The impacts of rising interest rates and persistent inflation are taking an increasing toll. Recently, influencer platforms Influo and Connus, dark kitchen Casper, crypto platform Bit4You, and job platform Karamel.career have gone bankrupt. Other startups are quietly sold (often for a pittance) to avoid public humiliation or bankruptcy.

Investment Tips for Startups

1. Caveat Emptor: whether it’s a crowd loan, win-win loan, convertible loan, or direct equity investment, do your due diligence before investing in a startup. Assess the risks. Do not rely solely on the information provided by the involved company or mandated broker.
2. Diversify your investments: typically, only a small percentage of startups succeed. This remains risk capital. Do not forget this.
3. Be proactive and monitor your investment: ask questions and insist on regular updates.

What to do if things start to go wrong?

As a creditor:

• Consider suspending deliveries or requiring advance payments. Assess your recourse options (retention of title, pledge).
• If there is still trust, consider converting your claim into equity to gain (more) control over the startup.
• Do not forget to timely file your claim (in judicial reorganization or bankruptcy).

As a director:

• If the continuity of a company is at risk, directors must intervene in a timely manner (e.g., apply the alarm bell procedure or mandatory filing for bankruptcy upon meeting insolvency conditions).
• There are various avenues to consider for rectifying the situation, such as restructuring, selling shares or assets, restarting via judicial reorganization, liquidation, silent bankruptcy, and bankruptcy. This requires thorough planning and advice.
• Do not forget your directors’ liability insurance.
• Decisions made in the months leading up to a bankruptcy can affect potential director liability afterward. Directors should not take this lightly.

As an investor:

• Typically, investors are left empty-handed. Startups usually have little tangible fixed assets, and investors are among the last to be paid in a restructuring or bankruptcy.
• In the case of a win-win loan, a certain percentage of the investment can be recovered from PMV or the government through a tax credit in case of default. If the conditions for the received tax benefits are not met, the win-win investor risks losing these benefits.
• In case of manifest errors, the board can potentially be held liable, but this is less straightforward for startups due to the inherently risky nature of such ventures.

Seek proper guidance

The documentation regarding an investment in a startup is often complex, and not everyone understands the legal jargon or knows their rights. Insolvency is a distinct area of law that is rapidly evolving. It is advisable to seek guidance from an experienced lawyer at the time of investment or during restructuring.

Need assistance?

Do you have questions about investing in a startup? Are you a company in difficulty, a director, an investor, or a creditor of a struggling company? Do not hesitate to contact us. We have extensive expertise and are happy to assist you.

Anthony Van der Hauwaert, lawyer – partner | Racine

The post Navigating startup bankruptcies: risks and investor advice first appeared on Racine.

A first glance at the Bill reveals that following notable modifications to Belgian insolvency law are in the pipeline:

1. In addition to the five pre-existing insolvency procedures for undertakings, notably (i) the procedure for amicable agreements outside judicial reorganisation; the judicial reorganisation  with a view to (ii) an amicable agreement (henceforth open to agreements with only one, or more creditors), (iii) a collective agreement (with all qualifying creditors) or (iv) a court supervised transfer of the business; and (v) bankruptcy proceedings, the Bill introduces two new insolvency proceedings:

a.     (vi) the possibility of a confidential judicial reorganisation. Such procedure remains confidential and allows the debtor to reach agreements with a limited number of creditors. Unaffected creditors thus remain outside the plan and are entitled to the full payment of their claim; and

b.     (vii) a pre-pack confidential preparation of bankruptcy proceedings which allows the debtor, who believes to be in a state of bankruptcy, to request the court to declare him bankrupt, and to request that prior to the declaration of bankruptcy, the transfer of all or part of his assets and activities is prepared. The court will appoint a liquidation expert (vereffeningsdeskundige/ praticien de la liquidation), who will be act as bankruptcy trustee in subsequent bankruptcy proceedings. The liquidation expert examines to what extent the debtor’s objectives are realizable and will be involved in the preparation of the possible bankruptcy, representing the interests of the creditors. The aim of this new procedure is to avoid unlawful cessions now that such procedure is regulated by a mandatory control of the (potential) supervisory judge and court.

2. The Bill introduces new concepts:

A court mandatary (gerechtsmandataris/ mandataire de justice) is the common notion for the liquidation expert (vereffeningsdeskundige/ praticien de la liquidation), restructuring expert (herstructureringsdeskundige/ praticien de la réorganisation) and provisional administrator (voorlopige bewindvoerder/ administrateur provisoire) appointed by a judicial authority. Where the main tasks of the restructuring expert are to assist the debtor and creditors in drawing up and negotiating a reorganisation plan, the liquidation expert is responsible for verifying the claims submitted, managing the debtor’s assets and, if necessary, liquidating them.

