The tax authorities are not always
Constitutional Court judged that tax authorities are always
ordinary creditors in the WCO.
In its judgement of 18 February 2016, the Constitutional Court has once again made some important decisions regarding the position of the tax authorities in their capacity of public creditor in the context of a reorganisation in compliance with the Continuity of Enterprises Act.
According to the Court, the tax authorities are ordinary creditors, and they cannot improve their position during the suspension by taking a mortgage registration.
1. The reasons leading to this judgement
Since the entry into force of the law
of 31 January 2009 regarding the continuity of enterprises (hereinafter
LCE), the tax authorities have tried, on multiple occasions, to
improve their position in the procedure of judicial reorganisation by
undertaking creative attempts to promote themselves to extraordinary
However, this is in conflict with the spirit as well
as the purpose of the LCE, regarding to which the legislator has clearly
imposed its will to treat both public and private creditors equally.
Court of Appeal in Brussels has submitted a preliminary question to
the Constitutional Court whether the tax authorities, by registering
their legal mortgage during the period of protection against creditors, violated the constitutional
2. Continuity of Enterprises and attachment during the suspension of claims
to Article 31 of the LCE, no conservatory or executory seizure can be levied during the suspension on claims in the
suspension (in other words claims that date back to before the opening
of the suspension). Although, seizures levied before the opening of
the procedure maintain their conservatory character, but the court can
grant releases, to the extent that this does not cause a significant
disadvantage for the creditor.
The purpose of the LCE is to grant
enterprises in difficulties judicial protection against any form of
execution, bankruptcy and seizure of claims in the suspension.
aim of that period of protection (i.e. period of suspension) is to
allow the enterprise in difficulties to reorganise itself in order to
maintain its continuity.
3. The facts
present case, the tax authorities had registered their legal mortgage on
the part of the real estate of the enterprise in difficulties, after
the opening of the procedure of judicial reorganisation. The tax
authorities relied on the legal argument that the right of the tax
authorities to proceed to register a mortgage cannot be mistaken for a seizure. According to the tax authorities, the reserved right of the
mortgage registration results from the VAT code and from the Income Tax
Code. Hence, the tax authorities believed that Article 31 LCE does not
target the legal mortgages of the tax administration. Because the LCE
does not say a single word about a possible prohibition of registration
of a legal mortgage by the tax authorities, it seemed evident for the tax
authorities to levy conservatory attachments during the period of
This course of action causes an unequal treatment of
the creditors during the procedure of judicial reorganisation. In that
way, the tax authorities obtain a favourable position compared to other
creditors, which manifestly interferes with the fundamental principles
of the LCE.
Not surprisingly, this has been confirmed by the Court.
4. Argumentation of the Constitutional Court
Constitutional Court judged that, since Article 31 LCE does not
prohibit the tax authorities to file a mortgage registration during the
period of the suspension in order to be acknowledged as a preferred
creditor, this impairs, in a disproportionate fashion, the rights of the
other creditors. Their situation will be directly affected by the
existence of such a prerogative of the tax authorities, and conflicts,
according to the Constitutional Court, with the desire of the legislator
to protect the equality between creditors.
the legal mortgage is no seizure. But the seizure on a real
estate does not constitute a prerogative, whereas a mortgage leads to a
right in rem being granted, which results in the grade of preferred
creditor as of the registration. If the tax authorities file a mortgage
registration during the suspension, they will not become a preferred
creditor. However, they will have that grade at the end of the
suspension, and in case of concurrence, the other creditors who cannot
dispose of this prerogative, will only be paid if the tax authorities
are fully paid. The Constitutional Court argues that such a situation
does not respond to the will of the legislator.
this judgement, the tax authorities lose yet another one of their many
backdoors that they are always looking for in order to assert their
superior position within the LCE.
For enterprises in
difficulties, and their ordinary creditors, this implies the
confirmation that the public creditor has to be equally treated, which
should allow for a smoother reorganisation.
02 March 2016
Leila Mstoian - firstname.lastname@example.org
Leo Peeters - email@example.com
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