Liquidation of companies

First amendment by the law of 2 June 2006:

The law of 02.07.2006 had made the first amendments regarding the liquidation of companies. Until then, any company (ranging from an one man limited liability company to an joint-stock company) could organize its own liquidation in the event of cessation of activities or in the event of an imminent loss within the company itself, with the appointment of a liquidator.

Because there was little control, things sometimes happened in an unorthodox way, and often to the detriment of creditors. Previously, the law provided that before the dissolution a statement of assets and liabilities must be drawn up by a company auditor, and that the General assembly must first conclude on the dissolution. The statement of assets and liabilities may not be older than three months before the General Assembly. The General Assembly then designated who the liquidator could be, usually a former director or manager. Often, liquidations were also organized to avoid greater scrutiny in the event of bankruptcy, as well as the risk that certain transactions would be declared null and void (in the so-called suspicious period of six months before the bankruptcy).

2. To deal with these abuses, the appointment of a liquidator was required to be submitted to the Commercial Court of the company's registered office.

This can then be done by means of a petition, to which must then be added the decision of the General Assembly to dissolve the company, the statement of assets and liabilities, the indication of the acts that would have already been performed by the liquidator in the meantime. If this information has not been added, it is not possible to proceed with liquidation.

3. The Court will also supervise the chosen liquidator.

In this choice there must be so-called guarantees of righteousness. A person with a correctional conviction will therefore not be eligible, nor will a director who has caused problems for the company. If these guarantees are not available, it is very well possible that the Court itself would appoint someone else, which in practice could often be a lawyer, who regularly acts as a curator, in view of the professional experience gained (and therefore also paying! ).

The Court will theoretically have to decide within 24 hours after the filing of the application for approval of the liquidation. There will also be more supervision on the liquidation itself, where it was the intention of the law that the liquidations would also take place very quickly, and would not drag on for years.

4. In the sixth and twelfth month of the first liquidation year, the liquidators must submit a detailed statement of the status of the liquidation to the Registry of the Commercial Court.

This includes receipts, expenses, distributions and a statement of what remains to be settled. From the second year of the liquidation, this detailed statement is sent to the Registry every other year.

5. There is also a check before closing the liquidation. Before the liquidation is concluded, the liquidators submit the plan for the distribution of the assets among the various creditors to the Commercial Court for an agreement.

If this does not happen, the liquidators can incur sanctions and be replaced. This law entered into force on 06.07.2006, and with regard to existing liquidations, the current liquidators will have to adapt to the foreseen arrangements by 26 June 2007 at the latest.

The law of 17 May 2017 against inactive companies:

6. Many companies are inactive. Annual accounts are not filed in time. It is theoretically punishable, but third parties must then file a complaint. Inactive companies are sometimes bought to avoid founders' liability (which applies for 3 years after incorporation). Therefore, since that law of 2017, companies that fail to file their annual accounts within 7 months after the closing date of the financial year can be dissolved by the Courts at the request of interested third parties (creditors, competitors), of the public prosecutor or Chamber of Commercial Investigation (albeit they can still regularize during the procedure and thus file the annual accounts in a useful order, provided appropriate justification). By directors acting in their own name, or shareholders, third-party opposition to the dissolution would also be possible within 6 months after the publication of the dissolution. All in all, the rules have become a lot stricter. Annual accounts must therefore be filed in a very timely manner.

7. Judicial dissolution of the company is now also possible if:

i) this has been deleted in the Central database for Enterprises ( ( see economie.fgov.be);

ii) the directors/managers have not appeared before the Chamber of Trade Investigation after 2 summonses;

iii) the directors/managers do not have sufficient basic knowledge for the management of companies (such as accounting, financial and tax knowledge).

Once dissolved, the company only exists for its liquidation and the directors/managers will have to actively cooperate, on punishment of payment of closing costs and possible professional prohibition (specific professions) for a maximum period of 3 years.

The further professionalization therefore continues.

The law of March 23, 2019:

8. The role of the President of the Commercial Court has been significantly reduced. The appointment of a liquidator must only be confirmed in the event of a deficit liquidation (i.e. the statement of assets and liabilities drawn up after the dissolution shows that not all creditors can be repaid in full), and insofar as the creditors are not only the shareholders (and they confirm that they agree with the appointment of the chosen liquidator).

In the event of a deficit liquidation, the liquidators must at the end present a distribution plan to the chairman who must approve it.

If new assets and debts arise after the liquidation has been concluded, the law now provides:

-new assets automatically become the undivided property of the shareholders, but on the other hand, creditors who have not been paid in full can demand the reopening of the liquidation (at that time, these new assets automatically become the property of the new company);

-in the case of new debts, each shareholder is liable for the debts that arise later in the amount of his received part of the liquidation balance, insofar as he was (or should have been aware- given the circumstances-) of the existence of these debts.

Sources: Law 2 June 2006 amending the Companies Code with regard to the liquidation procedure of companies, Belgian Official Gazette of 26 June 2006. Law 19 March 2012 amending the Companies Code with regard to the liquidation procedure, Belgian Official Gazette 7 May 2012. Law of 22 April 2012 amending the Judicial Code with regard to the liquidation procedure of companies, Belgian Official Gazette 7 May 2012. David Blondeel, The new procedure for the judicial dissolution of companies, TRV, 2018, p.77; H. Braeckmans, R. Houben, The new code of companies and associations, part I, RW 2019-20, p. 538