The new Insolvency Code: overview of the most important changes from a debtor perspective

As of 1 May 2018, a new Insolvency Code has entered into force, applicable to insolvency proceedings initiated after this date. The new Insolvency Code merges the old Bankruptcy Act and the old Business Continuity Act into the new Book XX of the Belgian Economic Code (BEC), adding some substantial modifications towards the relevant stakeholders.

This blogpost aims to provide a limited but practical overview of the most important changes from a debtor perspective.

The scope of the Insolvency Code

The most important change is the extension of the scope of insolvency proceedings. The previous limitation to “merchants” has been abolished and has been replaced by the notion of “an undertaking”. As a result, insolvency law and proceedings now apply to many more economic actors, all of whom can now be declared bankrupt or be subject to a judicial reorganization. For example, the new definitions of Book XX BEC will apply to liberal professions (vrije beroepen), non- profit organizations and even to (factual) directors. This means that they can be declared bankrupt, as well as benefit from the reorganization possibilities provided by the Insolvency Code.

The embedding of the principle of a “fresh start”

One of the main objectives of the new Insolvency Code is to give the debtor a genuine second chance to a fresh start and consequently to remove the stigma of bankruptcy. In view of this, the legislator has decided to exclude certain goods, ranging from income to labour, gifts or inheritances (in the broadest sense) from the bankruptcy assets, in order to facilitate the fresh start of the debtor. The exception to this rule relates to goods acquired by the bankrupt debtor on the basis of a cause that precedes the bankruptcy. Such goods could be considered as a component of the bankruptcy assets.

Replacement of the regime of ‘excusability’ of debts (“verschoonbaarheid”) by remission of debts (“kwijtschelding”)

Another important change is the introduction of the regime of remission of debts, which implies a semi-automatical release of debt.

In light of the “fresh start objective”, the legislator deemed it logical to modify the regime of the ‘excusability of debts’ (“verschoonbaarheid”), wherein a debtor normally needs to await the closure of the bankruptcy before obtaining a release from its debts. With the new regime of remission of debts, the debtor is able to request and obtain the release from its debts even before the closure of the bankruptcy, if the following conditions are met:

  • The debtor requests for the ‘excusability’ in its capacity of natural person; and
  • The remission of debts is requested by the debtor when applying for the bankruptcy or within 3 months after the publication of the bankruptcy order.

Interested actors (such as a creditor or the Public Prosecutor) may oppose to the remission of debts, in case of serious misconduct of the debtor contributing to the bankruptcy.

A new legal basis for liability: wrongful trading

The new Insolvency Code broadens the scope of director’s liability in case of a bankruptcy. The liability regarding wrongful trading (i.e. the wrongful continuation of the undertakings’ activities by a director who knew or should have known that there was no apparent reasonable prospect for the undertaking to ensure its continuity) now applies to each (legal) person who has (had) general management authority within the undertaking, without the requirement of handling in a formal capacity as a director, i.e. so-called factual directors(“ feitelijk bestuurders”).

This rule does not apply when the undertaking declared bankrupt is a “small” non-profit organisation, international non-profit organisation or foundation.

Furthermore, the new Insolvency Code also embeds the notion that directors can be held fully or partially liable for indebted social contributions. In case of bankruptcy this will be possible when:

  • the concerned director, within the five preceding years, has been involved in at least two other bankruptcies; and
  • the social contributions in these other bankruptcies have also been left unpaid.


Steven Daems


insolvency & restructuring counselling