BELGIUM Law and Practice Contributed by: Wim Aerts, Dorothée Vermeiren and Stijn Van Walleghem, Clifford Chance
6.6 Practical Considerations/Limitations on Enforcement In the Belgian market, normally the enforcement of security is used as a pressure point to encour - age a consensual solution. Because the enforce - ment process is relatively simple, it is an effective tool to force parties into a consensual solution. Also, enforcement has a negative impact on value and the court process and judgment are public. Recently, however, the authors have seen more borrowers turning to the courts to make use of reorganisation proceedings to implement restructurings or to accompany enforcements, and it is expected that such trend will continue as the markets gain further experience with the possibilities offered by the new Belgian insol - vency regime. 6.7 Claims Against Secured Lenders Post-Enforcement An enforcing creditor normally does not take over any liabilities in the event of enforcement, provided that, if a secured creditor appropriates shares as part of a share pledge enforcement, it will become the shareholder and may take on liabilities in that capacity. 7. Bankruptcy and Insolvency 7.1 Impact of Insolvency Processes Belgian insolvency laws provide for three pri - mary insolvency procedures, being (i) a judicial reorganisation procedure, (ii) a transfer of busi - ness under judicial authority (followed by the liq - uidation/bankruptcy of the remaining legal entity and (iii) a bankruptcy procedure. In addition, a company can also be put into judicial/voluntary liquidation. Unless such procedures are private or of a preparatory nature, they generally include a stay on enforcement, subject to certain excep - tions (including the enforcement of a pledge over
shares). Insolvency and judicial reorganisation are court supervised processes and there is no possibility for lenders to control the same, and/ or appoint the relevant administrators. 7.2 Waterfall of Payments The ranking of different types of debt of the bankrupt debtor is determined on the basis of a complex set of rules. Costs and indebtedness incurred by the bankruptcy receiver, and costs incurred when contributing to the realisation and enforcement of secured assets, will be paid first. Next are the creditors having the benefit of secu - rity over the assets, that are paid out of the pro - ceeds of the realisation of their assets, followed by creditors having a legal privilege over all or some of the assets; this includes tax and social security interests as well as employees. Gener - ally, in Belgian bankruptcy proceedings, no dis - tributions will be made to unsecured creditors. In judicial reorganisation proceedings, certain pay - ments may be made (or must be made) to pre - serve the continuity of the business (eg, wages, critical suppliers) even if they are not preferred. New funding provided during such proceedings may also be super preferred in the event of a later bankruptcy. 7.3 Length of Insolvency Process and Recoveries Reorganisation proceedings (or proceedings for the restructuring through a transfer of business under court supervision) cannot take more than 12 months. These proceedings will often involve some cram-down for creditors. Bankruptcy pro - ceedings may, however, take several years and all the costs of the bankruptcy will be paid, as a preferred claim, out of the estate value. This means that insolvency proceedings are often value destructive and there is significant leak - age, even for secured creditors. Also, secured creditors can take recourse outside of the
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