Conflicts after bankruptcy and liquidation

A creditor can have a director declared personally liable for the shortfall where a serious fault he committed contributed to the bankruptcy.

Article XX.225 of the Belgian Code of Economic Law lets current or former directors be declared personally liable for all or part of the company’s debts, up to the shortfall, where a manifestly serious fault they committed contributed to the bankruptcy. Any form of serious tax fraud always counts as such a fault. The claim does not apply where the bankrupt company had an average turnover of less than 620,000 euros and a balance sheet total of no more than 370,000 euros.

Both the receiver and any aggrieved creditor can bring that claim. A creditor can, however, only bring it himself after giving the receiver formal notice and the receiver failing to bring the claim himself within a month.

Article XX.227 provides for a second claim: a person who knew or should have known that there was manifestly no reasonable prospect left of avoiding bankruptcy, and who, from that moment on, did not act as a normally prudent director, is liable for the shortfall towards the estate. That claim falls within the receiver’s exclusive competence; an individual creditor cannot bring it himself.

From the judgment declaring bankruptcy, the bankrupt loses management of all his assets by operation of law. A pending legal claim can then only be continued against the receivers, and any case concerning the estate already pending on the date of the bankruptcy is suspended by operation of law until the debt has been declared.

Everest (anti)fraud looks together with you, as a creditor, at what claims you have, and brings the claim before the competent court where discussion offers no solution.

Are you a creditor of a company that went into bankruptcy or liquidation, and do you believe that errors, or even offences, were committed in its management that need to be exposed? We review together with you what claims you have, and what steps can be taken. Where possible, including through mediation, we favour dialogue; where necessary, we go to court.

Article XX.228 brings those claims exclusively before the insolvency court. Did the company go into liquidation without bankruptcy, other rules apply: where no liquidator was appointed, the directors are treated as liquidators by operation of law towards third parties, and a shareholder remains liable, after the liquidation closes, for unpaid debts he knew of. Where an asset turns out to have been overlooked after closure, any unpaid creditor can apply to reopen the liquidation.

Did the fault occur before the bankruptcy, your file also touches on the ordinary director liability our page on conflict management through court proceedings sets out. Our page for company directors sets out the standards a director must meet during his mandate. Our approach to shareholder disputes in general sits among our practice areas, with closed files among our references.

Article XX.225 of the Code of Economic Law gives no exhaustive definition, but provides that any form of serious tax fraud, organised or not, always counts as such a fault. The director is then personally liable for the shortfall, up to the amount by which the debts exceed the assets.

Both can, but not simultaneously without condition. An aggrieved creditor can only bring the claim under Article XX.225 himself after giving the receiver formal notice and the receiver failing to bring it himself within a month.

Article XX.119 of the Code of Economic Law suspends by operation of law any case concerning the estate already pending on the date of the bankruptcy, until the debt has been declared. A conflict already before the court therefore stops temporarily.

The claim does not apply where the bankrupt company had an average turnover of less than 620,000 euros and a balance sheet total of no more than 370,000 euros. A creditor can have a director declared personally liable for the shortfall where a serious fault he committed contributed to the bankruptcy.