Due to the lockdown measures and other restrictions imposed by the government to fight the COVID-19 pandemic, many companies are dealing with revenue losses while having the same level of (fixed) costs. Royal Decree 15, which was published and entered into force on 24 April 2020, implements new temporary measures to protect businesses that had not ceased payment before or on 18 March 2020, but found themselves in difficulty afterwards due to the COVID-19 crisis.
These measures will last until 17 May 2020, unless extended, and prohibit creditors from:
- initiating or continuing conservatory or executory attachments on any goods, except immovable goods;
- initiating bankruptcy or liquidation proceedings; and
- terminating contracts entered into prior to 24 April 2020 in case of non-payment (except regarding employment contracts).
On the unilateral request of an interested party, the president of the relevant business court may decide that a company does not fall within the scope of Royal Decree 15 or decide to mitigate the effects of the measures.
To rule on those cases, the president of the relevant business will take into account the interests of the applicant and the impact of the COVID-19 crisis on the debtor's business, including:
- the significant decline of the debtor's turnover or activity;
- the full or partial use of economic unemployment; and
- the closure of the debtor's business pursuant to the public authority's order.
The obligation on the directors of defaulting companies to petition for bankruptcy will also be suspended until 17 May 2020 provided that the (conditions of) bankruptcy results from the COVID-19 crisis.
The payment periods included in a reorganisation plan approved prior to or on 17 May 2020 will also be extended for the duration of these temporary measures.
The above measures do not apply to companies that were already in an insolvency situation prior to the COVID-19 crisis (ie, before 18 March 2020). Arguably, such a distinction will be difficult to make or prove in practice.
These temporary measures do not release businesses from their obligations towards business partners and employees and do not affect the application of the Financial Collateral Act.
As the principle remains that due debts must be paid, other contractual remedies, such as the exception of non-performance, set-off and retention rights, remain available.
The above measures will have a significant impact on creditors. Such creditors should evaluate, for example, whether they can execute their securities or claim payment from third parties (eg, based on a guarantee).
The government has also announced that similar measures will be adopted for claims and proceedings against consumers.
