administrators that were appointed by several connected corporations that file for bankruptcy on the same date if social security debts remain after the liquidation.
In the context of this liability scheme, a mistake or error by the administrators need not be proved.
Under Article XX.227, only a bankruptcy receiver can initiate proceedings against a bankrupt entity's actual or former directors and administrators to claim complete or partial reimbursement of the remaining debts if such individuals:
Compensation awarded is distributed by the court among the creditors.
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