Corporations wishing to obtain short-term funding in Belgium basically have three options : bonds ("obligation / obligatie"), treasury certificates ("thesauriebewijzen / certificats de trésorie"), and promissory notes ("billet à ordre / orderbriefje"). This report deals with the Belgian legislation with respect to promissory notes (sometimes referred to as "commercial paper"). We shall briefly describe the regime with respect to treasury certificates in a subsequent contribution.

A promissory note is a promise to pay a specific sum. Next to a payment instrument, it is often used as a debt instrument which, if issued in the form required by law, confers on the bearer an unconditional right to receive the amount promised on the maturity date.

A promissory note must contain the words "promissory note", a promise to pay a determined sum (in practice not less than BEF 25 mio.), an indication of the maturity date (in practice : 1, 2, 3, 6 or 12 months), the place of payment, the name of the party to whom or to the order of whom the payment must be made, the date and place of the issue, and the signature of the issuer of the promissory note. It is an abstract instrument in the sense that parties which were not bound by the underlying legal relationship which gave rise to the issuance of the note can rely on the note independent of that relationship.

The most notable feature of the promissory note is that it is very easily transferable by endorsement, endorsement transferring all rights derived from the note.

If the note is expressed to be payable at sight or at a fixed period after sight, the issuer can stipulate that the amount of the note will accrue interest. The interest rate must be indicated on the note. This interest rate is generally based on the corresponding short-term market rate, which in Belgium is often BIBOR, the Belgian equivalent of LIBOR

Since promissory notes usually require an investment of more than BEF 10,000,000 per single investor, no emission prospectus will be required.

The content of this article is intended to provide general information on the subject matter. It is therefore not a substitute for specialist advice.

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For further information contact Vincent Macq on + 32.2. 517.94.47.
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