A scheme of arrangement in Belgium is a court-supervised restructuring mechanism that allows a financially distressed company to reach a binding agreement with its creditors, avoiding formal liquidation. Belgium';s insolvency framework has undergone significant modernisation in recent years, aligning closely with EU Directive 2019/1023 on preventive restructuring frameworks. This guide covers the legal basis, eligible entities, procedural stages, creditor dynamics, costs, and practical considerations for founders, directors, and international investors navigating Belgian insolvency law.
Belgium does not use the term "scheme of arrangement" in the same way as English law jurisdictions. The functional equivalent is the gerechtelijke reorganisatie, or judicial reorganisation, governed by Book XX of the Belgian Code of Economic Law (Wetboek van Economisch Recht, or WER). This procedure is the primary tool for restructuring a company';s debts while keeping the business operational.
The judicial reorganisation procedure offers three distinct tracks. The first is an amicable settlement with all creditors or specific creditors. The second is a collective agreement with creditors through a court-approved reorganisation plan. The third is a transfer of the business under judicial authority, where the enterprise or parts of it are sold as a going concern. Each track serves a different commercial objective, and a company may shift between them during the procedure if circumstances change.
For international businesses, the key practical point is that the procedure suspends enforcement actions by creditors. Once the court grants a suspension period, creditors cannot seize assets, initiate new enforcement proceedings, or accelerate secured claims. This breathing space is the central commercial benefit of the procedure and is often the primary reason a distressed company files.
The primary legal basis for judicial reorganisation in Belgium is Book XX of the Code of Economic Law, which consolidated and modernised Belgian insolvency law. The relevant provisions were further updated to implement EU Directive 2019/1023, which introduced harmonised standards for preventive restructuring across EU member states.
The competent court is the ondernemingsrechtbank, or enterprise court, in the judicial district where the debtor has its registered office or principal place of business. Belgium has multiple enterprise courts across its regions, and jurisdiction is determined by the debtor';s centre of main interests (COMI), a concept that also governs cross-border insolvency proceedings under EU Regulation 2015/848 on insolvency proceedings.
The court appoints a judicial administrator (gerechtsmandataris or gedelegeerd rechter) to supervise the procedure. This official monitors the debtor';s compliance with procedural requirements, facilitates negotiations with creditors, and reports to the court. The administrator does not manage the company';s day-to-day operations - management remains in place - but the administrator';s role is significant in practice because the court relies heavily on the administrator';s reports when deciding whether to extend or terminate the suspension period.
The Public Prosecutor';s Office (parket) also has a role. It can be notified of the proceedings and may intervene if there are concerns about fraudulent conduct or abuse of the procedure. In practice, the prosecutor';s involvement is limited in straightforward commercial restructurings but becomes relevant when there are indications of asset stripping or preferential treatment of connected creditors.
Any enterprise within the meaning of Book XX WER can apply for judicial reorganisation. This includes commercial companies, sole traders, liberal professions, and agricultural enterprises. Non-profit associations and foundations are also covered if they carry on economic activities. Public entities are generally excluded unless they operate in a commercial capacity.
The debtor must demonstrate that it is in a state of financial difficulty or that its continuity is threatened in the near future. Belgian law does not require actual insolvency at the time of filing - a forward-looking assessment of financial distress is sufficient. This is an important distinction from liquidation proceedings, where cessation of payments and a shaken credit must both be established.
The application is filed with the enterprise court by the debtor';s legal representative. The filing must include a set of mandatory documents: recent annual accounts, a list of creditors with amounts owed, a cash flow forecast, and a statement describing the causes of the financial difficulties and the proposed restructuring measures. Incomplete filings are a common reason for procedural delays, and foreign founders unfamiliar with Belgian accounting standards often underestimate the documentation burden.
Once the court accepts the application, it grants an initial suspension period of typically two to six months. The court can extend this period up to a maximum of twelve months in standard cases, and in exceptional circumstances up to eighteen months. During this period, the debtor prepares a reorganisation plan or negotiates with creditors under judicial supervision.
A non-obvious requirement is that the debtor must continue to pay employees and certain privileged creditors during the suspension period. Failure to meet payroll obligations or to pay social security contributions can lead to the court terminating the procedure early, which would expose the company to immediate bankruptcy proceedings.
The collective agreement track - the closest functional equivalent to a scheme of arrangement in the English-law sense - requires the debtor to prepare a written reorganisation plan and submit it to creditors for approval.
The plan must describe the proposed treatment of each category of creditor, the timeline for repayment, any haircuts or deferrals proposed, and the operational measures the company will take to restore viability. Belgian law requires that the plan treat all creditors of the same class equally. Creditors cannot be discriminated against within a class, though different classes can receive different treatment.
