The most important procedures when planning to wind down a company.

A company merger, company sale, bankruptcy or voluntary closure can all be a reason for a company to wind down. Labour law provides for strict procedures for companies planning to wind down. Companies that do not comply with these procedures risk severe criminal sanctions.

What is the winding down of a company?

In labour law, it is a case of closure if two criteria are met. Firstly, the company must definitively cease the main activity of the company or one of its departments. This can be a voluntary closure or bankruptcy. Secondly, the number of people employed in the company must fall below a quarter of the number of people employed in the previous year. 

The obligation to provide prior information.

If the two criteria cited above are met, and the company had at least 20 employees in the previous calendar year, they will first have to inform and consult its works council (or the trade union delegation) about the intention to close. It is essential that these social bodies are the first to know about the intention to close, so that they don’t find out about it through the media. If the company does not comply with this procedure, it is a clear violation of the ‘Renault Act’, which entails severe criminal penalties!

What are the information and consultation round?

The employee representatives on the works council or, in the absence of such representatives on the trade union delegation, need to be given every possible explanation of the economic figures and reasons for the intention to wind down, during the information and consultation round. They may also try to propose alternative solutions to avert the closure. Ultimately, if sufficient explanation is provided and there are no viable alternatives, the company can formally announce the decision to wind down in the works council. 

From a cooling-off period to a social plan.

After the works council, a whole range of official bodies must also be informed. These include the Minister of Work, the National Employment Agency (RVA), the Chairman of the Joint Committee and the Closure Fund. From the day of the decision to close, a so-called “cooling-off period” of thirty days begins. During these 30 days, the employer may not fire anyone, except for serious reasons. The aim is to work out a social plan during this cooling-off period.

Closure compensation

If the company effectively winds down, the dismissed workers will, if they meet certain conditions, be entitled to closure compensation in addition to their usual severance pay. For this, an employee must have been hired with an employment contract of indefinite duration, must have accumulated at least one year’s seniority, and must have been dismissed by the employer in the context of the wind-down procedure. The closure compensation is an amount per year of seniority in the company, whereby a maximum of 20 years of service can be taken into account. Employees aged 45 and over are also entitled to additional closure compensation for each year of service to the company after their 45th birthday, up to a maximum of 19 years. The amounts themselves evolve in line with the consumer price index. More details on the closure compensation can be found on the website of the Federal Public Service Employment, Labour and Social Dialogue (Dutch, French and German only):

A company in difficulty may ultimately not be able to pay the closure compensation, which will then be paid by the Closure Fund.


Don't hesitate to contact us