On 8 January 2012, an act implementing Directive 2009/109/EC (the "Directive") was adopted by the Belgian Parliament (the "Act"). The Act entered into force on 18 January 2012. The Act was adopted in response to the European Commission's comments that some of Belgium's reporting and documentation requirements for mergers and divisions were outdated and excessive; the purpose of the Act is to reduce the administrative burden in this regard.
The Act provides new rules with respect to the reporting and publication obligations for mergers and divisions. In particular, the Act introduces the possibility to waive the obligation to have reports drawn up by the company's board of directors and auditor and allows the draft terms of merger to be published by electronic means. Furthermore, the Act modifies the threshold for a squeeze-out in the event of a merger by acquisition. This newsflash provides an overview of the most important changes introduced by the Act.
The company must still file draft terms of merger with the clerk's office of the competent commercial court. However, the shareholders may now waive the company's obligation to draft certain accompanying reports.
In the event of a merger, the reports of the board of directors and the auditor on the draft terms of merger are not required if the shareholders of both companies involved agree to waive these formalities. The same is true for the intermediate report on substantial modifications to the company's capital. However, a valuation report by an independent expert on contributions in kind that increase the acquiring company's capital is required, unless an auditor's report on the draft common terms of merger has been provided. In other words, if the shareholders waive the auditor's report on the draft terms of merger, a report on contributions in kind will be required. In this regard, the Act confirms the position of the Institute of Company Auditors (Institut des Réviseurs d'Entreprises/Instituut van de Bedrijfsrevisoren) that an auditor's report for a contribution in kind is required, and thus resolves the uncertainty which had existed between academics and practitioners on this subject. The shareholders' decision must be unanimous.
In the case of a division that entails the creation of two or more new companies with a contribution in kind (the shares of each new company being allocated to the shareholders of the divided company in proportion to their rights in the capital of that company), amended Article 747 of the Company Code now provides that reports by the board of directors and auditor of each company whose capital is increased by means of the contribution in kind are no longer required if reports on the division were prepared by the board of directors and auditor of each company.
Approval of a merger or division
When a limited company (société anonyme/naamloze vennootschap) opts for a simplified form of merger (the acquiring company owns 100% of the acquired company's capital), the general meetings of the two companies are no longer required to approve the merger if the following conditions are met:
- the draft terms of merger are published at least six weeks prior to the merger;
- all shareholders of the acquiring company have the right to consult the documents related to the merger at the company's registered office at least one month prior to the merger;
- shareholders representing 5% of the acquiring company's capital still have the right to request that a general meeting be held.
The Act lets companies choose between publication by extract or electronic means, to meet the publication and information requirements. The latter option involves a mention of the draft terms of merger in the Belgian State Gazette with a reference to a website where the merger documents can be consulted. As unlisted Belgian companies are not obliged to have a website, the legislature decided that they may refer to the Companies Database (Banque-Carrefour des Entreprises/Kruisbank Ondernemingen"). If the company decides to make the documents available through the Companies Database, certain costs may be involved.
In addition, the obligation to make the documents available at the company's registered office may now be replaced by free online access, if the documents are made available at least one month before the general meeting called to approve the merger.
Finally, the company may send requested documents solely by electronic means, provided it has obtained the express written consent of each recipient. However, if the company website provides for the possibility to download and print the documents free of charge, such consent is not required.
Squeeze-out threshold and reduction of associated formalities
In accordance with Article 2(11) of the Directive, the Belgian legislature decided that a squeeze-out may be carried out, in the framework of a merger by acquisition, if the acquiring company already holds 90% or more of the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired. A squeeze-out in the framework of a merger by acquisition is therefore possible when this 90% threshold is met, whilst a threshold of 95% is still required for a merger under other circumstances.
In the case of a merger by acquisition where the acquiring company holds 90% or more of the shares and other securities conferring the right to vote at general meetings of the company or companies being acquired, there is no need for the general meeting of the acquiring company to approve the merger if the following conditions are met:
- the draft terms of merger are published at least six weeks before the general meeting of the acquired company or companies;
- all shareholders of the acquiring company can request to consult the documents related to the merger at the company's registered office.
Nevertheless, without prejudice to the foregoing, shareholders representing 5% or more of the acquiring company's capital still have the right to request that a general meeting be held.
Entry into force
The Act entered into force on 18 January 2012, ten days after its publication in the Belgian State Gazette, and will apply only to mergers and divisions whose draft terms are filed with the clerk of court after this date.
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.
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