Creditor voting takes place at a general meeting convened by the court. The plan is approved if a majority of creditors representing at least half of the total outstanding claims vote in favour. This is a simple majority by number and a majority by value - both thresholds must be met simultaneously. This dual-majority requirement differs from some other EU jurisdictions and can complicate negotiations when there is a small number of large creditors who hold a disproportionate share of the debt.
Once approved by creditors, the plan is submitted to the court for homologation. The court reviews the plan for compliance with mandatory legal requirements - it does not conduct a full merits review of the commercial terms. The court will refuse homologation if the plan violates the equal treatment principle, if it was obtained by fraud, or if it fails to meet the minimum recovery standard for dissenting creditors. This minimum recovery standard, introduced in line with EU Directive 2019/1023, requires that dissenting creditors receive at least as much as they would in a liquidation scenario.
After homologation, the plan binds all creditors covered by it, including those who voted against it. This cramdown effect is one of the most commercially significant features of the procedure. A creditor who voted against the plan cannot pursue individual enforcement actions as long as the debtor complies with the plan';s terms.
In practice, founders should consider engaging creditor advisers early. A common mistake is to present the reorganisation plan to creditors for the first time at the general meeting, without prior consultation. Belgian courts and administrators expect the debtor to have conducted meaningful pre-vote negotiations, and a plan that arrives without prior creditor engagement is likely to fail the vote.
Where a collective agreement is not achievable, or where the business is not viable as a standalone entity, the debtor can apply for a judicial transfer of the business. This track is sometimes called a pre-pack in informal usage, though Belgian law does not use that term.
Under the transfer track, the court appoints a judicial administrator with a mandate to organise the sale of the business or specific assets as a going concern. The administrator identifies potential buyers, manages a sale process, and presents the proposed transaction to the court for approval. The sale proceeds are then distributed to creditors according to the statutory priority rules.
The transfer track is particularly relevant for foreign investors considering acquisitions of distressed Belgian businesses. A court-approved transfer provides the buyer with a clean title to the acquired assets, free from most pre-existing liabilities. Employment law obligations are a significant exception - under Belgian law and EU Directive 2001/23 on transfers of undertakings, employees of the transferred business generally transfer to the buyer with their existing contracts and seniority.
Many underestimate the employment dimension of a judicial transfer. Belgian employment law is protective, and the costs of restructuring the workforce post-acquisition can be substantial. A buyer who acquires a distressed business through the transfer track should conduct detailed due diligence on headcount, collective agreements, and pending labour disputes before committing to the transaction.
The timeline for a judicial transfer varies. A straightforward sale of a small business can be completed within four to eight weeks of the court';s appointment of the administrator. Complex transactions involving multiple sites, regulated activities, or cross-border elements typically take three to six months.
If you are considering acquiring a distressed Belgian business or need to assess your options as a creditor in a transfer proceeding, contact info@vlolawfirm.com. We can help structure the setup correctly the first time.
Belgium is an EU member state and applies EU Regulation 2015/848 on insolvency proceedings directly. This regulation determines which EU member state';s courts have jurisdiction to open main insolvency proceedings, based on the debtor';s COMI. It also governs the recognition of Belgian insolvency proceedings in other EU member states and the coordination of parallel proceedings.
For a Belgian company with operations in multiple EU countries, the COMI analysis is critical. If the company';s COMI is in Belgium, Belgian courts have jurisdiction to open main proceedings, and those proceedings are automatically recognised across the EU. Creditors in other EU member states cannot open competing main proceedings, though they may open secondary proceedings limited to assets located in their jurisdiction.
A practical scenario: a Belgian holding company with subsidiaries in France and the Netherlands files for judicial reorganisation in Brussels. The Belgian proceedings are recognised in France and the Netherlands without any additional formalities. French and Dutch creditors must file their claims in the Belgian proceedings and are bound by the reorganisation plan once it is homologated. However, if the French subsidiary is itself insolvent, French courts can open secondary proceedings in France covering only the French assets.
A second practical scenario: a UK-based investor holds a significant debt position in a Belgian company that files for judicial reorganisation. Post-Brexit, the UK is no longer covered by EU Regulation 2015/848. Recognition of the Belgian proceedings in the UK will depend on UK domestic private international law rules, which are less automatic and less predictable than the EU framework. The UK creditor should seek specific advice on enforcement options and the effect of the Belgian plan on UK-law governed debt instruments.
Belgian law also contains specific rules on the treatment of financial collateral arrangements under the Act of 15 December 2004 on financial collateral. Security interests structured as financial collateral - such as pledges over bank accounts or financial instruments - are largely exempt from the automatic stay that applies during judicial reorganisation. This is a significant carve-out that affects the negotiating position of secured financial creditors.
