Enactment

On 11 September the Belgian Act that introduces certain measures to restrict the activities of vulture funds (the “Act”) was published in the Belgian Official Journal.

Recently, the Belgian Continuity of Enterprises Act (hereinafter the “Act”) celebrated the fifth anniversary of its adoption by the Belgian parliament. Since its entry into force on 1 April 2009, the Act has been quite successful: in comparison with the former “Judicial Composition Act” of 17 July 1997, a significantly larger number of enterprises have had recourse to it. The Act does indeed offer a new range of options – including a potential judicial settlement with debtors – intended to help distressed companies to recover from their financial situation.

Since the entry into force of the Financial Collateral Act of 15 December 2004 (the "Collateral Act") implementing Directive 2002/47/EC on financial collateral arrangements as regards linked systems and credit claims (the "Collateral Directive"), financial collateral arrangements have benefitted from increased flexibility and legal certainty in Belgium.

After almost four years of existence, the Belgian “Act on Continuity of Enterprises” has achieved great success for companies in financial difficulties that wish to shelter from creditors’ lawsuits in order to attempt a restructuring of their business. The Act enables distressed companies to use effective and flexible recovery procedures to continue their business activities and to avoid insolvency.

On 9 February 2009, the Act of 31 January 2009 on the continuity of companies (Loi relative à la continuité des entreprises/Wet betreffende de continuïteit van de ondernemingen, the "Act") was published in the Belgian State Gazette.

The Act – which actually consists of two separate acts for technical reasons - will replace the unsuccessful Act of 17 July 1997 on composition with creditors.

Tax treatment in the hands of the creditor

The waiver of debt results in the accounting ‘loss’ of a receivable. Such loss, however, is not automatically tax deductible in the hands of the creditor.

The deductibility of such loss may be prohibited, either because it is deemed not to be incurred to retain or increase taxable income (‘general deduction criterion’), or because it is deemed to be an ‘abnormal or benevolent advantage’ granted to the debtor (‘anti-abuse rule’).

New restructuring legislation was recently adopted in Belgium and comes into force on 1 April 2009. The Act of 31 January 2009 on the continuity of undertakings (the Act on Continuity) aims to replace the existing judicial composition procedure (concordat judiciaire/ gerechtelijk akkoord) with a more effective and flexible restructuring instrument.  

The key features of the Act on Continuity are:

Entry into force on 1 April 2009 of the new Act on the continuity of companies

The Act of 31 January 2009 on the continuity of companies (Loi relative à la continuité des enterprises/Wet betreffende de continuïteit van de ondernemingen, the "Act") entered into force on 1 April 2009.

The Business Continuity Act of 31 January 2009 (the “Act”) creates a variety of flexible tools to promote business recovery and turnaround. In addition to an updated judicial reorganization procedure (i.e., a reorganization overseen by the court), the Act also introduces several interesting options for out-of-court workouts and preventive measures to promote business recovery.

Out-of-court agreements

The Act of January 31, 2009 on the continuity of companies (Loi relative à la continuité des enterprises/Wet betreffende de continuïteit van de ondernemingen, the "Act") entered into force on April 1, 2009.