BELGIUM Law and Practice Contributed by: Pieter Puelinckx, Yves Moreau, Donald Krols and Astrid Laga, Linklaters
Bankruptcy proceedings can delay the enforce - ment of security. Although the lenders in princi - ple retain the right, in the case of bankruptcy of the debtor, to initiate or continue proceedings, any enforcement procedure is automatically suspended while creditors’ claims are checked. Enforcement procedures by the lenders may be suspended by the court, at the request of the receiver, for a period of up to one year from the declaration of insolvency to allow the receiver to proceed with the sale by court order. In judicial reorganisation proceedings (a corpo - rate rescue procedure), all enforcement meas - ures will be suspended during the moratorium declared by the court (for a period of up to four months, which may be extended, under certain circumstances, up to a maximum of 12 months). 3.7 Subordinating Existing Debt to Newly Created Debt A creditor can agree to contractually subordi - nate existing secured debt to newly created debt through a subordination or intercreditor agree - ment. Furthermore, should the debtor enter into insol- vency proceedings, the pre-existing secured debt may become subordinate to claims of cer - tain privileged creditors (in particular bankruptcy proceeding debts (debt of the estate) – eg, the
the borrowers could be transferred. The lenders would then generally cover such risks in their contractual agreements. 3.9 Effects of a Borrower Becoming Insolvent In principle, a validly granted and perfected security interest cannot be declared void in the event of the insolvency of the borrower. However, new security granted in respect of pre- existing debt may be declared ineffective against third parties if concluded or performed during a so-called “hardening period” before a bank- ruptcy judgment. The cessation of payments (a condition for filing for bankruptcy) is deemed to have occurred as of the date of the bankruptcy order. However, the court issuing the bankruptcy order may deter - mine that the cessation of payments occurred at an earlier date (but not earlier than six months before the date of the bankruptcy order). The period from the date of cessation of payments up to the declaration of bankruptcy is referred to as the “hardening period” . The rules regarding the hardening period do not apply in case of judicial reorganisation. In case of the opening of a judicial reorganisation procedure, during the moratorium, no enforce - ment measures with respect to pre-existing claims in the moratorium may be continued or initiated against any of the debtor’s assets. The debtor cannot be declared bankrupt, nor can its business be wound up by court order. 3.10 Taxes on Loans See 3.4 Taxes or Fees Relating to the Granting and Enforcement of Security for the (registra - tion) fees relating to the granting of mortgages.
costs of managing the estate). 3.8 Lenders’ Liability Under Environmental Laws
As a principle, lenders do not bear liability for environmental damages or infringements of environmental legislation incurred by the bor - rower (see 2.7 Soil Pollution or Environmental Contamination ). However, if the lenders become the owners of the properties through the enforce - ment of a security, the environmental liability of
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