Summoned by the Chamber for Enterprises in Difficulty: what does it mean?

A letter from the Chamber for Enterprises in Difficulty (Kamer voor ondernemingen in moeilijkheden / chambre des entreprises en difficulté) of the Belgian enterprise court alarms many business owners. Yet this summons is neither a criminal charge nor bankruptcy proceedings. The chamber examines warning signs to assess whether the continuity of your business is under threat and whether measures are needed.

How you prepare and present yourself helps determine what happens next. This article explains what the Chamber for Enterprises in Difficulty does, how the investigation works, what the possible outcomes are and how best to prepare.

What does the Chamber for Enterprises in Difficulty do?

Every enterprise court (ondernemingsrechtbank / tribunal de l’entreprise) has one or more chambers for enterprises in difficulty. The rules are set out in Book XX of the Code of Economic Law (Wetboek van economisch recht / Code de droit économique). The chamber monitors businesses facing financial difficulties, with the aim of detecting problems early, while a solution is still possible. To that end, it gathers data that may point to difficulties, including:

• arrears of social security contributions, VAT or payroll withholding tax (bedrijfsvoorheffing / précompte professionnel), reported to the court by the National Social Security Office (RSZ / ONSS) and the Federal Public Service Finance;
• protested bills of exchange that remain unpaid;
• judgments against the business, including judgments by default;
• annual accounts that were not filed on time.

When several signs point in the same direction, the chamber may open an investigation. This is an examination of your business’s situation, not a sanction.

The investigation and the summons

The investigation is conducted by a reporting judge: a professional judge or a lay judge (rechter in ondernemingszaken / juge consulaire) of the enterprise court. The judge may summon you to explain the situation of your business. You must appear in person, but you may be assisted by a person of your choice, such as your accountant or your lawyer.

If you do not appear, the investigation continues without your input and the chamber decides on the next steps based on the information available to it. Failing to appear is therefore no solution, and it sends a bad signal.

During the interview, you explain the figures, the causes of the difficulties and, above all, the measures you are taking or planning. The reporting judge may ask for additional documents or information. The interview is not a public hearing: it is a discussion of your business’s situation.

Possible outcomes of the investigation

• Closure: if your business turns out not to be at risk, or you have the situation under control, the investigation may be closed.
• Monitoring: the chamber may decide to keep monitoring developments and to summon you again later.
• Referral to the Crown Prosecutor: if the conditions for bankruptcy appear to be met, the chamber may forward the file to the public prosecutor’s office (procureur des Konings / procureur du Roi), which may then itself apply for a bankruptcy order.

The chamber itself cannot declare you bankrupt. Its report may, however, prompt an application by the public prosecutor’s office, on which the enterprise court then rules in separate proceedings.

Why early action pays off

A summons is a warning at a moment when options often still exist. Those who wait until their debts become unmanageable lose those options one by one.

For directors, their personal position is also at stake. A director who continues a loss-making activity while knowing, or while they should have known, that there was no longer any reasonable prospect of saving the business may be held personally liable in a later bankruptcy. You can read more in our article on directors’ liability in bankruptcy. A timely analysis therefore also protects you personally.

Tools to rescue your business

The investigation is also an opportunity. You can ask the chamber itself to appoint a restructuring expert (herstructureringsdeskundige / praticien de la réorganisation) as business mediator (ondernemingsbemiddelaar / médiateur d’entreprise) under Article XX.29/2 of the Code of Economic Law, who helps you prepare an agreement with your creditors or a reorganisation; you bear the costs yourself. If your business is viable, an amicable settlement with your main creditors or a judicial reorganisation may be the right course.

• The amicable settlement: you negotiate with one or more creditors on matters such as payment schedules or a partial debt write-off. Such a settlement can be concluded outside any proceedings and, under certain conditions, be approved (homologated) by the court.
• Judicial reorganisation (gerechtelijke reorganisatie / réorganisation judiciaire): the court grants a moratorium. During that period, creditors can in principle not take enforcement measures and you cannot be declared bankrupt, while you prepare an amicable settlement, a collective agreement with your creditors or a transfer of the business under court supervision.

How to prepare for the summons

A well-prepared file makes the difference. Bring up-to-date figures, such as a recent balance sheet, a cash-flow forecast and an overview of your debts. Also bring your recent VAT returns and an overview of your position with the National Social Security Office.

Show the steps you have already taken: payment plans with the National Social Security Office and the tax authorities, cost savings, new financing, filing of overdue annual accounts. For tax arrears, our article on VAT debts and payment plans can help you further.

Explain honestly what caused the difficulties and how you intend to put things right. A business owner who knows their figures and has a credible plan is more convincing than one who downplays the problems.

Unfiled annual accounts

Missing annual accounts are one of the clearest warning signs. Regularise them as soon as possible. If a company has failed to file its annual accounts for three consecutive financial years, the court may moreover, at the request of the public prosecutor’s office or any interested party, order the judicial dissolution of the company.

Frequently asked questions

Do I have to appear?

Yes. You are expected in person, possibly assisted by your lawyer or accountant. Staying away deprives you of the opportunity to explain your plan and may push the file more quickly towards the public prosecutor’s office.

Does this also apply to a sole trader, a non-profit association or a liberal profession?

Yes. Since 1 May 2018, the insolvency rules of Book XX of the Code of Economic Law apply to all enterprises: companies, but also self-employed sole traders, non-profit associations (vzw / ASBL) and members of the liberal professions. They too can therefore be summoned by the chamber.

Can I still apply for judicial reorganisation during the investigation?

Yes. The investigation does not prevent you from applying for judicial reorganisation or negotiating with your creditors. On the contrary: the chamber will generally regard a seriously prepared reorganisation application as a positive signal, provided the plan is credible and is not merely intended to buy time.

Can I approach the chamber myself?

Yes. A business owner who sees difficulties coming can ask the chamber to summon his or her creditors with a view to reaching a settlement (Article XX.29/1 of the Code of Economic Law) or ask for a business mediator. Early action increases the chances of a solution and also shows that you, as a director, are taking responsibility.

How Novex Advocaten can help

We analyse the warning signs in advance, prepare the file with you, accompany you to the interview with the reporting judge and, where necessary, work out a reorganisation. Also read our article on judicial reorganisation and our article on being summoned in bankruptcy proceedings.

Call 0484 99 22 72 or email asfour@novexadvocaten.be: preparation is everything.