The overall market for event-driven financings was generally considered slow in Belgium in the past 12 months, primarily reflecting reduced M&A activity in the upper segments of the market, with notable exceptions. This is in line with the picture observed in other jurisdictions and not as such due to specific local conditions. While Belgium has always been a market very well served by traditional banking lenders, in particular in the mid-market segment, the increased prevalence of direct lending over the past few years has been notable, including over the last 12 months, and against the background of reduced M&A activity. This may be due in part to the desire to reach higher leverage levels and also due to a decrease in pricing difference between traditional bank lending and private debt.

In view of the overall size of most transactions, the number of issuers of high-yield debt and/or broadly syndicated loans is small, and the number of transactions that would be suitable to both the private debt market and the syndicated loan market is limited. However, where a transaction is indeed in scope of both, borrowers will often consider both options, and the competitive dynamics at that point in the Belgian market are not generally different from those in other European markets.

The Belgian market has always been very well served by the strong Belgian banking sector, often through club deals in view of the mid-market nature of many Belgian transactions. Looking across market segments, it may be too early to consider private debt the preferred form of acquisition financing in Belgium, although the share of acquisitions financed through private debt is clearly growing.

In Belgium, private credit may be considered to be fairly expensive debt compared to typical club deals. In the past few years, sponsors have been opportunistic in having higher leverage and financing add-ons, with all debt or mostly debt, and benefit from other flexibilities offered by private debt documentation, as well as benefiting from a decrease in pricing difference with other products due to competitive dynamics.

On some transactions in Belgium, private credit providers will either co-invest in the equity or provide PIK (payment-in-kind) financing which may or may not have an equity-linked component in the pricing or fee structure. PIK financing will often be structurally subordinated and will benefit from limited security with no overlap with the security package for the senior financing. The security will often be limited to shares in an entity above the single point of enforcement for the senior financing and claims on such entity. There will typically not be intercreditor arrangements between the PIK financing and the senior financing.

Private credit providers are mostly focused on sponsor-led transactions, but there are a number of private credit funds which regularly transact with founder-owned companies, either from specific strategies or from general leveraged lending strategies. Whether more private credit providers will consider founder-owned companies or financing them from leveraged lending strategies will in part depend on the pressure to deploy capital.       

Recurring revenue-based financing is provided by private credit providers in Belgium, typically in relatively small deals.

It is difficult to point to a typical size limit for private credit transactions in Belgium as there are not many deals in the market which will test this limit, given the number of private credit providers which can take very large tickets. The ability to take a large ticket will of course also depend on the fund’s available capital and/or the status of new fundraising. These limits and any challenges in new fundraising are, however, not Belgian specific as the vast majority of private credit providers which are active in Belgium are international funds.

Belgian Regulators and Private Credit

The Belgian regulators (the Belgian National Bank and the Financial Services and Markets Authority) are not specifically focused on regulating private credit lenders. They are awaiting the implementation of the European Directives AIFMD2 and CRDVI, but are not developing any initiatives in parallel.

AIFMD2

The current European Directive on Alternative Investment Fund Managers (AIFMD) requires fund managers to comply with a variety of prudential and conduct of business rules. These rules are general in nature and apply to business operations and dealings with investors generally. AIFMD also contains rules which are specific to investment techniques (such as leverage) and which are specific to certain asset classes (such as private equity) but are silent on loan origination. AIFMD has, however, been amended (to include loan origination among other matters) but is yet to be implemented across the European Union. It is referred to as AIFMD2 in its amended form.

AIFMD2 introduces a range of rules on loan origination. These include subject matters such as:

• implementing policies, procedures and processes for the granting of loans;
• implementing policies, procedures and processes for assessing credit risk;
• loan concentration of 20% of the fund’s capital (called and uncalled contributions) to a single borrower of a certain type;
• leverage restrictions (175% for open-ended funds and 300% for closed-ended funds); and
• prohibition to grant loans to the fund manager (or its staff) or to its delegates, to the fund’s depositary (or its delegates), or to group companies.

AIFMD2 is not going to impose any specific licensing requirements for fund managers which are already authorised. They may need to apply for a variation of permissions but will otherwise only need to ensure compliance with the new rules.

