Law relating to mergers, demergers, and conversions enters into force

The Belgian mobility law of 25 May 2023 (available in Dutch and French) implementing the EU mobility directive (Directive (EU) 2019/2121 of 27 November 2019) relating to cross-border conversions, mergers, and demergers of companies entered into force as from 16 June 2023. Corporate restructurings with draft terms filed with the enterprise court on or after that date are subject to the new law; ongoing restructuring procedures are unaffected.

The new law introduces substantial changes to the landscape for both domestic and cross-border restructurings involving Belgian companies but primarily affects cross-border restructurings which, in accordance with the terms of the EU mobility directive, are often regulated more rigorously to increase the protection for all parties involved (including minority shareholders, creditors, and employees). Nonetheless, certain changes to domestic restructuring proceedings are also of note, such as the introduction of a simplified procedure for mergers between companies in which all shares are directly or indirectly held by one person, or by multiple shareholders in the same proportions. Such “sister” companies are allowed to merge without issuing new shares and are therefore exempt from some otherwise important formalities.

The three most important highlights of the new law concern the introduction of the following:

1. A new creditor protection regime and a substantial increase in the duration of cross-border restructurings: The law provides a new system protecting creditors on an ex-ante basis. Eligible creditors, who are not satisfied with the safeguards offered in the draft terms of the cross-border restructuring proposal, may apply for adequate safeguards within three months from the date of publication of the draft terms in the official journal. A waiting period of three months must therefore be observed, during which time the general meeting of shareholders cannot make any decisions regarding the restructuring proposal. This results in a substantial increase in the duration of cross-border procedures as compared to the previous regime under which cross-border conversions could be executed within two months, and cross-border mergers and demergers within six weeks from the publication of the draft terms in the official journal. Cross-border restructurings under the new regime will therefore last at least three months.
2. Exit rights for minority shareholders: Minority shareholders (and holders of profit-sharing certificates) in a Belgian company have the right to exit the restructured company if they receive shares (or profit-sharing certificates) in a non-Belgian company as a result of the restructuring. Upon exit, the dissenting shareholders are entitled to a cash payment from the restructured company for their shares equal to the value specified in the restructuring proposal. In principle, this cash payment is limited to a maximum of 25% of the value of the restructured company, as the cross-border restructuring must be approved by the general meeting of shareholders with a majority of 75% of the votes. Any withdrawal of minority shareholders will lead to the annulment of their shares, triggering specific tax-related issues, such as withholding tax on the deemed distribution. In the event of a disagreement over the amount of the cash payment, the dissenting shareholders may seek a resolution through court proceedings.
3. Enhanced control by notaries public to prevent abusive, fraudulent, or criminal purposes: The new law significantly strengthens the role of notaries public in the restructuring process, as they are now required to conduct more thorough examinations, while considering indicative factors and additional documentation, including a tax certificate from the Belgian government. It is therefore recommended that the restructuring process is fully coordinated between the notary public and tax and legal advisers from an early stage, to mitigate unexpected obstacles and avoid unnecessary delays.

Considering the above, it is inevitable that the new law will have a profound impact on the tax, legal, and financial aspects of cross-border restructurings. New legislative tax initiatives are expected shortly to align the tax law with these changes. In this respect Deloitte Legal is proud that one of its colleagues, Kristof Maresceau (Director, Corporate M&A Deloitte Legal), was involved in the drafting of the new law, as one of two experts appointed by the Belgian government, further showcasing the knowledge and experience of our Deloitte teams in this type of complex restructuring.