Limitation of the definition of Eurobonds

According to Belgian financial law, a company that wishes to offer Eurobonds to the Belgian public is not required to publish an emission-prospectus as long as there is no promotion campaign conducted in Belgium. The requirement to publish a "Belgian" emission-prospectus is considered incompatible with the international nature of this debt-instrument.

According to the former definition as laid down in Article 34, §1, 2nd sub-paragraph of Royal Decree no. 185, bonds qualified as Eurobonds if the following cumulative conditions were fulfilled :

• - a substantial portion of the bonds was offered in one
• Member State of the European Communities ("Member State")
• other than the Member State where the issuing institution
• has its registered office;
• - the bonds had to be underwritten and distributed by a syndicate
• of underwriters of which at least two members had their registered
• office in different Member States; and,
• - only credit institutions or stockbroking companies subscribed
• to or (initially) bought the bonds.

The Belgian legislator has now considered this definition as being too broad. In practice, many companies made use of the exemption from publishing a prospectus when offering bonds which, according to the above-mentioned (former) definition, qualified as Eurobonds but, because of the limited international perspective of the offering, could not justify this prospectus exemption (e.g. Luxembourg affiliate of a Belgian bank issued Eurobonds which were only sold in Belgium and Luxembourg. No emission-prospectus was available in Belgium).

The definition of a Eurobond has now been significantly narrowed by the Law of December 21, 1994 and its implementing Royal Decree of January 13, 1995. According to this new definition a bond must fulfil the following conditions in order to qualify as a Eurobond and benefit from the prospectus exemption in Belgium:

• - the emission must exceed BEF 2 billion;
• - a substantial portion of the bonds must be offered in several
• Member States other than the Member State where the issuing
• institution has its registered office and under conditions that
• may interest both institutional and private investors;
• - the bonds must be underwritten and distributed by a syndicate of
• at least three non-affiliated members, each having its registered
• office in a different Member State;
• - the issuing institution commits itself to apply for a listing on
• a Stock Exchange of the European Communities (which will trigger
• the obligation to issue a prospectus on the occasion of the
• listing);
• - sufficient information must be made available to the investors
• on the occasion of the issuance; and,
• - only credit institutions or stockbroking companies are allowed
• to subscribe to or (initially) buy the bonds.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

For further information contac Jan Van Lancker on + 32.2. 517.94.31.