Today, the Law of 20 December 2020 on various temporary and structural provisions on justice in the fight against COVID-19 (the “Law”) was published in the Belgian Official Gazette. Among other things, this new law to combat the corona crisis reintroduces the temporary but far-reaching measures previously provided for by Royal Decree no. 15.
General stay of enforcement
The Law introduces a stay of enforcement in relation to all debts, irrespective of their date of incurrence or due date, at least until 31 January 2021. This stay of enforcement will benefit undertakings, i.e. individual entrepreneurs, partnerships and legal entities (companies as well as associations and foundations, but excluding public entities):
- whose continuity is threatened as a result of the COVID-19 pandemic,
- that had not stopped making payments on 18 March 2020, and
- that are currently subject to mandatory closure measures (as laid down in Ministerial Decree of 28 October 2020, as amended).
The personal scope of the current general stay of enforcement is therefore more limited than that previously introduced by Royal Decree No. 15, which did not require the relevant undertakings to be subject to mandatory closure.
The stay of enforcement does not affect the obligation of undertakings to pay their due debts. However, during the stay period undertakings enjoy significant protection against their creditors, through measures which include the following:
- During the stay period, no seizure (other than of immovable property) may be made or continued.
- Involuntary bankruptcy and judicial dissolution are also temporarily excluded, unless on the initiative of the Public Prosecutor's Office or a provisional administrator.
- Contracts (except employment contracts) entered into prior to 24 December 2020 may not, for the time being, be terminated on the grounds of non-payment.
The aforementioned suspension of the right to terminate existing contracts does not apply in the event of a breach of non-monetary obligations. While the text of the Law does not say so explicitly, the suspension also applies to payment obligations that became due prior to 24 December 2020. Note that at the end of the stay period, the creditor will regain his rights to terminate the contract, arguably also for non-payment that originated during the stay period and has not been remedied.
The stay of enforcement does not affect the application of the Belgian Financial Collateral Act, nor the obligations of employers. Moreover, other contractual remedies, such as the exception of non-performance, set-off and retention rights, remain available. In addition, the president of the competent Commercial Court may, at the request of any interested party, lift the stay in whole or in part for a given undertaking.
The Law also reintroduces a temporary restriction on certain seizures against private individuals (who are not undertakings), as previously introduced by the Law of 20 May 2020. For example, the Law suspends most executive seizures, except of immovable property other than the debtor's domicile. This restriction also applies (at least) until 31 January 2021. However, seizures always remain possible for certain debts, such as criminal fines and tax debts.
Limited safe harbour for new loan facilities
The Law of 20 December 2020 also aims to facilitate new lending during the suspension period, through measures that continue to have effect thereafter. The Law creates a limited safe harbour for new loan facilities (as well as securities provided and other acts performed in execution thereof) in the event that the debtor would subsequently go bankrupt and the facility turns out to have been granted during the so-called “suspect period”. New securities granted for old debts do not fall under the safe harbour.
Furthermore, the Law states that the circumstance that the new financing did not save the borrower is in itself not a sufficient ground for lenders’ liability. The latter provision, like many provisions inspired by a similar rule for judicial reorganizations, is arguably mainly symbolic, since even in normal times the threshold for lenders’ liability is much higher. Yet, it is a signal of the legislator that the relevant legal rules should be applied so as not to discourage new lending.
