Belgium implements the EU mobility directive: what changes for M&A?

The Belgian law of 25 May 2023 transposing the EU Mobility Directive on cross-border conversions, mergers and (partial) demergers was published in the Belgian State Gazette on 6 June 2023 (the “New Belgian Mobility Law”). Amongst other amendments to the Codes of Private International Law and Judicial law, the New Belgian Mobility Law amends Book 12 and 15 of the Belgian Code on Companies and Associations (the BCCA) regarding the restructuring of companies and the European corporate entities. With a limited number of provisions entering into force as of 30 June 2023 and 15 December 2023, most of the provisions of the New Belgian Mobility Law will enter into force as of today (16 June 2023). 

1 Belgian scope of application

The European Mobility Directive’s main purpose is to further facilitate the cross-border movement of companies within the EU. With the same brush, it aims at resolving legal uncertainty for shareholders and other stakeholders such as creditors and employees in the same context. The Belgian legislator has taken that same purpose into consideration by extending the scope of the New Belgian Mobility Law to cross-border reorganisations  regardless of the participating foreign company being established in the EU or not. The existing rules on purely domestic Belgian reorganisations have not been amended, which will result in noteworthy differences between cross-border and domestic reorganisations. 

2 Key changes impacting corporate transactions

2.1    Publication formalities

The New Belgian Mobility Law allows for the cross-border reorganisation proposal to be (i) filed and published in full in the Belgian State Gazette (as was the case under the old regime and is still the case for domestic reorganisations) or (ii) to be published on the company’s website along with the publication of a hyperlink to the company’s website in the Belgian State Gazette. This new second option will have an impact on the starting moment for the six-weeks waiting period between the filing date and the vote on the transaction. When using the new second option (online method), such waiting period will only kick off as of the moment the link has been published in the Belgian State Gazette. When using the first option (publication in full in the Belgian State Gazette), such waiting period will still kick off as of the moment of the filing with the local clerk’s office. Since the Belgian clerk’s offices take a varied amount of time (1-2 weeks or sometimes even more) to comply with these publication formalities, using the online method might not be the preferred option in cases where transaction timelines are tight. However, as discussed below, waiting periods linked to creditor protection and notary intervention will likely lead to longer waiting periods until completion of the cross-border reorganisation in any event.  

2.2    General meeting of shareholders

The required threshold for the approval of the cross-border reorganisation proposal at the general meeting of shareholders is now lowered from 80% to 75 % (or 2/3) of the votes cast during such meeting. In the case of different classes of shares, this majority must be obtained for each class of shares. Furthermore, the holders of non-voting shares and profit sharing certificates will be allowed to vote on the proposal with one vote per share (within the limits provided for by the BCCA). 

2.3    Compensation for dissenting shareholders

The New Belgian Mobility Law introduces a monetary compensation for those shareholders or holders of profit sharing certificates that are opposed to the proposed cross-border reorganisation. This monetary compensation right only applies if the acquiring company is not incorporated in Belgium. 

  • Procedure 

Three steps need to be taken by the dissenting shareholder in order to execute this monetary compensation right. Firstly, the shareholder has to notify the company of its intention to use such right. This way, the required calculations by the company of cash-out costs can be done in due time. Secondly, the dissenting shareholder must vote against the cross-border reorganisation proposal at the general meeting. Thirdly, the dissenting shareholder must reconfirm its intention to use its monetary compensation right at that general meeting. 

The exiting shareholder(s) will then be entitled to receiving monetary compensation equal to the value of its/their shares as valued in the cross-border reorganisation proposal. Such monetary compensation will be determined in a board report and the adequacy of the monetary compensation and the valuation methods used will be assessed by the statutory auditor. Shareholders who disagree with the valuation of their compensation can challenge this decision through summary proceedings before the President of the Enterprise Court. Such option is subject to a strict deadline of one month after the vote on the cross-border reorganisation.

  • Payment and consequences 

The monetary compensation will be funded by the company itself and not by the remaining shareholders. The net-asset and the liquidity test do not apply. The dissenting shareholders can, however, only be compensated after the creditors who have requested additional securities or guarantees to protect them against this cash-out have been granted such additional security or guarantee or after their receivable has been paid or their claim has been rejected by the President of the Enterprise Court. 

2.4    Challenge of exchange ratio

Shareholders who have not used their right to monetary compensation still have the possibility to challenge the exchange ratio. The three procedural steps described in the previous section in relation to the monetary compensation right are to be followed. After that, the claim for the challenge of the exchange ratio can be brought before the President of the Enterprise Court through summary proceedings. A successful claim can lead to an additional payment in cash (or in kind in certain circumstances).  

