Pursuant to the federal ministerial orders of 18 March, 23 March and 3 April 2020, retailers have been ordered to close non-essential physical shops from 18 March 2020 at noon up till 19 April 2020 included, thereby directly affecting retailers’ incomes. At the same time, retailers typically face significant fixed costs, such as loans and salaries. Unavoidably, this situation leads to cash flow problems, causing many retailers to consider their payment obligations, including rent. Likewise, landlords have ongoing financial commitments and heavily rely on a stable income from rent.
Measures already taken
Over the past weeks, the federal government and the regions have taken several measures to support companies and self-employed people who are suffering economic loss due to the corona crisis. These measures include the deferral of VAT payments and social security contributions.
Further, in order to protect cash flow and safeguard funding during this difficult time, an agreement was reached between the federal government and the financial sector, acting through Febelfin. This agreement rests on two pillars: (i) a charter on the possibility to defer loan payments; and (ii) the creation of a guarantee scheme.
1. The possibility to defer loan payments
Under certain conditions, the financial sector offers viable, non-financial companies and self-employed people (in addition to private individuals) facing payment problems because of the corona crisis, the possibility to request postponement of payment of capital, excluding interest, until 31 October 2020 at the latest. Banks will not charge fees for the postponement applications.
The deferral of payment can be requested for any of the following loans: (i) loans with a fixed repayment plan ("crédits avec un plan de remboursement fixe" / "kredieten met een vast aflossingsplan"); (ii) cash credit ("crédits de caisse" / "kaskredieten"); and (iii) fixed advances ("avances fixes" / "vaste voorschotten").
Deferral of payment of loans may be requested by non-financial companies, Small & Medium-sized Enterprises, self-employed people and non-profit organisations (hereafter the "applicant"). An application will only be considered if the applicant fulfils the following four cumulative conditions:
- The corona crisis is causing payment difficulties to the applicant due to (i) a drop in turnover or activity; (ii) recourse to temporary or complete unemployment; or (iii) the obligation to close down operations further to a governmental order;
- The applicant is permanently based in Belgium;
- On 1 February 2020, the applicant was not in default under its outstanding credit obligations, taxes or social security contributions or the applicant was less than 30 days late in paying its outstanding credit obligations, taxes or social security contributions as per 29 February 2020, and
- The applicant has fulfilled all its contractual credit obligations with all banks during the last 12 months prior to 31 January 2020 and is not going through an active credit restructuring procedure.
For applications submitted up to and including 30 April 2020, deferral of payment up to maximum six months may be obtained, until 31 October 2020 at the latest. For applications submitted after 30 April 2020, the deadline is the same, i.e. 31 October 2020. Banks will assess whether applicants fulfil the conditions.
Febelfin states on its website that a bank cannot refuse a deferred payment request if the applicant satisfies the four cumulative conditions mentioned.
2. The creation of a guarantee scheme
The federal government will activate a guarantee scheme for all “new” loans and “new” credit lines with a maximum duration of 12 months, which banks provide to viable, non-financial companies and self-employed people in need of cash flow. The purpose of the scheme is to maintain funding of the economy.
All new loans and credit lines with a maximum maturity of 12 months (excluding refinancing loans) provided until 30 September 2020 will be covered by the guarantee scheme.
A budget of 50 billion EUR has been allocated by the federal government to guarantee losses that financial institutions may face as a result of these new loans and credit lines.
Upon expiry of the guarantee scheme, the amount of losses incurred on loans and credit lines under the guarantee scheme will be assessed. The burden will be shared between the financial sector and the public sector. The National Bank of Belgium, together with Febelfin, will set up a monitoring system to assess the financial sector's commitments regarding deferral requests, as well as the guarantee scheme.
The guarantee scheme and its conditions of implementation and application (e.g. definition of "new loans and "new" credit lines, expiry date of the guarantee scheme, etc.) will be subject to a ministerial decree that is expected to be published in the coming weeks.
Other measures possibly in the pipeline
In a television debate on 5 April 2020, the Belgian federal Economy Minister expressed support for the idea of postponing the Belgian 2020 summer sales ("soldes d'été"/"zomersolden") from July 2020 to 1 August 2020. The federal government is also considering a one-time postponement of the 2020/2021 winter sales from January 2021 to a later period. If these plans are put into effect, specific new legislation is to be drafted and adopted in the coming weeks.
A number of other sectoral requests are also on the table, it being understood that the competent ministers have not yet expressed their final views, let alone adopted legislation, on these topics:
- A temporary reduction of the real estate withholding tax ("précompte immobilier" / "onroerende voorheffing");
- A prohibition against expelling retail tenants due to their non-payment of rent during the store closure imposed by the authorities; and
- A rent reduction during tenants' stores closures imposed by the authorities
Currently, no legislative measures have been taken in response to the corona crisis that directly regulate the relationship between the banks and their borrowers and/or the relationship between landlords and tenants. However, the financial sector initiative mentioned in points I. and II. above, if properly rolled out, can be expected to give some breathing space to landlords and tenants. It may partially facilitate the necessary discussions that landlords and tenants need to have on payment obligations.
A number of other measures are possibly in the pipeline, including a postponement of the 2020 summer sales from July 2020 to 1 August 2020.
Disclaimer: This newsletter is intended to provide information of general interest to the public and is not intended to offer legal advice about specific situations or issues. This newsletter is based on legislation, website publications and announcements as publicly available on 6 April 2020. AKD does not intend to create an attorney-client relationship by offering this newsletter.