Filing for bankruptcy..bankruptcy..

Filing for bankruptcy and bankruptcy are extremes that every entrepreneur seeks to avoid. Solutions can be put in place to prevent such a situation. The best is to anticipate. But that's not always possible. Who could have predicted a health crisis like the one we've been experiencing since 2020? Here we give you some tips and food for thought.

The solution often lies in managing your cash flow

Company cash is often made up of cash in hand and/or at the bank. But what about issued invoices? How many of them are awaiting payment? In general, contractors pay suppliers, VAT, taxes and staff salaries on time, both to maintain quality service to their customers and to avoid substantial administrative fines. On the other hand, a number of their bills are not honored.

To improve the liquidity of his company, the entrepreneur can for example invoice one or more installments, claim payment in cash or at the latest 30 days end of month, warn his customers of the consequences in the event of late payment, etc. he entrepreneur cannot take the risk of finding himself in payment difficulty because he himself is not paid. If preventive solutions are not enough, you have to move on to the active phase: sending payment reminders or even, if necessary, forwarding unpaid invoices to an external service, for example to a debt collection company.

The mediation service

Unfortunately, sometimes good cash management is no longer enough. The economic situation deteriorates and the entrepreneur is tempted to stop his activities. Another option is mediation. The mediator will accompany the entrepreneur in his negotiations with his various suppliers, in order for example to put in place tenable clearance plans with his creditors. He will help her to reorganize her company so that it is profitable financially and over time. Be careful though! These tips come at a cost.

The judicial reorganization procedure, the ultimate solution

This procedure allows the entrepreneur to avoid bankruptcy by maintaining the continuity of his economic activities. It is required before the Commercial Court by a lawyer. There are three types of procedures in Belgium:

• The first aims for amicable agreements with a few creditors. This procedure is applied for the least critical situations. Payment schedules are put in place, interest rates are frozen, trade agreements are reached with suppliers, etc.
• The second aims to seek a collective agreement with all creditors.
• The third seeks the transfer of activities under authority, to transfer the activities of the company. This is the last resort that somehow saves the furniture.

The judicial reorganization procedure system makes it possible to avoid seizures but it is not automatic! In addition, it will be necessary to pay the costs of execution of the bailiff or the appointed notary (for a public sale for example).

Cost of the procedure? less than €100 for the request for proceedings, to which the lawyer's fees must be added (between €3,000 and €10,000). How long? A judicial reorganization procedure lasts 6 months, during which all debts are frozen. Attention! New claims will not be part of the proceedings.

Prevention is cure! Any entrepreneur is attentive to economic fluctuations that can impact his business (loss of an important contract or client, declining market, insurmountable debt, etc.) but he must also always keep an eye on his cash flow to react directly and take the bull by the horns if he wants to avoid a deterioration in his economic situation.