Alerting and Detecting business Difficulties

Verified 08 March 2024 - Directorate for Legal and Administrative Information (Prime Minister)

The alert procedure makes it possible to detect at the earliest possible stage the economic difficulties of a business. The Social and Economic Committee (ESC) or its members may initiate this procedure. On the other hand, it is an obligation for the auditor.

An information sheet on the alert procedure applicable to the individual contractor (EI) shall be available here.

The appointment of an auditor (CAC) is mandatory when certain thresholds of balance sheet, turnover and number of employees are exceeded. For these thresholds, you can consult the dedicated card.

The CAC must trigger the warning procedure where it identifies facts which may jeopardize the continued operation of the business.

For example, the following triggers the CAC alert:

  • Expiring major contracts (concession, manufacturing license, lease)
  • Loss of half of equity
  • Tax and social debts
  • Social conflicts

The alert procedure is organized differently depending on whether the business is a public limited liability company (SA: titleContent or LOCK: titleContent ) or another business (SARL, CNS, etc.).

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SA and SAS

An SA may be headed either by a Management Board and a Chief Executive Officer or by a Supervisory Board and an Executive Board.

The SA alert procedure is also applicable to the LOCK when organized as an SA (i.e. with a management board or supervisory board).

SA to Board of Directors

The alert procedure consists of the following 4 phases:

  1. Alert from the Chairman of the Board of Directors
    The CAC must alert the chairman of the board of directors to facts that may jeopardize the continuity of the company's business (major contracts that are expiring, loss of half of the share capital, decrease in the order book, social conflicts, etc.). This alert is made by registered mail with AR.
    The Chairman of the Board of Directors must reply by registered letter AR within 15 days of receiving the letter from the auditor. If this response is sufficient to ensure continuity of operation, the alert procedure shall be terminated at this stage.
  2. Meeting of the Management Board
    In the absence of a reply or if the reply is deemed unsatisfactory, the auditor shall request in writing the Chairman of the Management Board to convene a meeting of the Management Board to discuss the facts.
    The Chairman of the Management Board must then convene the Management Board within 8 days of receipt of the letter from the auditor. Deliberation must take place within 15 days of receipt of this letter. The auditor shall be summoned to that meeting.
    The procedure is confidential. However, where the situation is very serious, the auditor may inform the president of the commercial court.
  3. Convening of a general meeting
    A general meeting shall be convened in the following cases: the board of directors has not been convened, the auditor has not been convened to the board of directors, or the auditor finds that the continuity of operations remains compromised.
  4. Information of the President of the Court
    Where the Administrative Council finds that the decisions taken at the general meeting do not improve the situation, it must inform the President of the Commercial Court accordingly.
SA with Executive Board and Supervisory Board

The alert procedure consists of the following 4 phases:

  1. Executive Board Alert
    The CAC must alert the Executive Board of facts that may jeopardize the continuity of the company's business (major contracts that are expiring, loss of half of the share capital, decrease in the order book, social conflicts, etc.). The CAC sends registered mail with AR.
    The Executive Board shall reply by registered letter AR within 15 days of receipt of the letter from the External Auditor. If this response is sufficient to ensure continued operation, the alert procedure shall be terminated at this stage.
  2. Meeting of the Supervisory Board
    In the absence of a reply or if it is considered unsatisfactory, the auditor shall request in writing the Executive Board to convene a meeting of the Supervisory Board to discuss the facts as identified.
    The Executive Board must then convene the Supervisory Board within 8 days of receipt of the auditor's letter. Deliberation must take place within 15 days of receipt of this letter. The auditor shall be summoned to that meeting.
    The procedure is confidential. However, where the situation is very serious, the auditor may inform the president of the commercial court.
  3. Convening of a general meeting
    A general meeting shall be convened in the following cases: the Supervisory Board has not been convened, the Auditor has not been convened to the Supervisory Board or the Auditor finds that the continuity of operations remains at risk.
  4. Information of the President of the Court
    Where the ACC finds that the decisions taken at the general meeting do not improve the situation, it shall inform the President of the Commercial Court accordingly.

Other businesses

The auditor implements the alert procedure in 2 steps:

  1. Request explanations from the leader by registered letter with AR on the facts that jeopardize the continuity of the operation (for example, major contracts that are about to expire, loss of half of the share capital, excessive financial costs, etc.).
    The officer must respond to the ACC within 15 days, giving an analysis of the situation and specifying the measures envisaged.
  2. Meeting of the General Assembly
    In the absence of a reply from the manager or if he finds that the continuity of the operation remains compromised, the auditor shall draw up a special report.
    He asks the leader to convene a general meeting to deliberate on the facts. If it does not do so, it is the auditor who does it.
    If, at the end of the general meeting, the auditor finds that the decisions taken do not ensure the continuity of the operation, he shall inform the President of the Commercial Court.

Please note

This procedure also applies to LOCK: titleContent which do not have a body equivalent to a management board or a supervisory board.

In the companies of at least 50 employees, on ESC may implement an alert procedure for events which may affect the economic situation of the company (e.g. loss of a significant customer, significant and lasting drop in orders, restructuring project). We're talking about the economic warning right.

The ESC may then ask the employer to provide explanations.

If the replies are deemed insufficient or confirm the concern, the ESC draws up a report which is forwarded to the employer and the auditor (CAC).

Following this report, the ESC issues an opinion on whether:

  • Either refer the matter to the Management Board or the Supervisory Board for businesses which have them
  • Either inform the partners for the other businesses

If deemed necessary, the EESC may request that the matter be placed on the agenda of the next meeting of the Management Board or Supervisory Board. The employer's response must be substantiated.

For businesses that do not have a board of directors or supervisory board, the manager shall communicate the CSE report to the members.

Any partner or shareholder has the possibility to trigger the alert. The procedure is different for the members of a SARL or the shareholders of an SA, SAS or SCA.

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Associates of an SARL

Any partner of a SARL may ask the manager in writing about any event that could jeopardize the continuity of the operation (for example, sudden loss of a large client, restructuring, etc.). He has this option twice a day accounting year.

Within one month, the manager must reply in writing to the questions put to him.

The reply shall be communicated to the External Auditor (ACC) if one exists. The latter may then initiate an alert procedure if it deems it necessary.

Shareholders of an SA, SAS or SCA

The shareholder is the owner of one or more shares in a public limited liability company (SA), of a simplified business by actions (LOCK) or a limited partnership (SCA).

One or more shareholders representing at least 5% share capital may put questions in writing to the President of the Management Board or the Executive Board on any matter which may jeopardize the continuity of operations.

This possibility is open twice by accounting year.

The Chairman of the Management Board or the Executive Board shall reply in writing within one month to questions from shareholders.

He shall, within the same period, send a copy of the question and his reply to the auditor, if the business has one. The latter may then initiate an alert procedure if it deems it necessary.

Any business registered in SCR: titleContent or at RNE: titleContent as a company in the trades and crafts sector or any legal person governed by private law (association) has the possibility of joining an approved prevention group (APG).

The mission of the APG is to provide its members, in a confidential manner, with periodic analysis of economic, accounting and financial information. When he sees signs of difficulties (for example, difficulty settling tax and social security payments), he must inform the manager.

GPA then directs the leader to a network of experts.

FYI  

Membership of an approved prevention group shall be subject to payment.

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