These new rules are in relation to the business operations of the fund. They will not give the fund any regulatory permissions to grant loans to specific types of borrowers. That is a different matter and AIFMD2 is therefore without prejudice to local rules on corporate and consumer lending which will continue to apply.

AIFMD2 should be implemented by 16 April 2026.

CRDVI

The current European Capital Requirements Directive (CRD) provides for a harmonised regime on banking business (including lending) across the European Union. CRD has, however been amended among other matters to include lending from outside of the European Union but is yet to be implemented across the European Union. It is referred to as CRDVI in its amended form.

CRDVI introduces rules on lending by non-EU credit institutions (ie, banks) to European borrowers and will require such non-EU credit institutions to set up a branch office in the country of the borrower and obtain authorisation locally (exemptions are available). Other types of non-EU-based lenders should remain unaffected provided they do not meet the materiality requirements of qualifying as a credit institution under CRDVI. Private credit funds should therefore not be affected in the Netherlands. CRDVI implementing legislation is, however, still to be published in the Netherlands.

CRDVI should be implemented by 11 January 2027.

Lending to corporate legal entities and the holding of security in connection with loans to corporate entities does not require a licence or other regulatory approval in Belgium; this applies equally to Belgian and foreign lenders. 

Lending to corporate legal entities is not regulated in Belgium and accordingly there is no regulator that regulates the corporate lending market. Private credit funds conducting fundraisings in Belgium may, depending on the structure and the target investor audience, be subject to regulation. The Financial Services and Markets Authority will be the primary regulator. 

There are no restrictions on foreign investments in private credit funds in Belgium, provided the private credit fund has complied with the regulatory requirements applicable to the relevant fundraising.

There are no compliance and reporting requirements in Belgium for private credit providers that engage in corporate lending only (ie, to parties other than consumers). Regulated credit funds are subject to the regulatory reporting requirements as these apply to investment funds (but not subject to any standalone corporate lending reporting requirements).

There are no specific concerns on club lending by private credit providers, neither is this a priority of the national competition authority in Belgium. However, club lending is subject to applicable EU and national antitrust rules and, accordingly, private credit providers should not use a club lending occasion for purposes of (tacit) collusion on other (competitively sensitive) matters.

Common Structures

The most common structures (disregarding any holdco financing or equity co-investments) are either a combination of senior term debt and a super senior revolving facility or a combination of senior term debt and super senior term and revolving facilities.

Revolving facilities

Revolving facilities are typically only provided by private credit providers for a certain bridge period.

Delayed draw facilities

Delayed draw facilities are common in Belgium and feature on the majority of deals. In first-out last-out (FOLO) structures, the super senior lender or super senior lenders will often be allocated part of the delayed draw facility (which then is converted into a super senior delayed draw facility) alongside their participation in the drawn term debt (which is then converted into super senior drawn term debt).

Key documents are a commitment letter, a term sheet and a precedent facilities agreement and, after the initial commitment phase of the transaction, a facilities agreement and intercreditor agreement. A precedent intercreditor agreement is often designated in the initial commitment phase, but it will depend on the selection of any super senior lender how effective that designation is, given that the relationship between senior lenders and super senior lenders (also in the facilities agreement) is not standard and still developing. A number of the provisions which are relevant for this relationship will typically be included in the facilities agreement and others in the intercreditor agreement

FOLO

FOLO transactions are quite common in Belgium and the relationship between senior lenders and super senior lenders is dealt with in the same manner as transactions in which there is only senior term debt and super senior revolving debt. Less common in Belgium is to allocate senior term debt to a super senior revolving lender.

External Factors

Documentary terms for private credit transactions are not typically Belgian-specific and the drafting of private credit documentation in Belgium therefore changes with the international market.

There are no specific restrictions on foreign lenders in respect of providing private credit or taking security, other than as set out in 2. Regulatory Environment and 4. Tax Considerations. It is worth noting that the vast majority of private credit providers which are active in Belgium are not Belgian funds.

There are no specific Belgian law restrictions on the use of proceeds from private credit transactions by a borrower. The drawdown period for private credit facilities will typically be longer than the drawdown period for bank financing, so that has to be taken into account from a timing perspective.