3.     The powers of the Chamber for Companies in Difficulty are extended:

a.     In the event of imminent insolvency, the debtor may ask the Chamber for Companies in Difficulty that creditors are summoned, in order to reach a settlement that is determined by the Chamber for Companies in Difficulty.

b.     Chamber for Companies in Difficulty may appoint a restructuring expert at the request of the debtor to facilitate the rescue of the undertaking.

4.     Employee rights are strengthened:
Employee representatives in the works council, the Committee for Prevention and Protection at Work and the union delegation, the workers’ delegation, have the right to have access to the file of the public judicial reorganisation or transfer under judicial authority, without approval by the delegated judge.

5.     Equity holders’ (veto) rights are restricted:
To the extent that the implementation of the reorganisation plan requires a decision by a general meeting, and the general meeting unreasonably prevents the implementation of the plan, any interested party may request the court to order the legal entity to take the decisions that the implementation of the plan requires. Think of the example where a reorganisation plan provides for a debt-to-equity swap. Even if the plan is approved, the debt-to-equity swap will not be effective until a general meeting has decided to increase the equity of the company and to issue new shares. Shareholders could obstruct to such equity increase, making the plan de facto unworkable. Such situations will now be avoided by new Articles XX.83/20 and XX.83/40 BCEL.

6.     Judicial reorganisations by collective agreement distinguish between SMEs and large companies. Whereas in the case of SMEs, reorganisation plans are deemed approved by the creditors when the majority of them, representing at least half of the claims, approve of the plan, creditors in large companies must be divided into different classes before they can vote on a plan.

At least the following classes are distinguished: (i) equity holders, (ii) extraordinary creditors and (iii) ordinary creditors. For the reorganisation plan to be approved, a majority in each class of voters must (in principle) be obtained. However, the court can impose the plan on non-consenting classes under certain conditions, the so-called “cross-class cram-down”. For the court to impose the plan on dissenting classes, the following conditions must be met:

a.     The plan complies with the formality requirements (cfr. Article XX.83/17 BCEL);

b.     The plan has been approved by: (i) either one of the two existing classes; or, (ii) if there are more than two classes, the plan has been approved by a majority of the voting classes, provided that at least one of those classes is a class of secured creditors or is higher in rank than the class of ordinary creditors or, if not, (iii) at least one class of affected parties who could reasonably be expected to receive payment if the normal order of priority in liquidation were to be applied, approves the plan;

c.      it does not deviate to the detriment of any of the non-consenting classes from the existing legal or contractual ranking that would exist in the context of a liquidation, unless there are reasonable grounds for that deviation and the said creditors or equity holders are not manifestly disadvantaged as a result;

d.     no class of affected parties receives or retains under the reorganisation plan more than the full amount of its claims or interests.

7.     Unfortunately, the Bill remains silent as to whether company directors are excluded from the definition of undertaking for the purposes of insolvency law or not.

If you have any further questions and/or require assistance in this respect, the Restructuring Team of Racine would be glad to assist.

The post Key takeaways of the Bill implementing the European Restructuring Directive as submitted to Belgian Parliament on 20 March 2023 first appeared on Racine.

Racine Brussels is also this year the exclusive contributor to The Legal 500: Restructuring & Insolvency Country Comparative Guide.

Understanding the restructuring and insolvency process and the tools available to avoid bankruptcy in this post-Covid era is more important than ever.

Our partner Anthony Van der Hauwaert and counsel Rubben Lindemans provide an overview of the Restructuring & Insolvency laws and regulations in Belgium. These series of online country comparative legal guides are designed to give the in-house community greater insight to the laws and regulations in unfamiliar jurisdictions. Each country chapter is written by a firm ranked by The Legal 500 in an easy to use Q&A format.

For more information you can Download the brochure or read the rest of the article on the website of The Legal 500.

If you have any further questions and/or require assistance in this respect, the Restructuring Team of Racine would be glad to assist.

The post Restructuring & Insolvency 2022 – Belgium first appeared on Racine.

In 2020 Racine assisted as counsel a major IT restructuring firm during its restructuring proceedings with a view to organize a court supervised sale of its business. Those proceedings have resulted in a successful transfer of a large part of the business and employment to two third parties, pursuant to the authorization of the Brussels’ business court. The company filed for bankruptcy shortly thereafter.

The bankruptcy trustees, who disagreed with the court decision authorizing the transfer, subsequently filed an appeal against that decision. At the same time, they had initiated third party opposition proceedings against the same court decision, together with some employees who were not taken over. The Business court rejected the claimant’s demands in those latter proceedings already in February 2021. This triggered however a second appeal by both the trustees and employees.

