A new role for economic professionals
working with firms in difficulty
The inter-institutes recommendation for economic
professionals aims to clarify the role of professionals
working with firms in difficulty.
The Institute of Registered Auditors (IBR-IRE), the Institute of chartered Accountants and Tax Consultants (IAB-IEC) and the Institute of Accounting professionals and Tax Experts (BIBF-IPCF) have collaborated in the drafting of an inter-institutes recommendation.
The intention of this recommendation was to capture the missions of the economic professionals in the context of the Law regarding the Continuity of Enterprises (hereinafter LCE) of the 31st of January 2009 after the amendments by the law of 27 May 2013.
This concerns more specifically the registered auditors, the external
chartered accountants, the external tax consultants, the external certified
accountants and the external certified tax accountants.
The recommendation not only explains the new role assigned to the economic professionals but also provides information on the way to fulfil this new role and on the consequential administrative obligations that are related.
Pursuant to the new provisions of the LCE, the new role assigned to the professionals includes a prevention component on the one hand and a remediation component on the other :
henceforth the economic professionals collaborate actively in the prevention of the discontinuity of enterprises (preventive phase);
they have also been entrusted with missions of supervision and/or assistance within the scope of the initiation of the judicial reorganisation proceedings (remediation phase).
1. Legal scope
The recommendation is applicable to all the institutes and is available on their respective websites.
is binding for the IBR-IRE members (registered auditors), the IAB-IEC
members (external chartered accountants and tax consultants) and the
BIBF-IPCF (external certified accountants and tax accountants).
the LCE, nor the recommendation applies to internal members and interns
of the professional institutes.
It does not apply to the statutory
auditors responsible for auditing the annual accounts or the
consolidated accounts, except for the provisions relating to detection and
2. Preventive phase: detection and reporting
The economic professionals have several missions in the context of prevention and detection of firms in difficulty.
Detection or reporting
Within the scope of the preventive phase, the economic professionals may be led to discover, in the course of their mission, facts that could compromise the continuity of the company. It should be noted that in the course of their mission means that they do not have to look, in a planned and systematic way, for the serious and consistent facts that compromise the continuity of the company.
The recommendation contains a non-exhaustive list of possible facts that could compromise the continuity of enterprises.
These indications are:
Of a financial nature: unfavourable development of the financial structure and the profitability, difficulty to ensure the availability of the means of funding,..,
Of an operational nature: loss of market share, social unrest,
Of another nature: legal proceedings, unfavourable amendments of legislation,
The economic professionals who notice serious and consistent facts must inform the company in detail, if necessary through its management body. The LCE does not specify explicitly how to inform it; the recommendation suggests proceeding by registered mail for purpose of proof.
The communication by the economic professional must be complete, clear and detailed, and must allow the concerned debtor to understand the significance of the information included in this communication. Just suggesting that the continuity of the company is likely to be compromised is not enough.
Besides, in case of noticing new and more serious facts, a new communication to the management body is obliged.
Finally, it is important to note that if the economic professional observes serious and consistent facts in the course of his mission, the potential end of his mission and of his relation with the clients does not relieve him of his responsibilities to inform the management body.
Communication to court
If within one month after the communication of the economic professional, the management body does not take the necessary measures to ensure the continuity of the company during a minimal period of twelve months, the external chartered accountant, the external tax consultant or the registered auditor (with the exception of the certified (tax) accountant) can inform in writing the president of the commercial court. This communication to the court is not mandatory.
The judge can also obtain information from the economic professionals on the recommendations they have made and, if necessary, the measures taken by the company subsequently.
The communication of such information does not constitute a breach of professional secrecy.
3. Remediation phase: supervision and assistance
At opening of a procedure of judicial reorganisation under the supervision of the commercial court, a firm in difficulty benefits from a moratorium for a defined period. The firm in difficulty must include certain documents in its petition for the initiation of a procedure of judicial reorganisation: the balance sheet and the profit-and-loss account as well as the budget.
The economic professionals intervene here for the objectification of those documents.
When the management body decides to initiate a procedure of judicial reorganisation, he must ask an economic professional to :
edit an accounting statement showing the assets and liabilities and the profit-and-loss account, of no more than three months old, and to
assist the editing of the budget with an estimate of the income and expenses at least for the duration of the requested moratorium.
Whenever he observes material inaccuracies, the economic professional must inform the management body and propose the appropriate modifications.
If the management body refuses to make the proposed amendments, the economic professional must step down from his mission of supervision and/or assistance and formulate a declaration of end-of-mission without forgetting to inform the management body about the reasons for stepping down.
The economic professional must then reflect on the deficiency of additional or corrected information such as requested must be considered as the observation of serious and consistent facts.
In that case, he must inform in detail the firm in difficulty and, if necessary, the president of the commercial court.
That will enable the commercial court to judge about the possibilities of a reorganisation.
It is strongly advised to the economic professionals, and even mandatory for the external (tax) accountants, to establish beforehand, in a distinct engagement letter, the tasks agreed in the framework of supervision and assistance.
It is also recommended to foresee in a contractual limitation of the liability of the economic professional.
Given the new missions assigned to the economic professionals further to the amendments of the LCE, it was important for the institutes to clarify their role working with a firm in difficulty as well as the obligations resulting from it.
Furthermore, the harmonisation between the different institutes on the interpretation of the missions and obligations, as included in the LCE, was necessary to avoid any difference of interpretation between the institutes.
It is strongly recommended for the economic professionals to read the recommendation carefully as it clarifies on the way they have to carry out their obligations and defines the various tasks assigned to them.
21 October 2016
Mathieu Maniet - firstname.lastname@example.org
Leo Peeters - email@example.com
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