Whether debt buybacks by the borrower or sponsor are permitted will depend on the requirements of the private credit provider and sponsor precedent. A number of private credit providers require that the documentation does not permit debt buybacks. In any event, if debt buybacks are permitted, the documentation would cater for appropriate disenfranchisement.

There are no recent legal or commercial developments that have required major changes to legal documentation for private credit transactions. Belgium is, however, in the process of amending its Civil Code; the sections of the new Civil Code that have already entered into force have not so far required amendments to documentation having a commercial impact, but this cannot be excluded for future changes.

Please see 1.5 Junior and Hybrid Capital.

Payment in Kind

Typical senior term debt will often cater for a PIK toggle, allowing the borrower to capitalise interest or part of the interest for a period of time (which may or may not be limited), either at a premium or not. Belgian law only allows for capitalisation of interest after one year, which is not in line with market practice for a PIK toggle.

Amortisation

There are no Belgian law reasons for a private credit provider to require amortisation and most transactions do not have regular amortisation. Transaction documentation may cater for the ability to incur incremental debt in certain currencies with de minimis amortisation.

It is typical in Belgium for senior term debt (initial term debt and delayed draw facilities) to benefit from call protection for a period of one to two years, with different mechanisms, including make-whole provisions and fees expressed as a percentage of the amount prepaid. Depending on the nature of the relevant loans, prepayment penalties may need to be limited under Belgian law to six months.

Interest accounted for by a Belgian company as well as interest accounted for by a non-Belgian company but which is attributable to a Belgian branch, is in theory subject to 30% Belgian withholding tax. However, several double-tax treaties reduce the applicable withholding tax rate to 5%, 10% or 15% and, in addition, various other exemptions may apply.

The most important exemptions for interest on corporate loans are the following.

• Interest payments made by a Belgian company to a lender that qualifies as a “professional investor” within the meaning of Article 105, 3° of the Royal Decree implementing the income tax code (RD/BITC). Belgian companies and Belgian establishments of foreign companies subject to tax in Belgium on their Belgian immovable income qualify as “professional investors”.
• Interest on loans granted by financial institutions located in the European Economic Area, or in a country with which Belgium has concluded a double-tax treaty.
• Interest on loans granted by non-bank lenders resident in Luxembourg, the Netherlands, Germany, Switzerland, the UK and the US that are subject to the relevant double-tax treaty with Belgium, subject to certain conditions and formalities.
• Interest accounted for between related EU (or Swiss) qualifying resident companies. For the purpose of the application of this exemption, two companies are “related” if:
1. one of the companies holds (directly or indirectly) a participation of at least 25% in the share capital of the other company for an uninterrupted period of at least one year; or
2. a third EU (or Swiss) resident company holds (directly or indirectly) at least 25% in the share capital of both the borrowing entity and lending entity, for an uninterrupted period of one year.
• Interest paid by a Belgian company to a foreign investment company that (i) qualifies as an Alternative Investment Fund (AIF), (ii) is established in a member state of the EEA, and (iii) does not issue its shares in Belgium (subject to conditions and formalities).
• Interest paid by certain qualifying Belgian entities (such as listed holding companies, certain public entities or internal banks), subject to a number of conditions and formalities.

Typically, private credit providers are structured through qualifying fully exempt treaty jurisdictions. For entities that do not qualify under the loan exemptions, and depending on the details of the transaction, it is sometimes advisable to perform a bond issue rather than granting a corporate loan in order to benefit from “larger” withholding tax exemptions (namely, the X/N Clearing System or registered bonds).

In addition, a number of important structuring considerations need to be kept in mind.

• The definition of “interest” under Belgian tax law is broad and includes any income that is received by the lender in order to remunerate “the granting of capital by the lender at the debtor’s disposal”. Any fee payments under the underlying loans need therefore to be carefully considered as potentially treated as interest for Belgian tax purposes.
• In recent years, there have been an increasing number of challenges by the Belgian tax authorities of withholding tax exemptions on interest payments flowing through intermediary financing companies based on a deemed absence of beneficial ownership or necessary substance and/or the application of the EU or national anti-abuse rules.

