The end of the JRP, but at what cost?

As the regional budget dedicated to financing part of the costs associated with judicial reorganisation procedures (JRPs) comes to an end, the Brussels entrepreneurial network could be paying the price. Fryderyk de Peslin Lachert, lawyer at Janson and insolvency expert, explains the importance of JRPs.

As companies face financial challenges, the judicial reorganisation procedure (JRP) presents itself as an alternative, offering a legal framework for getting things back on track. 'The JRP is not a failure, rather the opposite. It aims to guarantee the continuity of a company's activities while protecting jobs,' Fryderyk de Peslin Lachert, lawyer at the Janson law firm, emphasises. However, with the allocated funds running out, small businesses may no longer be able to finance their JRP. Without this safety net, Brussels businesses could see their chances of recovery seriously diminished. But how can the necessary resources be maintained to prevent the entrepreneurial network from paying the price?

JRP: a bastion for businesses in difficulty?

When a company applies for a JRP, it is primarily seeking to control its liabilities, in other words all its debts, whether or not they have fallen due. The aim is to relieve the financial pressure on the company and to give its activities a fresh start. The procedure offers the possibility of spreading payments over several years, thereby restoring cash flow and giving the company suffocated by its debts room to breathe.

Fryderyk de Peslin Lachert explains: ‘The law provides for up to 80% debt write-off’. In practice, a company with debts of up to €500,000 could, at the end of the JRP, owe just €250,000, with payments spread over several years. In addition, the company benefits from a deferment of two to four months, either from the start of the JRP in the case of public proceedings, or on request under certain conditions in the case of confidential proceedings. During this period, all its debts are frozen with immediate effect. ‘In practical terms, this means that creditors can neither seize nor demand payment of the sum owed. This period of calm allows the company to refocus and think about the measures it needs to put in place to return to profitability. This period is a blessing for many companies,’ the insolvency expert adds.

Either one or more amicable agreements are reached, with or without the assistance of a court-appointed agent, or a restructuring plan is submitted to a vote of the creditors. It is then more advantageous for them to support this plan, rather than see their debtor go bankrupt. In essence, ‘JRPs make it easier to negotiate with reluctant creditors, whether to spread or write off part of their debt, or to impose measures designed to protect the company's interests’.

End of the budget: why is this a threat?

However, the regional budget dedicated to financing part of the costs of the JRPs has been fully used up. For Fryderyk, this situation is weakening the entrepreneurial network in Brussels. ‘The wave of bankruptcies is already underway, but it could explode in the coming months. It's clear that this represents an enormous risk for small businesses and for Brussels‘ SME infrastructure’, the lawyer warns.

Successive crises, notably the COVID-19 pandemic, have already left their mark on the regional economy. Today, the end of the funds allocated to the JRP could make any attempt at recovery even more difficult for Brussels companies. As a result, information campaigns are needed. 'There is still a lack of awareness about the existence of the JRPs. But the most important thing for us as insolvency practitioners, is to act preventively,' the commercial dispute specialist insists, before continuing: ’The sooner these companies consult a professional, such as BECI's Centre for Enterprises in Difficulty, the better their chances of recovery. We can really save the company.’

Why reinvest? 

To prevent the ship from sinking, Fryderyk de Peslin Lachert is calling for reinvestment in the JRP budget. In his view, we need to convince the stakeholders in the sector that the JRP is not a failure, but rather a recovery opportunity for the economic health of Brussels.

The lawyer highlights the importance of restoring the confidence of investors and public authorities. ‘Insolvency must be normalised. JRP is a tool that can be used to refocus and restructure a company's business, to ensure greater profitability’.

Communication efforts must also be made to encourage investment in businesses in difficulty. ‘Investing in a company under JRP can be a significant asset. This investment is not used to pay off debt, but to buy growth. We need this budget’, he concludes.