Judicial reorganization offers companies in payment difficulties a chance to protect themselves temporarily against their creditors.
To do so, they must submit a reorganisation plan to the Court of Commerce.
As soon as the court approves the judicial reorganisation, the creditors of the company in difficulties can no longer distrain its assets.
So this often presents creditors with a fait accompli.
Most companies seeking protection from their creditors end up becoming insolvent or being liquidated, though.(*)
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Reorganization | Numbers | Insolvency or liquidation |
|---|
| 2019 | 581 | 66% |
| 2020 | 478 | 60% |
| 2021 | 407 | 54% |
| 2022 | 465 | 55% |
| 2023 | 598 | 32% |
statistics as at 7 may 2024
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
Of companies which fall behind with paying their tax, one in seven fails (*)
The company reports overdue debts to the tax authorities at the end of the financial year in its recently filed annual accounts (item 9072). This may indicate serious financial difficulties, especially if the company in question also shows liquidity problems.
Please note that this information is based on recent annual accounts and thus reflects the state of overdue debts as of the closing date of the financial year.
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
In other words, this company has already not posted any annual accounts for two consecutive financial years.
This is a really bad sign!
Such companies score -4 at most, or even worse if there are other bad signs involved.
It is highly inadvisable to do business with these companies, because they're either not really trading any more, which is why they're not posting any accounts, or they're deliberately refusing to meet their reporting obligations.
One quarter of those which fail have a general indebtedness > 100% (*)
A general indebtedness of < 50% is absolutely healthy.
General indebtedness = debt/total assets
This shows what percentage of a company's total funds is being provided by third party funds, or debt.
Being > 100% indebted means a company's equity assets are negative, due to carrying over major losses:
so its liabilities exceed 100% of its total assets.
Such a situation is unsustainable in the long term (cf.
alarm bell procedure).
= A very bad sign!
Businesses do benefit from having a certain level of debt, however, as interest on debt capital is tax-deductible, for example.
Deducting notional interest also plays a major role in choosing between debt and equity in Belgium.
(*) Source: Companyweb: results based on our own study into causes of bankruptcies.