Although Belgian domestic law does not contain a clear definition or even guidance on the concept of “beneficial ownership”, following the Danish cases, it is clear that this concept should be interpreted “economically” – ie, designating the entity that actually benefits from the interest paid to it, even if national laws lack clear definitions and/or tax administrations used to interpret the concept of beneficial ownership in a more “legalistic” way (as was the case in Belgium). The economic interpretation can therefore be expected to prevail, certainly when applying EU tax exemptions (such as the IRD), but in many cases also when applying pure national law exemptions and national anti-abuse rules.

Similarly, some double-tax treaties (eg, the treaty with Luxembourg) are subject to the “principal purpose test” (PPT) as set out in Article 7 (1) of the MLI. The PPT allows participating states to disregard a “transaction” when concluded with the sole purpose of benefiting from a provision of a double tax treaty. Whether or not the PPT is met is a factual exercise, mainly depending on how the relevant investor is managed and/or organised.

Belgian VAT will only apply to the extent the recipient of the services (ie, the lender or the counterparty, as the case may be) is established in Belgium for Belgian VAT purposes. Under the Belgian VAT rules, any fees charged to a recipient established in Belgium will be subject to 21% Belgian VAT, except in case an exemption would apply. Services related to the granting or the negotiations of loans are fully exempt from Belgian VAT. This exemption is interpreted restrictively in Belgium and is limited to the grant and negotiation activities that are directly connected and essential to the granting/conclusion of a loan. The VAT exemption does not apply to standalone technical services such as advertising and marketing services or pure compliance work, even if rendered in the context of a loan agreement.

No Belgian stamp duty applies on loans operations and usual banking activities. Documentary duties are however payable on certain financial agreements. The duties are payable at the rate of EUR0.15 on loan and credit agreements and on pledge agreements, if executed in Belgium. They are payable at a flat amount of EUR50 for most notarial deeds.

The taking of security (for example by way of a mortgage on a Belgian property) may be subject to certain costs (for instance, the taking of a mortgage gives rise to registration duties and other costs and fees for an amount of approximately 1.4% of the secured amount). Registration duties may also apply on transfers of Belgian mortgage loans. A Belgian mortgage means a security interest over real estate situated in Belgium, regardless of where the borrower is located.

Please see 4.1 Withholding Tax and 4.2 Other Taxes, Duties, Charges or Tax Considerations.

In addition, Belgian borrowers may be subject to certain conditions and reporting obligations in relation to interest paid to a lender acting out of so-called Non-Cooperative Jurisdictions (in essence a foreign lender which is not subject to tax or subject to a tax regime which is deemed to be notably more advantageous than the Belgian corporate tax regime). The Belgian tax authorities may require the Belgian borrower to provide evidence that the payments were made in the context of a real and genuine business transaction and to a foreign entity that cannot be considered artificial. If the Belgian borrower were to fail to deliver adequate evidence, the Belgian tax authorities may deny the deductibility of the interest payments in the Belgian Borrower’s corporate income tax return.

There are no tax incentives available for foreign private credit lenders lending in Belgium, but with regards to the generally applicable withholding tax exemptions, please refer to 4.1 Withholding Tax.

There are no additional tax considerations necessary for non-bank lenders. Please see 4.1 Withholding Tax.

Security is generally available over all assets of the obligors. Although very much dependent on the transaction, a typical security package consists of security over shares, security over various types of receivables (including bank accounts) and security over moveable assets (including intellectual property). Security over real estate assets is typically excluded in view of the costs associated with such security in Belgium. Other than security over real estate, which requires a notary-led process, there are limited formalities that apply to taking security in Belgium and any applicable formalities are not particularly time-consuming. Security is typically created so as to limit operational intrusiveness and unnecessary administrative burden.

It is possible under Belgian law to create a pledge over all (or some) movable assets of a Belgian company or the “business” as a whole of the Belgian company. While this is not technically equivalent to an English law floating charge, such pledge would cover all present and future movable assets of a company, but not any real estate, and is perfected through the registration of such pledge in the Belgian National Pledge Register. Such registration is not possible for all types of assets (such as separate pledges of receivables and/or bank accounts) and pledges over movable assets based on dispossession are still possible under Belgian law. Overall, the authors do not see a real distinction in the terms of security given by banks and private credit providers, although the former may typically expect a more comprehensive security package.

