On 25 May 2023, the Belgian law implementing the EU Directive 2019/2121 of the European Parliament and of the Council of 27 November 2019 amending Directive 2017/1132 regarding cross-border conversions, mergers and divisions has been adopted (the Belgian Mobility Law).
In this article, we will focus on the key amendments introduced by the Belgian Mobility Law into the BCAC.
New types of reorganisation
The Belgian Mobility law introduces two new types of reorganisations: a cross-border de-merger by separation and a merger between sisters wholly owned companies (sister-sister merger):
- In the cross-border de-merger by separation, the de-merged company transfers part of its assets and liabilities to one or more recipient companies by operation of law, and shares are issued against the contribution of the de-merged company to such company itself (and not to its shareholder, as would be the case in a partial demerger). This new type of reorganisation can only be applied in a cross-border context. The legislator should however have had the intention to apply this new type of reorganisation in a domestic context as well.
- The sister-sister merger can be triggered when shareholders who hold the same proportions of shares in the merging companies, or when one shareholder holds (directly or indirectly) all the shares in the merging companies. Consequently, all assets and liabilities of the acquired compan(y)(ies) will transfer to the other company, and the acquired compan(y)(ies) will be dissolved.
Exit Right for dissenting shareholders
The Belgian Mobility Law grants an exit right to shareholders (or holders of profit-sharing certificates) opposing to the cross-border merger, de-merger or conversion (the Exit Right), in case the remaining company after the reorganisation is not governed by Belgian Law. Dissenting shareholders can exercise their Exit Right upon completion of the following actions:
- notifying the relevant company prior to the contemplated cross-border reorganisation of their intention to exit,
- voting against the contemplated cross-border reorganisation at the extraordinary general meeting of shareholders of the company, and
- reconfirming the exercise of the Exit Right during such shareholders’ meeting.
The shareholders exercising their Exit Right shall be eligible to receive the cash consideration from the company as determined in the relevant cross-border reorganisation proposal drawn up by the management bodies of the companies involved, and as assessed by, as the case may be, the (statutory) auditor (the Exit Fee).
The valuation of the shares will be determined based on generally accepted valuation methods on the date immediately preceding the announcement of the cross-border reorganisation. Shareholders, who voted against the cross-border reorganisation and had it noted as such at the shareholders’ meeting, can oppose to the amount of the Exit Fee within 30 days following the vote on the cross-border reorganisation before the President of the competent Enterprise Court.
The shares held by the shareholders exercising their Exit Right will be cancelled upon completion of the reorganisation.
Right to challenge the exchange ratio
Shareholders who are not exercising their Exit Right, can challenge the exchange ratio, subject to similar conditions for the exercise of the Exit Right, i.e., (i) notifying, (ii) voting against the contemplated cross-border reorganisation at the extraordinary general meeting of shareholders, and (iii) reconfirming their disagreement with the exchange ratio during such shareholders’ meeting.
Provided all aforementioned steps have been observed, the opposing shareholders will be entitled to initiate summary proceedings before the President of the competent Enterprise Court to formally challenge the exchange ratio and request an extra cash payment (or any other remuneration in kind) from the relevant company.
Cross-border reorganisation proposal and reporting of the management body and auditor
The Belgian Mobility Law introduces additional information to be included in the cross-border reorganisation proposal, such as:
- the valuation of the Exit Fee for the shareholders exercising their Exit Right,
- the guarantees offered to creditors,
- the consequences on employment, and
- the information on subsidies and grants received in the five years preceding the contemplated reorganisation if the acquiring company is not governed by Belgian law.
These additional requirements allow for more comprehensive reporting obligations from each of the management body.
Duties of the notary
Upon receipt of all legally required documentation in a cross-border reorganisation (including tax and social security certificates), and within a term of two months, the notary is responsible for issuing a certificate confirming that all necessary formalities regarding the cross-border reorganisation have been completed in accordance with the BCAC.
The notary may even extend this period if the transaction involves complex aspects, subject to notifying the company before the initial two months deadline expired.
The notary can furthermore withhold the certificate and notify of the grounds thereto if:
- it is determined that the formalities have not been completed in accordance with the BCAC, or
- creditors still require additional securities and their claims have not been rejected by a legally enforceable court decision. In these cases, the notary has the discretion to grant a period for rectification, which must not exceed two months.
The notaries will not issue the certificate if he/she determines that the cross-border reorganisation has been carried out for abusive or fraudulent purposes, leading to or aimed at the circumvention of EU or Belgian laws, or for criminal purposes.
The notaries must consider all relevant facts and circumstances that come to their knowledge in making the required assessment and may seek guidance from the Federal Public Service Finance throughout the evaluation process.
Quorum and majority requirements
Under the Belgian Mobility Law, several changes regarding the voting rights of shareholders (and holders of profit certificates or non-voting shares) in cross-border and domestic reorganisations have been introduced.
First, the required majority for shareholders to approve conversions (both domestic and cross-border) has been lowered to 75% of the votes cast during the shareholders’ meeting.
Second, holders of non-voting shares now have the right to vote on all types of cross-border reorganisations with one vote per share, and holders of profit-sharing certificates will now also have voting rights in cross-border mergers and de-mergers subject to limitations.
Additional creditor protection mechanisms have been introduced to ensure that the rights and interests of creditors are safeguarded before completion of the reorganisation.
Reference is made to the withhold right of the certificate of the notary set out above. Further, a three-months waiting period has been introduced until the shareholders’ meeting can vote upon the cross-border reorganisation, which starts running as from the date of the publication of the cross-border reorganisation proposal in the Annexes to the Belgian Official Gazette.
During this period, creditors, who are not satisfied with the securities proposed in the cross-border reorganisation proposal, can request additional securities, and can submit observations on the content of the proposal. In case of disagreement creditors can oppose to the securities granted before the President of the competent Enterprise Court.
Information, consultation and participation rights of employees
Companies contemplating a cross-border reorganisation are required to provide employees with more extensive information and engage in more comprehensive consultations to ensure their rights are respected throughout the process.
These provisions aim to safeguard the rights and interests of employees during cross-border reorganisations, ensuring that their participation, information, and consultation rights are protected and maintained at a level consistent with the pre-reorganisation arrangements.
In that regard, at least six weeks before the date of the shareholders’ meeting deciding on the cross-border merger, the report of the management body shall be made available in electronic form to the employees' representatives or, where there are no representatives, to the employees themselves.
Under the new regime, a standstill obligation regarding employee participation rights, as outlined in Belgian Collective Bargaining Agreement n°94/1 is introduced. As a result, companies involved in a cross-border reorganisation have to ensure that the level of employee participation remains at least the same post reorganisation.
Entry into force
As of 16 June 2023, the new rules implemented by the Belgian Mobility Law are applicable, except for:
- technical rules that involve changes and cross-border integration of governmental administrative functions, such as communication between the Belgian Crossroads Bank for Enterprises and other EU company registers, which will enter into force as from 30 June 2023 and
- the requirement for companies to submit a tax and social security certificate to the notary, which will enter into force as from 15 December 2023.