All those proceedings have now been settled in a decision of the Brussels’ court of appeal of 28 June 2021. In short, the court of appeal found that none of the claimants disposed of the required legal interest to seek the annulment of the judgment authorizing the transfer of the business.

As regards the trustees’ appeal, the court first of all reminded that a party cannot file an appeal against a decision which has fully awarded what has been requested by it in first instance. As the transfer of the business was requested at the time by the company itself (be it, then still represented by its directors), the court ruled that the trustees, as new representatives of the company, lack the legal interest to file an appeal.

In respect of the appeal filed by certain employees who were not taken over, the court ruled that a hypothetical annulment of the court decision cannot be in the interest of the employees, as it would imply that also the transfer of the business itself must be undone. The undoing of the transfer would adversely affect the rights of those employees (as creditors of the bankruptcy), as this would:

·        increase the debts and liabilities of the bankrupt estate significantly

·        result in a loss of value of the returned assets, being most notably contracts which would terminate in case of a bankruptcy and therefore have practically no value

As the former company itself was also summoned to those proceedings by the claimants as a defendant, Racine defended the interests thereof on behalf of its former directors. The team consisted of our partner Stijn Vanschoubroek and our counsel Rubben Lindemans.

This is an important court decision, as it gives legal certainty to parties who acquire a business in distress as part of reorganization proceedings. Such legal certainty is key in any state adhering to the rule of law. Especially in these particular COVID-19 times which require effective restructuring tools to preserve a maximum of economic value of business that are still suffering from financial difficulties.

The post Trustees cannot appeal a prior judgment authorizing a transfer of a business as part of reorganization proceedings first appeared on Racine.

Racine Brussels is also this year the exclusive contributor to The Legal 500: Restructuring & Insolvency (5th edition) Country Comparative Guide.

Understanding the restructuring and insolvency process and the tools available to avoid bankruptcy in this Covid era is more important than ever.

Our partner Anthony Van der Hauwaert and counsel Rubben Lindemans provide an overview of the Restructuring & Insolvency laws and regulations in Belgium. These series of online country comparative legal guides are designed to give the in-house community greater insight to the laws and regulations in unfamiliar jurisdictions. Each country chapter is written by a firm ranked by The Legal 500 in an easy to use Q&A format.

For more information you can Download the brochure or read the rest of the article on the website of The Legal 500.

If you have any further questions and/or require assistance in this respect, the Restructuring Team of Racine would be glad to assist.

The post Restructuring & Insolvency 2021 – Belgium first appeared on Racine.

Racine Brussels is proud to again be recommended as a leading firm in the following practice areas in this year’s Legal 500 EMEA guide:

• Corporate, Commercial and M&A
• Insolvency and Restructuring

This is what Legal 500 says about us in their 2021 guide:

Corporate, Commercial and M&A

Anthony Van der Hauwaert heads up the corporate and transactional team, while retail sector expert Stijn Claeys leads the commercial group.

The firm advises publicly listed and private companies on a wide range of transactional and advisory matters, including domestic and cross-border M&A, group restructurings, share capital transactions, shareholder agreements, corporate governance and director liability.

Commercial work includes advice on franchising, advertising, supply agreements and consumer protection. Claeys has particular expertise in distribution law issues.

Testimonials

‘Hands-on team with smooth negotiators.‘

‘Stijn Claeys is partner at the commercial department. His strength is that he thinks along with the client, he understands the business very quickly, goes straight to the core of the problem, does not turn around the issue, tries to find practical solutions with ear for commercial arguments (if any), but he does not avoid tricky discussions and he is witty.‘

‘Always accessible, they think also out of the box, ready to go with you until the end of the process (dedicated).‘

‘I work with Anthony Van der Hauwaert. He is very knowledgeable and friendly. He understands the need very quickly and responds to it very well and quickly.‘

‘Stijn Vanschoubroek was our single point of contact, coordinating from his side with his colleagues internally. It sounds easy, but to keep communication clear & transparent seems to be a big issue in more complex situations for many companies.‘

‘The team is very professional and discrete. Always available for helping you out.‘

‘Pragmatic, cost-efficient and client-focused approach.‘

‘Racine has a great corporate team with lots of international experience and credentials. They understand complex global deals and work smoothly together with other lawyers from other jurisdictions.‘

Insolvency and Restructuring

At Racine, the focus is primarily on insolvency and restructuring-related litigation, with practice co-heads Joan Dubaere and Stijn Vanschoubroek often appointed as trustees and liquidators in various domestic proceedings. The team’s client roster includes both debtors and lenders, and it has a further ability to handle distressed M&A-related matters.