Corporate benefit considerations are the main considerations affecting upstream and/or cross-stream guarantees. Under Belgian law, each transaction entered into by a Belgian company needs to be in the interest of that Belgian company; group interest alone is not sufficient and will only be taken into account where the group is integrated and it can therefore be established that the Belgian company will indirectly benefit from the transaction. Moreover, the risk associated with the transaction should be proportional to the benefit received. While this is essentially a business judgement to be made by the directors, a practice has evolved where at least the proportionality is addressed by a guarantee limitation most often based on a percentage of net assets of the relevant obligor. These guarantee limitations are, however, not necessarily sufficient to ascertain corporate benefit, and other ways to increase corporate benefit (such as guarantee fees or direct borrowing) are possible. Please refer to 5.4 Restrictions on the Target, regarding financial assistance.

Belgian law has financial assistance restrictions in place for most types of companies. These restrictions prevent a company from granting loans, guarantees or security with a view to facilitate the acquisition of its own shares, subject to certain limited exceptions not commonly used. There is no whitewash procedure, and any acquisition debt would generally need to be excluded from the guarantee given by the target, unless other structural solutions are available.

Mortgage and Mortgage Mandate

Mortgage security is very expensive in Belgium, which is one of the reasons it is not commonly used in private debt transactions. As an alternative to actual mortgage security, a mortgage mandate exists which is an irrevocable power of attorney granted by the obligor to certain persons pursuant to which they may, in their discretion, register an actual mortgage. This allows parties to postpone the incurrence of mortgage expenses until the moment the credit position requires the mortgage to be granted. Note, however, that prior to the actual grant of the mortgage, the mandate is not a security interest, and hardening periods will apply upon grant of the actual mortgage. While a mortgage mandate is much less expensive than an actual mortgage, a notary will still need to be involved. 

Hardening Periods

Belgian insolvency laws have a so-called suspect period that may have a duration of up to six months prior to a company being declared bankrupt. The bankruptcy liquidator may scrutinise transactions during this period and in certain cases, such as security granted without adequate consideration, security granted for pre-existing indebtedness and other transactions detrimental to the creditors, these will not be opposable towards the bankrupt estate. The hardening periods may affect additional security that is granted in the context of amendment processes or restructurings, release-and-retake arrangements and/or the conversion of mortgage mandates into actual mortgages.

Retention of Title

Both retention of title and certain forms of extended retention of title regimes are available and/or recognised under Belgian law.

Assignment Restrictions

There is no absolute prohibition on clauses restricting transfers of receivables, although the Belgian pledge law considers them not opposable against the pledgee provided the underlying receivable relates to the payment of money and the pledgee is acting in good faith.

Security documents drafted for a financing between professional parties will typically permit the holder of the security to terminate the security by a simple notice. This allows for a very straightforward release document with only some perfection actions to be taken, although in practice we see (often unnecessarily) complex combinations of terminations and waivers. The timing of the release of security can be more complicated in case of an exit by the sponsor and the purchaser obtaining new financing.

It is recommended to notify the release of security over receivables and/or bank accounts to the debtors, although this is not always done in practice. The release of security over shares should be recorded in the relevant shareholder register. The release of security of real estate should be registered with the relevant office of legal certainty by the notary.

Belgian law recognises multiple security rights over the same assets, with ranking in most cases being determined by law on the basis of the date of first grant and/or registration. It is possible for creditors to cede their rank in favour of other creditors. It is possible to contractually agree the allocation of the proceeds of the enforcement of security among creditors, although this may only bind the parties. It is generally considered that questions regarding ranking of security and/or conflicting claims are complex in Belgium. Subordination provisions are commonly used in Belgium, with the survival of insolvency often being protected through a pledge.

The most important liens that may rank ahead of the secured lenders are the various forms of estate debts and expenses. Please refer to 7.2 Waterfall of Payments.

Cash Pooling

Cash pooling is common in Belgium and typically documented by way of ancillary facility or separately. The cash pooling provider will require first ranking security over certain bank accounts and/or receivables and such first ranking security is typically permitted under the facilities agreement.