2.5    Creditor protection

The New Belgian Mobility Law introduces important creditor protection mechanisms in the context of cross-border reorganisations. Firstly, the cross-border reorganisation proposal needs to include information regarding the supplementary security that will be offered to the creditors. Moreover, a Belgian notary cannot issue the mandatory pre-closing certificate as long as the creditors who have successfully requested additional securities or guarantees have not been granted such securities or guarantees (or have been paid). Finally, the shareholders will only be allowed to vote on the proposed cross-border reorganisation after a waiting period of three months starting from the moment of the publication of the reorganisation proposal. If the creditors are not pleased with the information provided in the cross-border reorganisation proposal, they can request additional securities or guarantees (as explained above) during this three-month period. 

2.6    Employee protection 

The New Belgian Mobility Law provides additional protection with regards to employee rights in the context of cross-border reorganisations. Through Collective Bargaining Agreement n° 94/1, the regime creates a standstill obligation which reassures employees that at least the same level of employee participation remains after the cross-border reorganisation has been completed.

2.7    Role of the notary

As it stands, notaries are responsible for delivering the certificate that confirms formalities under Belgian law to complete the reorganisation have been complied with. 

In line with the purpose of the EU Mobility Directive to provide additional protection to creditors, shareholders and employees, all comments by the protected stakeholders must now be submitted to the notary. The notary will have to consider all this information when making an assessment on whether the cross-border reorganisation is not set up for unlawful or fraudulent purposes leading to or aimed at the circumvention of EU or national law, or for criminal purposes. The notary can furthermore contact the relevant parties to request additional information relating to the envisioned reorganisation. The certificate of approval has to be delivered, in principle, within two months after the reception of all information; this term can be extended in certain circumstances. A supplementary term of up to two months can be granted by the notary to rectify non-compliance with the formalities provided for under the New Belgian Mobility Law. 

2.8    Two new types of cross-border reorganisation

Two new types of cross-border reorganisations are introduced by the New Belgian Mobility Law: (i) the demerger by separation (cross-border) and (ii) the sister-sister merger.

  1. In the case of a non-domestic demerger by separation, the divided company will transfer a part of its assets and liabilities to one or multiple recipients. By means of compensation, the divided company itself, and not the shareholders of the company, will then receive shares in the recipient company. This is a big difference with the existing partial demerger because here the shares are allocated to the shareholders of the divided company. 
  2. A cross-border merger between sister companies is possible when one person holds, directly or indirectly, all shares in the merging companies, or if the same shareholders hold the same proportion of shares in the merging companies. In the case of a sister-sister merger, the acquired company transfers all its assets and liabilities to another company, as a result of which the acquiring company will be dissolved. 

3 Practical takeaways for m&a transactions

  • The further facilitation of cross-border movement of companies within the EU and the introduction of two new types of cross-border reorganisations by the New Belgian Mobility Law, will result in more legal certainty for cross-border reorganisations in the framework of M&A transactions and offer more structuring alternatives.  
  • It is of the essence to determine ahead of the transaction’s kick-off whether there is a cross-border component to the contemplated reorganisation as both sets of rules (domestic and cross-border) and reorganisation types are different.
  • The notary sees the realm of his role being significantly increased. This comes at the cost of quite uncertain criteria in the notary’s assessment for the approval of a cross-border reorganisation and the issuance by the notary of the mandatory pre-closing certificate. On top of that, extra procedural waiting periods linked to the notary’s intervention apply. Contact with the notary early in the process and informal clearance of the proposed cross-border reorganisation seems of importance from a practical point of view.  
  • Creditor protection that fulfils the requirements of the New Belgian Mobility Law will be a pre-closing condition for cross-border reorganisation transactions (also taking into account the mandatory pre-closing certificate to be issued by the notary). These new rules will therefore have an impact on transactions timelines and workstreams. 
  • The New Belgian Mobility Law provides more efficient tools for shareholders to disagree with cross-border reorganisations. Companies will have to strategically assess possible scenarios and the potential influence they may have on the practical and financial aspects of the transaction (e.g. monetary compensation for dissenting shareholders).
  • It remains to be seen how cross-border reorganisations with participating foreign companies that are established outside of the EU, will manage to combine the New Belgian Mobility Act (based on the EU Mobility Directive) with third-country applicable legislation.

Maxime Colle
Seppe Jansegers