The costs of a judicial reorganisation in Belgium fall into several categories. Court filing fees are modest and represent a minor portion of the total cost. The more significant costs are professional fees: legal counsel for the debtor, financial advisers, and the fees of the court-appointed administrator.
Legal fees for a straightforward judicial reorganisation of a small or medium-sized enterprise typically start from the low thousands of EUR for the filing and initial phase. Complex restructurings involving multiple creditor classes, cross-border elements, or contested proceedings can run to the mid-to-high tens of thousands of EUR or more in legal and advisory fees. Administrator fees are set by the court and are generally proportionate to the complexity and duration of the proceedings.
The overall timeline from filing to homologation of a reorganisation plan is typically six to twelve months for a cooperative process. Contested proceedings, appeals, or complications with creditor voting can extend this to eighteen months or beyond. The transfer track can be faster - four to twelve weeks for a simple transaction - but requires a willing buyer and a cooperative administrator.
A common mistake made by foreign founders is to wait too long before filing. Belgian law allows filing when continuity is merely threatened - not just when the company is already insolvent. Filing early preserves more options, gives the debtor more negotiating leverage with creditors, and reduces the risk that key assets have already been dissipated. Directors who delay filing when they knew or should have known of the financial difficulties may face personal liability under Belgian company law.
Another non-obvious requirement concerns the treatment of connected-party creditors. Claims held by shareholders, directors, or related companies are subject to heightened scrutiny during the reorganisation. The court and administrator will examine whether these claims are genuine and whether the plan treats connected creditors on arm';s-length terms. Arrangements that appear to benefit insiders at the expense of external creditors are a ground for the court to refuse homologation.
Directors of Belgian companies also have ongoing obligations during the procedure. They must cooperate fully with the administrator, provide accurate financial information, and refrain from actions that would prejudice creditors. Breach of these obligations can result in the court terminating the procedure and opening bankruptcy proceedings, with potential personal liability for the directors.
What is the difference between judicial reorganisation and bankruptcy in Belgium?
Judicial reorganisation (gerechtelijke reorganisatie) is a restructuring procedure aimed at preserving the business as a going concern. It suspends creditor enforcement and allows the debtor to negotiate a reorganisation plan or arrange a going-concern sale. Bankruptcy (faillissement) is a liquidation procedure triggered when a company has ceased payments and its credit is shaken. In bankruptcy, a court-appointed trustee takes control, sells the assets, and distributes the proceeds to creditors. The two procedures are mutually exclusive at any given time, but a failed judicial reorganisation frequently leads directly to bankruptcy proceedings. Directors should be aware that the threshold for opening judicial reorganisation is lower - mere threat to continuity suffices - making early filing the more commercially rational choice in most distress situations.
How long does a scheme of arrangement procedure take in Belgium, and what does it cost?
The duration depends heavily on the complexity of the case and the level of creditor cooperation. A straightforward collective agreement with a cooperative creditor base can be completed in six to nine months from filing to homologation. Contested proceedings or complex multi-creditor restructurings typically take twelve to eighteen months. A judicial transfer of business can be faster, sometimes completing within six to ten weeks for a simple transaction. On costs, professional fees are the dominant expense. Legal and advisory fees for a mid-sized restructuring typically start from the low tens of thousands of EUR and scale with complexity. Court fees and administrator fees are additional but are generally lower than private professional fees. Budgeting conservatively and engaging advisers early reduces the risk of cost overruns.
Can foreign creditors participate in Belgian judicial reorganisation proceedings?
Yes. Belgian judicial reorganisation proceedings are open to all creditors regardless of their nationality or domicile. Foreign creditors must file their claims with the court within the prescribed deadlines - failure to file on time can result in the claim being excluded from the reorganisation plan. EU-based creditors benefit from the automatic recognition framework under EU Regulation 2015/848, which means the Belgian proceedings are directly effective in their home jurisdiction. Non-EU creditors, including those from the UK or the United States, must rely on domestic Belgian rules for the recognition of the plan';s effects on their claims. Foreign creditors holding Belgian-law governed debt are generally bound by a homologated plan in the same way as domestic creditors. Those holding debt governed by foreign law should seek specific advice on whether and how the plan affects their contractual rights.
Belgium';s judicial reorganisation framework provides a structured, court-supervised path for distressed businesses to restructure their debts and preserve operational continuity. The procedure offers meaningful creditor protections, a clear voting mechanism, and cross-border recognition within the EU. For international businesses and investors, understanding the procedural stages, creditor voting thresholds, and the treatment of connected-party claims is essential to navigating the process effectively.
VLO Law Firms advises international clients on insolvency and restructuring matters in Belgium. We can assist with judicial reorganisation filings, creditor claim management, going-concern acquisitions, and cross-border insolvency coordination. To request a consultation, contact: info@vlolawfirm.com