Hedging

It is typically possible in Belgian transactions for a borrower to enter into secured hedging, which would either rank super senior (up to a limit) or senior (subject only to being permitted hedging and the relevant hedging agreement complying with the terms of the applicable intercreditor agreement).

Licensing or Regulatory Limitations

With respect to licensing and/or regulatory limitations or holding of collateral, please refer to 2. Regulatory Environment and 4. Tax Considerations. There are no specific limitations.

Shared Security

Belgian law does not know the construct of a trust. Security is typically granted to a representative (ie, the Security Agent) acting on the basis of a representation organised by law. No such representation exists (yet) for a mortgage which will typically secure a parallel debt which is created contractually. Both regimes will allow the security agent to enforce the security and distribute the proceeds of enforcement in accordance with an intercreditor agreement.

If a lender transfers its claim on a borrower, this does not impact the representation or the parallel debt and, subject to novation, the security does not need to be retaken. Upon novation, security generally lapses save to the extent contractually preserved, which is what most agreements will provide. 

Enforcement of loans and guarantees can take place by sending a demand for payment, taking into account any applicable contractual agreements. Most types of security interests in Belgium can be enforced without prior authorisation of the courts.

The security most commonly enforced in Belgian enforcement proceedings is the share pledge, that can be enforced either through a sale to a third party or through appropriation by the pledgee. Appropriation is only possible if contractually provided for and is against a value determined in accordance with the pledge agreement. Typically, there is no ex-ante court involvement in such proceedings. Credit bids are not possible in Belgium. Other types of security are enforced through direct collection by the creditors (such as receivables or accounts), or through sale of the relevant assets. These other security interests have more impact on the going concern of the business and, absent bankruptcy or in the context of certain restructuring proceedings, are less commonly enforced. Enforcement of security over real estate requires a lengthy and court-involved process.

Security in Belgium is most often held by a Security Agent on behalf of the lenders. From an enforcement perspective it does not matter whether the lenders are banks or non-bank private credit providers.

A choice of a foreign law may be upheld in Belgium on the basis Regulation (EC) No 593/2008 of the European Parliament and of the Council of 17 June 2008 on the Law Applicable to Contractual Obligations (“Rome I”). The submission to the jurisdiction of foreign courts may be upheld in Belgium. A waiver of immunity of jurisdiction may be upheld in Belgium.

If a treaty or EU regulation is in place (eg, Brussels I or Hague Choice of Court Convention) a final judgment obtained in a foreign court against the Belgian company will be recognised and enforced by the Belgian courts. However, if no treaty or EU regulation is in place, a judgment of a foreign court will not be automatically enforceable in Belgium but will only be enforced without review of the case on the merits if certain conditions, primarily linked to procedural safeguards in the jurisdiction of origin of the judgment, have been met.

An arbitral award rendered pursuant to an agreed arbitration clause shall be enforceable against a Belgian company in Belgium subject to the provisions of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 10 June 1958 (as may be amended).

A challenge to enforcement can be done in multiple ways, among which are the following:

• the debtor, sponsor or other stakeholder can approach the courts to demand payment terms and therefore suspend the enforcement proceedings;
• the debtor can file for insolvency including a moratorium; and
• the debtor can start judicial reorganisation proceedings including a moratorium.

Enforcement of a share pledge in Belgium can, due to the absence of the need of ex-ante court approval, theoretically take place within a very short timeframe. In practice, however, significant preparation will be required and timing will be determined by such preparation, and may be impacted by intervening judicial reorganisation or insolvency proceedings started by the borrower or the sponsors. The costs of the enforcement are adviser and valuation costs and depend on the circumstances and complexity of the matter.

In the Belgian market, normally the enforcement of security is used as a pressure point to encourage a consensual solution. Because the enforcement 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 insolvency regime.

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.

Belgian insolvency laws provide for three primary insolvency procedures, being (i) a judicial reorganisation procedure, (ii) a transfer of business under judicial authority (followed by the liquidation/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 exceptions (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.

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 security over the assets, that are paid out of the proceeds 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. Generally, in Belgian bankruptcy proceedings, no distributions will be made to unsecured creditors. In judicial reorganisation proceedings, certain payments may be made (or must be made) to preserve 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.