Counsel Rubben Lindemans is another key name; he specialises in reorganisation proceedings and enforcement. Rubben  has been recommended as a “rising star” in Insolvency and Restructuring.

The post Racine recommended in the Legal 500 Emea 2021 Guide first appeared on Racine.

Consult the rankings of 2021 here.

The post Racine in Leaders League rankings first appeared on Racine.

Stefaan AERTS, court appointed trustee of SANTANA INTERNATIONAL NV, which was declared bankrupt this summer, succeeded in transferring the SANTANA cork brand to IMPERMO, the market leader in tiles, natural stone and parquet in Belgium. As a result, an important asset of the bankrupt company has been valorised and the reference brand for cork in Belgium will not disappear.

The post Cork brand SANTANA remains in Belgian hands first appeared on Racine.

Wij herhalen graag dan ook nog even de ter zake geldende wettelijke principes. Het laattijdig neerleggen van de boeken schaadt het vertrouwen tussen economische partners, is uitermate nefast voor de maatschappij, kan leiden tot persoonlijke aansprakelijkheden van de (feitelijke) bestuurders en wordt strafrechtelijk beteugeld.

Naar Belgisch recht bevindt een onderneming zich in een staat van faillissement als die onderneming op een duurzame wijze heeft opgehouden te betalen en het krediet geschokt is, of anders gezegd: als ze niet meer in staat is om binnen een redelijk korte termijn de schuldeisers te betalen met de normale bedrijfsmiddelen (eigen middelen of krediet). Eens de bestuurders vaststellen dat aan deze voorwaarden voldaan is, hebben ze één maand de tijd om aangifte van faillissement te doen ter griffie van de bevoegde rechtbank via het elektronisch register www.regsol.be.

Het neerleggen van de boeken heeft tot gevolg dat de ondernemingsrechtbank het faillissement zal uitspreken en een curator zal aanstellen met als specifieke opdracht het realiseren van het actief om vervolgens de opbrengst van de tegeldemaking te verdelen onder de schuldeisers. De curator neemt met andere woorden de leiding van de vennootschap over met het oog op de verkoop van alle activa.

Zeer vaak zoekt de curator in een eerste instantie overnemers voor het gehele of gedeeltelijke handelsfonds (lees: het actief van de vennootschap zonder de schulden), en dit om twee redenen. Enerzijds is een onderneming meer waard dan enkel de som van haar activa, en anderzijds heeft deze strategie in sommige gevallen het behoud van de tewerkstelling en andere lopende overeenkomsten tot gevolg. Die potentiële overnemers worden nogal eens gevonden bij directe concurrenten en het bestaande management/de bestaande aandeelhouders. Bij gebrek aan overnemer zal de curator het actief stuk per stuk moeten realiseren, wat vaak leidt tot een minder gunstig resultaat.

Het is aldus goed mogelijk dat de bestaande bestuurders, via een nieuwe vennootschap, het handelsfonds overkopen van de failliete onderneming om vervolgens de activiteit alsnog zonder het passief van de gefailleerde onderneming verder te zetten, maar uiteraard enkel en alleen op voorwaarde dat een correcte prijs werd betaald voor het handelsfonds aan de curator zodat de curator de gelden op zijn beurt kan verdelen onder de schuldeisers.

Helaas dienen wij als curator al te vaak een frauduleuze praktijk vast te stellen waarbij de bestuurder het handelsfonds reeds voor faillissement kosteloos heeft overgedragen naar een nieuwe onderneming. Het behoeft weinig betoog dat een constructie waarbij het actief kosteloos uit de onderneming wordt onttrokken terwijl het passief in de onderneming blijft absoluut uit den boze is en diverse burger- en strafrechtelijke consequenties tot gevolg zal hebben.

Naast het faillissement biedt de wetgever uiteraard nog andere mechanismen aan teneinde om te gaan met een overmatige schuldenlast, zoals onder meer de gerechtelijke reorganisatie.

Meer weten?

Contacteer het Racine insolventieteam.

The post Doorstart na faillissement : fraude of opportuniteit? first appeared on Racine.

Racine Brussels is also this year the exclusive contributor to The Legal 500: Restructuring & Insolvency (4th edition) Country Comparative Guide.

Our partner Anthony Van der Hauwaert and counsel Rubben Lindemans provide an overview of the Restructuring & Insolvency laws and regulations in Belgium. These series of online country comparative legal guides are designed to give the in-house community greater insight to the laws and regulations in unfamiliar jurisdictions. Each country chapter is written by a firm ranked by The Legal 500 in an easy to use Q&A format.

Read more

The post Restructuring & Insolvency 2020 – Belgium first appeared on Racine.