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.
The filing had to be made by: 31-07-2024
The annual accounts must be filed within 30 days after they have been at the meeting and no later than 7 months after the closing date of the financial year, are deposited with the Central Balance Sheet Office.
Companies that do not submit their annual accounts on time will be charged a rate surcharge.
From the first day from the 10th month and up to the 12th month after the closing of the financial year:
- 180 euros for small companies (= abbreviated scheme)
- 600 euros for the other companies
Companies in difficulty often withhold their annual accounts because they wish to hide the bad figures.
If the company shows other negative signals, this may indicate a serious negative signal.
Exercise increased vigilance and inquire with the firm in question as to why.
Please note: if an amendment to the articles of association has been published since the last filing of the annual accounts, the non-filing may be the result of an extension of the financial year.
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.
A business is liquid if it can meet its short-term payment obligations; if not, it is illiquid.
A liquidity of > 1 is considered very good
(= in theory, this business can pay its short-term liabilities if it realises its current assets).
The way this ratio has changed in recent years is highly significant.
If liquidity falls steadily, this means things are getting increasingly worse, and will end up being unsustainable.
How liquid and profitable a business is gives a good idea of how well it is doing.
| Liquidity | Profitability |
|---|
| + | - |
| + | Healthy | Chronically sick |
| - | Temporarily sick | Dying |
(**)
(**) Source: Handbook "Financial analysis process" by Hubert Ooghe and Charles Van Wymeersch (Intersentia)