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 proceedings 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 leakage, even for secured creditors. Also, secured creditors can take recourse outside of the bankruptcy proceeding, but unsecured claims will only receive payment (if value is available to them) at the very end of the insolvency proceeding.

Judicial reorganisation proceedings exist and are open to debtors (and, in certain circumstances, creditors, interested third parties or the public prosecutor) if the continuity of the enterprise is at risk. Judicial reorganisation proceedings and proceedings for the transfer of business under judicial authority offer bankruptcy protection and provide (in the event of public proceedings) for a temporary stay of enforcement pending the proceedings. During the procedure, the debtor remains in possession and remains entitled to operate the business. The aim of these procedures is to have either (i) an amicable agreement with creditors, (ii) a reorganisation plan approved with a view to preserve the continuity of the business, or (iii) a court-supervised sale of the companies’ activities. While the track record of judicial reorganisation in preserving continuity is mixed, the procedure is commonly used.

In 2023, changes were made to the procedure, allowing among others for a reorganisation to be private (ie, without automatic moratorium and publication). These and other procedural changes are contributing to the more common use of these proceedings, also in larger transactions.

Insolvencies are usually value destructive and all costs of the bankruptcy will need to be paid out of the estate. Upon the opening of the insolvency proceeding, a court-appointed liquidator will take over, which means there is loss of control. Furthermore, a liquidator may investigate the causes of bankruptcy, which include preferential transactions and any form of director and or lender liability claims. Lender liability may be upheld if extending or maintaining credit is deemed to have aggravated the bankruptcy by creating the impression of a solvent debtor, but is not often established in Belgium.

Transactions entered into during the suspect period (which is a period determined by the court upon the declaration of bankruptcy and can last up to six months) may be voided if they involve the payment of debts prior to their due date, the entering into transactions without adequate consideration and/or the granting of security for pre-existing debts, as well as other transactions where the counterparty was aware of the actual insolvency of the debtor. 

Contractual set-off is effective on insolvency.

Out-of-court restructurings can take many forms, including those involving equity contributions by existing equity holders, creditors becoming equity holders and/or enforcement of share pledges that do not require court approval. Frequently, the preparation of a share pledge enforcement is an effective tool to come to a consensual transaction with the existing equity holders.

A debtor can initiate judicial reorganisation proceedings through the adoption of a so-called collective plan which includes a cram-down procedure that can involve write-off of debt, extension of maturity dates, debt-for-equity swaps and similar arrangements. For smaller companies, the cram-down can be achieved by a majority vote of the creditors (in headcount and amount of claims), subject to certain exceptions (eg, for secured and state creditors and claims from employees). For larger companies, the approval of the plan and cram-down requires the approval of a majority in each class (in value). There is a double test to cram-down dissenting classes of creditors. First, the “best-interest-of-creditors test” applies, meaning that no dissenting creditor can be manifestly worse off under the reorganisation plan than in a liquidation scenario. Second, a “cross-class cram-down” to impose the plan on non-consenting classes is only possible if a majority of the classes of parties affected by the plan approve the plan (including a class deemed to be in the money in a bankruptcy) and the amended absolute priority rule is respected.

Note that a cram-down can also be achieved in practice through insolvency proceedings for the transfer of business under court supervision. In this scenario, the assets of the debtor will be sold, and the proceeds distributed to the creditors, after which the debtor will be liquidated. While certain secured creditors can impose conditions for the sale, they will not be able to block the transfer from going ahead.

Belgian law allows, to some extent, the pre-arrangement/pre-packaging of a restructuring process by using a private procedure (without publication), or opting for the private/silent preparation of subsequent bankruptcy proceedings involving the pre-packaged transfer of the business. In order to be allowed to follow such proceedings, the company must demonstrate that the confidential pre-bankruptcy proceedings will (i) facilitate the liquidation of the company while achieving the highest possible distribution to the joint creditors, and (ii) preserve employment to the extent possible.

There are not many notable cases which are publicly known and merit reference in this context.

See 8.1 Notable Case Studies.

See 8.1 Notable Case Studies.